Spotify makes a splash by purchasing two companies aimed at making its podcast offering even better, but should investors be taking note?
Feb. 17, 2022
Spotify (NYSE: SPOT) has announced the acquisition of two companies aimed at bolstering its already market-leading podcast offerings. The streaming platform has made a concerted push to become top of the podcasting charts over the last number of years. Heavy investment in both technology and original content has seen it surpass Apple Podcasts in downloads.
The firm bought podcast networks Anchor and Gimlet Media in 2019 in deals that totaled close to $340 million, and also spent big to attract some of the world's top creator talent, with controversial podcast host Joe Rogan pocketing $100 million in an exclusive deal with the company.
Now, two more strings have been added to Spotify's bow for an, as of yet, undisclosed fee.
Podsights
Podsights is an advertising technology firm that will enable Spotify to better track and scale podcast advertising. Spotify will be able to leverage data about how podcasts drive actions for advertisers, potentially increasing its negotiating power with these ad companies.
Spotify outlined in its statement that "over time, we plan to extend these measurement capabilities beyond podcasts to the full scope of the Spotify platform, including audio ads within music, video ads, and display ads." So while initially, the purchase of Podsights may only benefit one segment of Spotify's business, it has the potential to impact almost every aspect of its advertising ventures.
Chartable
Chartable provides audience insight and promotional tools to podcasters to allow them to learn more about their individual user-base. These insights are invaluable in driving growth for content creators and will mesh well with Spotify's existing tools. Charitable is expected to live within Spotify's 'Megaphone' offering, which it purchased in late 2020. According to Spotify:
"These tools will make it easier for publishers to turn audience insights into action and expand their listenership while ultimately growing their businesses."
Why does this matter to investors?
The key thing to consider with these purchases is that Spotify isn't resting on its laurels when it comes to podcasting. Measurement and attribution have been two longstanding issues for podcast advertisers, which the addition of Podsights will go a long way towards solving. If Spotify can simplify these issues and display further value to advertisers, particularly when traditional digital advertising routes are being shut down by Apple and Google, it could dramatically increase its advertiser-related revenue in the near future.
Similarly, by adding to its suite of analytics tools through Chartable, Spotify is enriching the experience it offers to individual creators. Spotify has signed a vast number of exclusive agreements with podcast creators, so it makes sense to want to help these creators grow their audiences.
Spotify already has an advantage over some of its Big Tech competitors in that its primary -- and only -- focus is audio. With continued investment into its technological capabilities, Spotify is trying to distance itself from the chasing pack. The firm surpassed Apple Podcasts for downloads for the first time last year and is looking to continue this growth. For investors, these acquisitions should be seen in a massively positive light and as a sign that Spotify is acting swiftly to address any concerns about lagging growth.
