Spotify is offering ad targeting across its podcast content

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Spotify will now allow targeted advertising across podcast content on its platform to nonpaying (free tier) subscribers, per The Verge. Previously, ad targeting was only based on users' music listening habits, but the platform will now enable advertisers to select listeners according to podcast preference.

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The capability will roll out in 10 markets, including the US, Canada, Mexico, Brazil, UK, France, Germany, Italy, Spain, and Australia.

As podcast listening on the app will no doubt continue to rise, serving targeted ads on the content should help Spotify to boost ad revenue on the fast-growing format.

Podcast consumption hours on the platform surged 250% in 2018, with 49% of Spotify's millennial audience engaging at least once a week, according to Spotify data cited by Warc.

CEO Daniel Ek expects podcasting to eventually account for 20% of total consumption on the app. Targeting capability ups the value of ads on the format, which should generate increased investment from advertisers - especially given that Spotify plans to develop an even more expansive targeting tool with layering, measurement, and reporting capabilities.

This should not only up its appeal to advertisers, but also allow it to create better shows as it amalgamates data on its listeners. I expect the two will create a positive feedback loop between quality content creation and boosted ad revenue.

The targeting tool will give Spotify a leg up on its competition and could help it take a greater share of the ad dollars expected to flow to podcasts. Ad spend on podcasts is projected to reach $1 billion by 2021, up from $479 million in 2018, per the IAB.

Spotify's podcasting rivals, like Apple and Stitcher, offer geo-based ad targeting, but have yet to release user habit- or preference-based ad targeting, meaning Spotify will have a tool on offer that its competitors don't.

This, combined with its commitment to providing extensive metrics on ad performance, should help Spotify stand out to advertisers that have otherwise struggled with performance measurement in the podcast ad space. If Spotify can grow its global hold on listeners, and offer advertisers specific data for more advanced ad targeting, it could pull ahead in the audio space.

Spotify's ad-targeting tool is just the latest in a series of product iterations intended to emphasize the format. Spotify's podcasting-related acquisitions in 2019 have amounted to a combined $400 million as of April. And it's also been rapidly iterating on its product to drive engagement:

• Earlier this month, Spotify began testing curated podcast playlists around certain genres.
• Last week, Spotify launched a new personalized playlist called "Your Daily Drive" in the US, combining music and podcasts in a playlist for the first time.
• Late last week, Spotify rolled out a redesign of the "Your Library" section of the app to Premium subs that makes it easier for users to move between music and podcasts.

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