What Marketers Need to Know About Spotify Ads

James Lawrence 

Welcome back to the Smarter Marketer Podcast. I'm here today with Simon Connolly. Simon's, currently Head of SMB at Spotify, Australia and New Zealand. So today we're going to be discussing all things Spotify and Spotify Ads. Simon. Welcome to the pod. 

Simon Connolly 

Thank you for having me. 

James Lawrence 

It's awesome to have you here. I think Spotify Ads and the Spotify platform, it's a topic, a subject matter which marketers are interested in. It's a sexy brand. So I guess a new channel - not totally new - but it's something which has probably grown a lot in the last couple of years and thought it'd be excellent to get you on board and just chat about what the platform is doing as we move through 2023. And think regardless of whether you're a marketer that has previously advertised with Spotify or whether you're not, I think just a good what it is, what it's not discussion is of use for everyone. So I guess just at the very beginning, how does Spotify Ads work? 

Simon Connolly 

Yeah, thanks for having me. So I think Spotify obviously is like a brand a lot of people know, particularly in Australia, New Zealand, but as an advertising channel, it's probably not forefront of mind for a lot of consumers out there. But I think people are surprised when they hear about the scale of the reach that's available there and the tools that we have. 

Simon Connolly 

So put like, really simply, there's two tiers to Spotify. Essentially. There's the premium tier where you pay subscription as you do with Netflix or Amazon Prime or anything, and you'd have all your music, they're available ad free. And then we also have the free version of Spotify as well, which is ad supported. So within that, users still have access to all the world's music and podcasts as well. But of course there is ad breaks. So those happen sort of in between the music and then obviously we can get into how all that works and what's the technology and the platform behind that as well. 

James Lawrence 

Do you have numbers on how many paid accounts versus non paid accounts there are in the Australian market? Because I have a premium account, so I presume that similar to, I guess, Netflix at present in Australia, you're not really seeing ads that might change, but is there a misconception around unpaid accounts versus paid like. 

Simon Connolly 

Yeah, I think particularly within media as well. A lot of us perhaps because we sell ads, we don't want to hear ads. 

James Lawrence 

I love being sold too, actually. 

Simon Connolly 

Spotify subscription is very popular in Australia. It is the number one audio streaming platform. But globally it works out to about 60% on average and that's kind of we don't give out the sort of breakdowns per individual, region or market but it works out more or less around that mark of paid to premium or free subscription, should I say. So there is a pretty sizable audience. So I think ComScore has us as total numbers of twelve and a half million monthly active listeners in Australia. So we are thinking like a 50% version of that. We're looking at the free thing. So we do have a lot of scale there. I think the other thing probably with the misconception is the assumption is that audience is then just teenagers or skew students. But what we see is actually it pretty much mirrors the demographics on the paid side as well. So it definitely as it does on the paid side, it skews younger. So I think roughly about 60% of our listeners in Australia are under 35. But those kind of demographics; the gender split, the age split, it's pretty much even. There is no big discrepancies on paid versus free. It's not as if the free is just sort of teenagers or students. 

James Lawrence 

I think that's where I was coming at with that question. And yeah, I'd heard that you guys presented to the Rocket team and that was something I found really interesting, that it is a bit of a misconception that all the ads are being served to young kids that can't afford a subscription. I think some of the references were quite common in office environments, corporate environments, a whole bunch of different use cases, which is kind of interesting. And then how do the ads actually work? I think just talk to us a little bit about is it all audio? Is it also kind of graphics/visuals on devices? 

Simon Connolly 

Yeah, so there's two formats really that we'll talk about. There's a few more higher impact formats that you can buy direct; sort of display, homepage takeovers. But I would say the majority of what we are working with and certainly if you're using Ad Studio, which is our self serve ad platform, there's two ad formats which is audio and video. It's pretty sophisticated in terms of its detection. So we can see within the app itself that if you are looking at the screen so if you're actually looking at your phone or you have your desktop open and you're interacting with Spotify, then you will be eligible to be served a video ad. 

