Spotify buys podcast promoting company Megaphone for $ 235 million
Daniel Ek, Managing Director and Co-Founder of Spotify AB.
Akio Kon | Bloomberg | Getty Images
Spotify makes another podcast acquisition.
The company announced Tuesday that it had reached an agreement to acquire ad tech company Megaphone, valued at $ 235 million. Companies declined to say whether it was cash, stocks, or a mix of both. The Spotify share fell by almost 1% after the market opened.
Megaphone provides technology for podcast publishers and advertisers looking for targeted slots for podcasts. It provides podcast hosting, distribution, and ad insertion tools for podcast publishers like ESPN and the Wall Street Journal. Advertisers can use the company's technology to find audiences for podcast content from these publishers.
Spotify has been in a podcast acquisition for the past several years, making deals on shows by Joe Rogan, Kim Kardashian, and Michelle Obama, and to purchase companies like The Ringer and Gimlet Media. More steps are now being taken to monetize all of this content using a new acquisition.
Megaphone, previously called Panoply Media, was renamed in 2019 after the podcast production team was laid off to focus on the technology platform side of its business. The company is owned by Virginia-based Graham Holdings Company.
The deal should give advertisers more scalability in terms of who they can reach through Spotify and allow podcast publishers to choose to monetize their shows.
Upon completion of the transaction, Spotify will make the Streaming Ad Insertion tool available to all podcast publishers via Megaphone technology. For the first time, this tool will open beyond its own original and exclusive podcasts. The company has stated that the Ads tool is "targeted – they are relevant to the people who receive them; measurable – we will more easily prove that they are effective and interactive …"
Advertising makes up a relatively small portion of Spotify's revenue, but management has been optimistic about the advertising opportunities. During its third quarter results, the company said that 22% of its average monthly users were engaged in podcasts for the most recent quarter, and that podcast ad revenue increased nearly 100% year over year. The company says its podcast catalog contains more than 1.9 million titles.
"I think there has been very little innovation, especially on the podcasting side, when it comes to better targeting advertising and allowing developers to actually monetize their product in much higher ways," said the company's CFO Paul Vogel, in his most recent third quarter earnings call. "And I think our ability to bring these tools and services into the ecosystem will be great for the overall growth of the business. It actually allows developers to make more money on their podcasts. And I think that will benefit us too . " ""