How Does Spotify Ads Work

Spotify went public in 2008 in a market crowded with rival music services. The music streaming app has shattered expectations by reaching over 365 million monthly users , including 165 million subscribers, across 178 markets. It is now the world's most popular audio streaming subscription service.

Spotify Ads is also the largest digital audio advertising platform — giving marketers and brands a direct line into the ears of millions of ad-supported listeners.

The breakneck velocity of Spotify's rise is incredibly impressive. The platform's active users spend on average 148 minutes a day listening to their favorite music app — and most of these users are enjoying Spotify's free, ad-supported version.

It's clear Spotify is seeing vast success, but let's dive a bit deeper into the world of advertising within the increasingly popular platform. Here's a quick look at what digital audio advertising is, what Spotify Ads can offer brands and advertisers, and how you can get started. It's easier than you might think.

Jump to a section:

What is Digital Audio Advertising?
The Advantages of Spotify Ads
How Spotify Ads Work
How You Can Advertise on Spotify
Spotify Ads Best Practices

What is Digital Audio Advertising?

"Digital audio advertising is advertising in an auditory medium, which is becoming more sophisticated and effective with today's growing music platforms."

-Josh Brisco, VP of Growth Media at Tinuiti

Have you ever tuned into your favorite podcast and heard the host seamlessly start talking about a service or product they enjoy? That's just one example of digital audio advertising. There are a variety of ad format options to choose from to engage your target audience – but more on that later.

The digital audio advertising industry is continuing to grow at a rapid pace, and Spotify has seen this first-hand. The platform's revenue grew a whopping 22% YoY largely due to advertisements and it's not expected to slow down anytime soon.

But there was another factor, other than just increased popularity, that undoubtedly changed recent trends and behaviors in the audio space – a global pandemic. Spotify saw their listeners develop new habits during this time period. They saw a heightened interest in podcasts, playlists, and various artists. In their 2020 Wrapped for Advertisers report, Spotify noted that weekday streaming behavior looked more like what they would expect on a weekend as more people turned to audio as a way to relax and unwind.

During this time period, the platform reported that they saw a 108% increase of total monthly active users who listened to podcasts when comparing months YoY, and 72% of users listened to more streaming audio during COVID to embrace more screenless moments in a world that was seriously screen fatigued.

But as some stats fluctuate, there's one thing that continues to remain steady – digital audio advertising is on the rise and it's here to stay.

"Today's brands are keenly aware they must diversify their messaging away from more traditional media like television, print, and radio in favor of newer more targeted ad formats like DAA. With ever more relevant ad formats and targeting methods, it is proving to be an excellent way to reach a captive audience on high-engagement platforms."

– Josh Brisco, VP of Growth Media at Tinuiti

Now all brands have that same opportunity with today's leading music streaming platform.

Spotify has been ramping up efforts to offer brands and marketers the ability to reach listeners through new ad formats and their "Spotify Ads Studio" that enables anyone to create and upload ads to Spotify in just minutes.

spotify ads guide water products on multiple devices

Source: Spotify

The Advantages of Spotify Ads

With a valuation of over $72 billion , str ong year-over-year growth in active users, with no signs of slowing down — Spotify has a bright future ahead.

Some marketers have been slow to leverage this new medium of advertising, but maybe now it's time to pay attention as time spent in these ad units is increasing. Spotify offers marketers many unique advantages that can be leveraged to reach millions of tuned-in listeners across the globe.

These include:

Access to 200 million+ ad-supported listeners

Each user spe nds 2+ hours listening daily

24% lift increase in ad recall for audio ads (according to Spotify)

As an added bonus, Spotify reports that "when compared to multi-format campaigns, audio-only campaigns tend to drive more foot traffic to stores at a more efficient cost per visit."

In addition to effectively reaching an incredibly wide audience, Spotify also collects data from its users that marketers can leverage to inform their targeting decisions.

Source: Spotify

Spotify's First-Party Data Advantage

Whenever a user listens to a song, queues a playlist, or creates their own playlist — they are telegraphing something about themselves:

How they feel

Where they are

What they're doing

This is the power of first-party data , and it's a golden commodity for marketers and brands when it comes to reaching a targeted audience at the right time.

Consider Spotify's running playlists for example. Spotify collects data that pinpoints when and how often users listen to running playlists. Brands like Nike put ad dollars to insert themselves into the headphones of users who are fired up and exercising. To put it simply – the ad resonates on an even deeper level.

Brands can use Spotify's first-party data to reach listeners during very specific moods or activities — all based on the music that they're engaging with.

How Spotify Ads Work

Spotify is based on a freemium model — where all users can have unlimited, free access supported by 15 and 30-second ad breaks. However, users can opt to pay for a premium account for an ad-free listening experience. The great majority of Spotify's listeners opt for the ad-supported version.

These ad units can play pre-roll and post-roll when users are listening to their favorite songs.

Spotify Ads has expanded into a variety of different ad units :

Audio Ads – short audio ads served between songs with clickable display content
Sponsored Session Video – your video ad unlocks 30 minutes of ad-free listening if a user opts to watch the full video
Video Takeover – your video message served in between songs (only when the screen is in view) including a companion banner with a customizable call-to-action
Podcast – your audio ad is weaved into a specified and targeted podcast for maximum results
Overlay – simple, clickable display ads that are served when a user returns to the Spotify app
Homepage Takeover – showcase your brand message on the front of Spotify's Desktop Homepage for 24 hours
Sponsored Playlist – customized playlist sponsored by your brand with a clickable display ad
Leaderboard – this clickable visual ad is shown for 30 seconds and is only served when Spotify is in view

Josh Brisco believes that Spotify's advertising platform will only become more powerful in the future.