​​Simon Connolly 

But I think, and this is something that's quite unique about Spotify and kind of maybe pushes us into a broader realm beyond the likes of other digital platforms, is people listen to music while doing something else, right? So while cleaning your house, while working out in an office, in a car, wherever the environment may be in those environments, of course it'll only be audio that plays. But I think that's kind of like for me is the really interesting play. It's the power of digital audio. It's sort of reaching you in those moments where even you're on the bus with your headphones on, when you're not actually exposed to your phone, you're not exposed to video or display banner, whatever ad that may be, but you still can be reached through digital audio. 

James Lawrence 

It's quite an intimate way of advertising, isn't it? Audio? It's kind of similar to podcast ads. I think there is that cut through which the knock on Facebook as it relates to this kind of space is that it often is sound off. People are scrolling through, so sound isn't coming through. YouTube, when you speak to the Google team will be saying, well, that's one of the benefits of YouTube is that generally you have sound on, but the idea that you're actually focusing in on audio and nothing but is a real tick, I think, in the Spotify box. 

Simon Connolly 

Yeah, I mean, audio is everything is our mission statement. People aren't interacting with Spotify sound off for sure. 

James Lawrence 

It'd be a duller experience, wouldn't it? That's really interesting. So you're not going to give us a secret to how many users there are in Australia, but if it is half of that audio, we're talking millions and millions of Australians accessing Spotify and presumably on a daily, if not weekly kind of basis. We'll talk a little bit, I think, about creative afterwards, but in terms of getting my message in front of the right people, what kind of targeting options do we have with Spotify? 

Simon Connolly 

Yeah, so we've kind of the full suite, I guess, of what you would expect with any kind of advertising platform in terms of targeting options that starts with demographics, geographic, you can go down to the postcode level. But what we can do to build on top of that, and this is really built around what we call streaming intelligence, which is the technology that really powers sort of everything at Spotify. So like the curated playlists that you get, your Discover Weekly, your release radar, all these things that are actually, as you mentioned, it's really one to one, it's quite intimate, personal, it's a playlist. Spotify is created only for you. You're probably the only person in the entire world who's got that exact playlist. And it's based on your interests, your listening habits. So that same technology kind of powers our advertising as well and those kind of filter into kind of the two key things which I think are the most interesting targeting options beyond obviously our standard demo geo targeting options and that's real time context and then the interests. So interest is based on the music you listen to, the podcast you listen to as well. So we're able to pull together pretty powerful sort of buckets of these kinds of people who are interested in sports versus these are the kind of people who are interested in entertainment and lifestyle. 

Simon Connolly

And then when it comes to the real time context, which I think is probably like the superpower of Spotify and it speaks to what we just talked about, the power of digital audio to reach you in moments, those screenless moments because we do a lot with curated playlists that are really sort of moment based. So that's like workout mixes, study mixes, there's even like sleep mixes where people are listening to relaxing music, noise. And that kind of contextual advertiser, or that contextual moment I think is really powerful moment for advertisers because we've seen it from our own research and our own studies that like two thirds, 75% of respondents say that they are much more favorable to ads when it recognizes the context when we're being played in. So if you're selling a sports drink and you're in a workout playlist, you know it's, it's a very very natural fit. 

James Lawrence 

That's it. It's kind of the big argument for all digital marketing in terms of when it comes to targeting. Right. It's like, well, let's give people ad experiences that at least are relevant to kind of what they're into. And I think the first client we ever ran Spotify ads for was actually a national gym franchise, and it was really interesting. And we were tapping into those workout type playlists, and we did some pretty interesting work targeting just a small number of locations in a certain area just to kind of get a handle on what kind of uplift we could get from it. And it was a really successful campaign. In terms of the interest based targeting, how big is that? Are we talking kind of 15 different targeting type interest types? We're talking hundreds? 

Simon Connolly 

Not hundreds. I don't know the exact number. 

