Spotify is buying podcast advertising firm Megaphone for $235 million, its latest attempt to stand out in a booming industry

• Spotify is buying Megaphone, a podcast tech company, for $235 million, it announced Tuesday.
• Megaphone makes tools for podcasters to host their audio and insert ads into their podcasts. It also aims to help brands better target their ad spending.
• Spotify said the deal, which is subject to regulatory approvals, will allow brands to advertise on Spotify-exclusive and Spotify-original podcasts.
• Spotify will also make Streaming Ad Insertion — a tool that gives data on ad reach, listening frequency, and anonymized audience data — to third-party podcasters to the first time, via Megaphone.
• The deal signals a major push on podcast advertising for Spotify, which has spent big money attracting top podcasters to its platform, and now hopes to monetize a booming industry.

Spotify announced Tuesday that it is buying podcast advertising and publishing platform Megaphone for $235 million, further expanding its efforts to monetize a booming industry.

The acquisition will let brands advertise on Spotify's original and exclusive podcasts, and let podcast publishers make more money from their audio, Spotify said.

Megaphone, headquartered in Virginia and founded in 2015, is a podcast tech firm which makes tools for podcasters to host their content and insert ads into podcasts. It also aims to help brands better target their ad spending.

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Spotify said that it would extend new advertising tech it unveiled in January — called Streaming Ad Insertion (SAI) — to third parties for the first time, via Megaphone. SAI allows podcast advertisers to measure ad reach, recall, listening frequency per user, and anonymized audience data like age and gender.

"This means that podcast publishers can offer more-valuable podcast audiences to advertisers based on confirmed ad impressions," the company said.

Spotify said the closing of the deal was subject to customary regulatory approvals.

"We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant," said Dawn Ostroff, Spotify's chief content and advertising business officer.

"We look forward to Megaphone joining Spotify on our mission to accelerate smarter podcast monetization for advertisers and podcast publishers powered by a scaled audience and state-of-the-art technology," said Ostroff.

Brenden Monaghan, CEO of Megaphone said: "We are incredibly excited to join Spotify to help advance the podcast medium for publishers and advertisers alike. We believe that Megaphone and Spotify's shared value in innovation will drive the podcast ecosystem forward around the world. "

Read more: Joe Rogan's blockbuster deal with Spotify is the streaming giant's biggest signal that it wants to dominate podcasting. Here's what it means for other show personalities and advertisers.

Spotify said in its statement that its Q3 earnings showed "22% of our total monthly average users engaged with podcasts last quarter and that podcast advertising revenue is up nearly 100% year over year."

Since 2008, Spotify has gained 320 million users worldwide, including 144 million subscribers, stretching across 92 markets.

The audio-streaming subscription service has more than 1.9 million podcast titles including hits from Michelle Obama, Kim Kardashian, and Joe Rogan's "The Joe Rogan Experience," which will be exclusively available on the platform next year.

Spotify and Megaphone's deal comes at a time when the podcast industry is booming, and advertisers are taking notice. In November 2019, a study from Edison Research and the PodcastOne network showed that 70% of podcast listeners — who listened for five or more hours a week — considered buying a new product or service after hearing about it on a podcast.

Spotify is now considering a separate paid subscription service specifically for podcasts, according to a survey the company recently sent out.

Spotify isn't the only company hoping to boost its podcast business through acquisitions: both Apple and Sony have held talks to buy Wondery, the world's largest independent podcast producer, Bloomberg reported Friday.

Additional reporting by Lauren Johnson.