"With millions of ad-supported listeners world-wide and robust targeting capabilities, it is a fantastic way to get in front of a desired audience. Its continued user growth and investment in its ad units, capabilities, and overall product make it one to watch."

How You Can Advertise on Spotify

These days, almost anyone with any budget can advertise on Spotify. Here's how to get started.

1. Set up an account

First things first, you'll need to set up your Ad Studio account to get started. Within this platform, you'll be able to:

Build out audio campaigns
Create audio ads using your script and a selection of background tracks and voice profiles
Gauge impressions based on your targeting and spend
Measure campaign performance within the dashboard

2. Begin targeting your audience

Targeting is one of the most important steps when creating an ad. If you're targeting the wrong people, your brand's message is unlikely to resonate. Ad Studio allows you to target audiences based on:

Who they are (age & demographics)
Where they are (city and geography)
How they listen (devices & connectivity)
What they listen to (genre, playlists, podcasts)
Predicted interests (lookalike targeting)
Off-platform behaviors (custom audience match & 3rd party interest targeting)
Past interactions (brand exposure, sequential messaging, real-time retargeting)

If your objectives change at all throughout your campaign – no worries – you can make changes to your target audience at any time.

Source: Spotify

3. Start creating your ads

As we previously covered, there are a variety of ad formats to explore within Spotify's Ad Studio. With this tool, you have the power to create ads that match your campaign objectives. Whether you're looking to set up video ads, podcast ads, or audio ads, Ad Studio can help you each step of the way. Within Ad Studio, you are able to create an ad from scratch by utilizing their music library filled with licensed selections, voiceover actors, and more.

Source: Spotify

4. Measure performance

Once your ads are live, it's critical that you measure their performance. Luckily, Ad Studio makes this process easy. Within the platform, you'll gain access to real-time reporting on ad delivery, performance, and audience metrics so you can see first-hand what's working and what could be improved.

Source: Spotify

What do Spotify Ads cost?

Prices depend on the length of the campaign, ad formats used, your country, the targeted audience, and the demand from competing advertisers. Spotify's website states that the minimum cost is just $250 to get started for those using the self-serve platform, Ad Studio. For those with higher budgets, Spotify offers custom offerings that align with specific advertising goals.

Spotify Ads Best Practices

We've covered everything from Spotify's overall advantages to various ad types, but how can you make sure you're following general best practices when it comes to advertising on the platform? Carly Fipps, Programmatic Senior Specialist at Tinuiti, shared four best practices for advertising on Spotify so your brand is up for success from the start.

Build strong messaging

In a recent study, Spotify has found that listeners are less concerned by the length of a creative, and more about the message itself so it's critical to have strong messaging from the start. Be clear, concise, conversational during your ads so listeners grasp the point(s) you're trying to make quickly. Don't forget to communicate any additional benefits you are giving your audience like promo codes or sale offerings.

Include a clear call-to-action (CTA)

What action are you trying to get listeners to take? Ads on Spotify are on the shorter side so by including a strong CTA (ie: "Buy Now"), you're allowing users to easily and quickly complete the intended action. Including a clear CTA within your ad is crucial – don't forget it!

Consider a two-fold audience approach

Layering Spotify 1st party data within a PMP Deal ID ( Target specific genres, playlists, interests, and demographic traits based on their streaming intelligence data)
Layering 3rd Party audiences within the DSP. (Just remember – Broad = Better scale)

Test and learn

No matter the campaign you're running, it's incredibly important to test and learn from the performance of your ads. You'll want to take a deeper look into your ad metrics to ensure you're meeting or exceeding your KPIs (Key Performance Indicators) to see if tweaks need to be made. As we've previously covered, Spotify has a wide range of ad types for advertisers to utilize. If one ad type isn't meeting your intended goals, be open to testing and trying out new methods.

Not looking to manage ads yourself?

No problem. Creating, managing, and tracking ad performance takes time – we get it. So, if you're looking to streamline your Spotify advertising process, Tinuiti can help. By working with our team of experts, you can take your Spotify ads to the next level by utilizing a more customized approach to further target your ideal customers. By working with a dedicated team, your Spotify advertising has the ability to stand out among the competition – elevating your brand to new heights in the streaming audio space.

"By working with Tinuiti, your brand's Spotify ads are in the hands of specialists who are familiar with audio campaign set up, optimization, and success. Our programmatic team is in the platform daily, making real-time bidding adjustments to campaigns that boost performance while maintaining efficiency. This performance visibility allows us to understand how audio stacks up against your other tactics in a user's path to conversion. Our programmatic experience and hands-on approach is what sets us apart."

– Carly Fipps, Programmatic Senior Specialist at Tinuiti

If you're interested in learning more about Spotify advertising, streaming audio, or how Tinuiti can help your business, contact us today.

Editor's Note: This post was originally published by Greg Swan in May 2018 and has been updated for freshness, accuracy, and comprehensiveness.