James Lawrence 

No. But just generally 

Simon Connolly 

Yeah. In around it's more general than… 

James Lawrence 

Politics into a particular sport kind of thing? 

Simon Connolly 

Yeah. Rather than getting too in the weeds with it, you want, obviously, the balance of reaching a sizable audience as well.

James Lawrence 

Yeah, totally. And then in terms of demo stuff; age, postcode targeting in Australia, right?

Simon Connolly 

Yes. We've got obviously, everybody who's using Spotify is logged in, so we've got that pretty rich first party data when it comes to self declared age and gender. And then, obviously, we're just working off IPS in terms of getting that postcode targeting. 

James Lawrence 

Okay. In terms of actually purchasing ads. Maybe just walk us through the different options there, I guess. We've definitely got the marketers working on really, really small businesses. We've got marketers working in mid market, upper end of SME type area, and then we've also got marketers working in really large organizations. So kind of what are the different paths to getting the most out of buying Spotify ads? 

Simon Connolly 

Sure, so there's three kind of paths to purchasing Spotify advertising. The first is, I guess more like the traditional media buy is digital direct route. So an IO based buy, there are minimums on those. So it's guaranteed. It's usually a higher minimum in terms of IO amount. So it tends to lean towards those enterprise level brands, big national brands, the big agencies as well tend to buy direct. We also have programmatic, so obviously through your TSP, or if you're buying programmatically, you can also access Spotify inventory through there as well, which is sort of my world. And where I work on is our self serve platform, which is called Ad Studio. So that's sort of the vast majority of advertisers who are accessing Spotify here locally, but globally as well. And put simply, it's just sort of ease of use. Right. So, again, it's a self serve platform, very much styled on every other sell serve platform that you would be familiar with, ads Manager, Google Ads, and you can start from as little as $250. So just can be through a credit card. You can do invoicing through it as well. And you're really getting that full suite of targeting options. You're getting that inventory, getting the audio and the video as well. So it's pretty democratic in terms of access. 

Simon Connolly 

There's not much that is held back that you have to direct. It's very instantly accessible through the self serve platform. And that's particularly for those SMEs, the smaller kind of side of things. And a lot of agencies as well are using Ad Studio for its ease of use and its flexibility as well. Right. So, again, you could just go in, like you said, you guys have done, test out a few campaigns, see the results, and then see if you guys want to invest further and take it. That's it.

James Lawrence 

We've always found it really easy to use and super useful in terms of running campaigns for clients through that interface. Maybe just talk to the listeners about the metrics because obviously it's a slightly different media to I think what a lot of marketers are used to in digital, so maybe just talk about like, if we're running a campaign, what kind of metrics are we getting reported back? 

Simon Connolly 

Yeah. So you'll get sort of everything you would come to, I would say, expect in terms of running digital marketing campaigns. So you'll obviously see your impressions, you'll see your reach, you'll see your click through rate, you'll also see which is somewhat unique for Australia because we have within Australia, I don't know how many kiwi listeners you have because its different in New Zealand…. In most of the world, the ads are non skippable in Spotify, but here in Australia, the ads are actually skippable. So you also see completion rates as well, because the user does have the ability to skip the ads. And we actually work on a second price auction model within Ad Studio. So it's a biddable platform and you are bidding and being charged for your completed listen. So we're not charging you until 100% of that ad is actually listened to. 

James Lawrence 

That's even though they are skippable. 

Simon Connolly 

Even though they are skippable. So LP incurs if the user chooses to skip the ad. 

James Lawrence 

So presumably ads that are relevant kind of rise to the top and get promoted by the algorithm. 

Simon Connolly 

Yeah, absolutely. And I think what we find, just like the user behavior of Spotify, we just in general have quite a high completion rate because if you think about it, it's very different from what we may experience on YouTube, where you're trying to get through the ad to get to the content. This is interstitial amongst music, so this could be studying or working out. So you're just listening to hours of music and there's certain ad breaks within there. And obviously a lot of it is screenless moments. So users are exposed to that ad. They're probably less inclined to sprint across the room to try to skip it, to move on. If you're in the middle of a workout or you're studying or you're doing the chores in the house, whatever it may be. 

James Lawrence 

That segues nicely into the next section. So the ads themselves, if we could maybe just talk, what are our options there, and then what works and what doesn't, based on your kind of experience. 

Simon Connolly 

Yeah. So it's audio video up to 30 seconds. If you go to Ads Spotify.com, obviously there within the help section, you can see the full ad specs, the dimensions. There's obviously an image that goes accompanying banner image as well that you can put in there and all file sizes and all that fun stuff I won't bore you with now, but what we really recommend, I think, is particularly the audio. I think video is somewhat universal now, right? So, like, every platform supports video. It's very much a video first, right, moving away from static banner images and digital advertising. So video tends to follow those same rules, right? You've got short sharp to the message point. I think it's where audio is quite unique to us, right, because that's particularly on where I work with a lot of smaller brands and agencies. They're not necessarily buying audio in any other means. They may have dabbled a bit in podcast, very unlikely to be spending on commercial radio. So audio is probably the stumbling block for them, where they're like, we don't necessarily know how to create audio ads, we don't know what we should be doing. We're kind of very. I'd say hyper conscious of that. And it's something we're trying to do is to lean very heavily into supporting businesses with that. 

Simon Connolly 

So to that end, within the Ad Studio UI, we actually have a free audio ad creation tool. So you follow the steps to creating a campaign, then you create an ad set. And then when you get to the ad creation page, you have two choices. One is you upload your own creative. So again, just follow the file sizes and the necessary formats. You can upload it there, or you can choose to use the free creation tool. So within there, directly within the UI, you have space to write a script. You have instructions that you can say in terms of like, inflection, emphasis, tone, you can pick a voice actor. So there's samples. And that could be like, you want a male voice, female voice, young, old, Aussie, Kiwi, American, Irish, whatever you want. And then you package that up. You pick the background music as well. There's a library of free assets there, and within 24 hours, that goes to a real actor. So not a generator.

James Lawrence 

I was going to say it's not some kind of AI generator. 

Simon Connolly 

Who knows, maybe at some point in the future, the way AI is going, maybe it ends up being there. But I can guarantee, as it stands today, these are human actors. 

James Lawrence 

Put this in the voice of Morgan Freeman, for my ad for Rocket.  *Laughs*

Simon Connolly 

*Laughs*. You get that ad within 24 hours, and then you can either choose to use that ad, you can ask for revisions upon that ad. Again, we're trying to make remove that barrier to make it really easier to use. There's a lot of resources. At Spotify, we actually recently did a webinar last Wednesday or this Wednesday, actually. I'll date the webinar two days ago.

James Lawrence 

We won't say the date, we'll just say two days ago. 

Simon Connolly 

Two days ago? 

James Lawrence 

Yeah, we're doing this in 2014. We're just ahead of the time. 

Simon Connolly 

That content is now actually on our YouTube channel as well. If you go to Spotify ads, there's a YouTube channel, you can see it there. It's called the secret sauce. How to write effective audio ads. And it just talks about because I think that's the other thing. We have the tool there, but a lot of clients we work with are like, actually, I don't know how to write copy for audio. So we just walk through some of the basics in terms of how to script it out, what instructions a voice actor needs in terms of pronunciation, emphasis, where you want it to be. But that's completely free of use within the Ad Studio UI. So anyone to day can go log in, get started, and have an ad created within a day. 

James Lawrence 

It's a pretty compelling value prop. Right? Particularly when it's $250 minimum purchase. 

Simon Connolly 

Yeah, and I think as well, it's probably one of our strongest USPS when we talk to brands is that this is something that potentially could cost thousands to go to a creative agency and have commissions, that it is a free resource that is available. And I'm not sure if you guys tried it in your own, but we've got, I would say, majority of our advertisers leverage it. So the quality and the results are pretty high on it.

James Lawrence 

It's excellent. I think it'd be good now because our experience, and this may not necessarily be everyone's experience, but I think for us, we do a lot of stuff in Google Ads search, bottom of the funnel, conversion rate, cost per conversion type thing. I think in our experience, our campaigns have probably compared more to top of the funnel type areas. More like when we're running YouTube for clients, when we're running Display, which then help bring people into an ecosystem to then purchase, I guess. Does that mirror where you would generally see the spotify ad sitting and then kind of segue into that? What are the types of businesses brands use? Cases that you see generally working really well?

Simon Connolly 

Yeah, absolutely. I think that's right. The objectives that you can buy within ad studio today are reach and completed listens or impressions, for lack of a better term. So very much top of the funnel, very much consideration and awareness driving. There's a lot of work going on for us to unlock mid and lower funnel objectives because obviously that's, like you said, particularly in tougher economic times like we're going through right now, a lot of budgets and dollars are being shifted into performance based. We very much conscious of that and we're trying to build a full funnel solution. But as it stands right now, very much top of the funnel, I think, as well, even when we have the ability to obviously kind of purchase on more lower funnel objectives, just what Spotify is as a platform, it's very different from obviously very different from paid search, but different from social media as well. It's an accompaniment to someone's day. 

Simon Connolly 

As I talked about, often music and podcasts are played in the background while somebody's doing something else. So the likelihood of converting then and there like you would expect on a social media platform is just not going to be like, for like right. It's always going to be kind of a very different experience. So it's very much about awareness, consideration, top of the funnel to that end and that kind of mirrors the advertisers we see. So we actually have quite a broad mix. But it's certainly those advertisers, I think that understand the power of top of funnel, understand cross channel attribution journeys as well. So understand that those conversions you may not be seeing directly from that session within Spotify, but obviously that's going to have a knock on effect to paid search or to social media as well in terms of cost effectiveness. And reach. What we're able to achieve in terms of awareness and spotify is really, really effective compared to other channels that have that same kind of scale. So, yeah, really kind of broad. Definitely. 

Simon Connolly 

We see if you have, I guess, a higher ticket value, like if you're something that takes a longer consideration cycle, we see a lot of those advertisers, particularly in education, I think that's to our young demographic as well. Right, so a lot of universities, a lot of third level education, we even see like autos or even down to the dealership level as well, we'll have those sort of higher value. I understand that that consideration cycle to buy a car, to sign up to a university course, even going a holiday could be weeks or months or years in some cases. And so they understand the power of their awareness reaching those users at that stage. 

James Lawrence 

We ran a really good campaign with LIV Mirvac and that's all about build to rent. So people making pretty big life decisions, right, about the kind of place they're going to move to long term. Is it fair to say that it probably skews more B2C, just given the kind of targeting options available. 

Simon Connolly 

Yeah, we've definitely run some B2B campaigns in the past. I would say the majority definitely is B2C. Just again, given the kind of reach play, right? So if you're getting a pretty broad search in terms of who you're reaching from Spotify, I mean, you can go down quite granular if you wanted to, but in general, best practices obviously keep it as broad as possible. 

James Lawrence 

Do you have any data that you can talk about publicly be around Spotify usage versus traditional radio? 

Simon Connolly 

We do actually. I mean, I don't have  it to hand, no, but just it was really interesting.

James Lawrence 

We had a client a few years ago because you mentioned education and they were an RTO that was very much targeting, I don't want to be too specific just in terms of giving away too much more than I should, but they were targeting school leavers that weren't going to go to university for a particular course. And the fit was just there. It just made so much sense that you would be buying your media in YouTube and Spotify. Just give them where we always say eyeballs, but this just doesn't apply in this instance.

Simon Connolly 

Earbuds. 

James Lawrence 

Basically the marketing team was fully bought into the strategy and it just got vetoed by the board and the board said, we listen to radio and it was like, yeah, but the target market doesn't. So just yeah, even just offhand any feedback on kind of demographically, is there an age? There’s good data from Google as how YouTube compares to cable in the States. Just looking at kind of how that graph tracks and before you get to about 35, 40, all the views are on YouTube compared to traditional cable TV. Yeah. Anything for the local Australian market? 

Simon Connolly 

Yeah, we do. So we've done a number of research comparing to commercial radio as well and what we kind of focus on is like the incrementality. So rather than either or, it's like if you are in the audio space, if you're considering radio as a channel, there is this very sizable and often, as you said, skews quite young audience that just does not listen to commercial radio. Again, that's a trend, linear TV. It's the same trend we're seeing in radio as well. It's skewing to a much more older demographic and obviously there may still be value in that, but the incrementality that you can get from including Spotify in that as well can be really, really powerful. 

Simon Connolly 

I think one of the things we call out there as well is if you're in a situation where you are buying radio, we don't recommend radio assets to be used on Spotify because it's a very different listening experience. So radio, same with linear TV, it's one to many where Spotify, it's virtually one to one. Right. It's a much more personalised experience. So that's part of the reason with the free audio creation tool as well, we're trying to make it very easy for advertisers to do creative unique to Spotify. And actually we recommend, in our best practice, even calling out in your ad copy; ‘hey, Spotify listeners’, making it very relevant to the environment because what we tend to find is the nature of traditional radio ads, the creative is sort of like abrupt, attention grabbing, trying to be loud, like verging aggressive. 

James Lawrence 

Yeah, for sure. That's what I was imagining when you mentioned the kind of the sleep playlist. I get to think of a traditional radio ad. Wake up!

Simon Connolly 

We're all obviously within an audio space, but Spotify is a very different audio environment than commercial radio. 

James Lawrence 

That makes a lot of sense. Similar to, I guess, the line we've been taking for the last couple of decades with digital is it well, it doesn't really matter if Spotify has a slightly lower skew older, because you're not paying if people aren't listening and if they're not getting through to the end of the ad. And then there is this Ginormous segment, which I imagine does the age range start at 18? 

Simon Connolly 

Yeah. So you can report on I think it starts you can see within the platform down to, I think, 16. But we you have the ability to do 18 plus, depending on what your advertising is. 

James Lawrence 

Yeah. Awesome. That's been awesome. I think that in terms of it's a really good overview of the product, how it works, how to get your foot in the door if you are interested, if you haven't done it or if you have done it a couple of years ago. There's been a lot of changes in terms of just, platform and an ability to get kind of creative moving. I always have the last question that I ask of every guest on the Pod, what's the best piece of career advice that you'd give to an Australian marketer? Or it doesn't even have to be an Australian marketer. It can be an Irish marketer. Kiwi marketer... 

Simon Connolly 

Career advice. I think probably the best advice I ever got in my career when I was young and I was very guilty of doing this, is don't worry about what someone else is doing, if that makes sense, where you like sometimes when you're young. I was fixated on so and so got this, and so and so is doing that, and I didn't get this opportunity. And I got that advice from a manager I had long time ago, where it's just like, I can only control myself, my own actions. And the more I spent on that and the more I could just focus on the things that I had an influence on or I could control, and I didn't care about what somebody else was doing, even if they got promoted ahead of me, I was like, Good luck. I can only focus on what I can. I think I got, well, two things. I think I became a better employee, I did better at my job, but I think also I just derived a lot more satisfaction from my job and I think it was a lot happier. 

James Lawrence 

I think it sounds like that could be broader than marketing advice. I reckon that goes into surely into life, right? 

Simon Connolly 

Yeah, maybe. My advice should just be ‘spotify ads’.

James Lawrence 

Spotify. I'll be happy with that. Simon, thanks so much for coming onto the Pod. 

Simon Connolly 

No problem. Thank you for having me.