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- [00:00]
Ad Tech God
This episode is brought to you by Zeta Global. Do you know what it takes to transform marketing into a data driven profit center? Are you able to align the C suite around your AI vision and strategy? Zeta Global has the Playbook to help you get started. Download Driving growth in the AI era today at ZetaCMO AI book again, that's Zeta CMO AI book welcome to today's episode of the Refresh. I'm your host and co founder of Market Ad Tech God. The Refresh is where we bring you the latest and greatest in advertising news. Don't forget to follow the market account on TikTok, Instagram and YouTube for more news related content. Just a quick announcement to the listeners. We want to be in the know. If you have a big announcement that's truly unique and offers the audience insights on the future of your company or the industry, please do not hesitate to reach out. You know how to reach me on today's episode. I have Per Sandel, the Vice President of product at Spotify. He's here to bring down the latest news around Spotify's investment into Programmatic with the launch of Spotify Ad Exchange, otherwise known as Saxophone, and what it all means for advertisers, creators and the future of audio. Per welcome to the Refresh.
- [01:26]
Per Sandel
Thanks for having me. Thrilled to be here today. And you know, I think I took you up on that offer of reaching out when we've got something exciting. So saw it on Twitter and slid into the DMs.
- [01:35]
Ad Tech God
So best thing you can do. I, I like tell everyone like hit me up. I'm pretty accessible. Like I, I respond to a lot of people every day. If it's good news, something big that I think is really interesting, I'll absolutely put them on the Refresh and and talk about what it means for the market. Per question for you, the recent news that you guys announced was really the Spotify Ad Exchange first and foremost. Why was that decided to be launched Now? What about today's audio market made you decide this was the right time to go to Market?
- [02:04]
Per Sandel
Yeah, great question. You know, I think it boiled down to us kind of looking at the industry, looking at kind of our existing advertising business and really making the assessment that we wanted to meet our customers where they were buying. And when we were looking at our direct customers, our agency partners, kind of the partners that we were working with in the DSP space already, we realized that they were all leaning into Programmatic and it made sense for us to meet them as close as possible with the technology stack that we were building. And our assessment was that they wanted more control, they wanted more access to information and to data and to our formats and to our placement. And so we decided to approach this investment to make it as easy as possible for advertisers to buy in whatever way works best for them, and kind of approached our product development with what's right for our customers, what's right for our advertisers. Putting them first was the right decision. And you know, that, that obviously Daisy chained into us building things like a unified auction, our ad server, et cetera. But, you know, ultimately the decision was really driven by what we were hearing in the market and the fact that customers wanted to access audio and this was the way that they wanted to access it over programmatic. And we heard a lot about that from the fields and made a decision to really invest in that from a technology perspective.
- [03:19]
Ad Tech God
So on the technology side, you know, owning your, your tech and owning your ad tech stack is really important. How does that ownership change what's possible for you and your advertisers?
- [03:30]
Per Sandel
Yeah, you know, I hear this term kind of a lot around the ecosystem, whether it's, you know, on Twitter or kind of, you know, some of the blogs that I read or the industry press. And it's definitely become an ad tech catchphrase of owning your own tech. And you know, from our side, I think there's a lot more to our stack than just sacks the ad exchange. But, you know, we had to build an ad server that sits behind the scenes there. We went even further and building our own ads API, our own ads manager that also sits on top of that same ad server, and really invested into the areas where we wanted to go, you know, kind of 360 around that whole ecosystem with building our first party measurement tech, things like conversion API, pixels, brand lift. It's not easy to do this. It takes a pretty significant amount of time and investment. But, you know, and I think when you think about it from an advertiser perspective, this is what allows you to be able to meet your advertisers where they want to buy. You want them really coming to your stack and coming as direct as possible, whether that's through a DSP directly to our exchange that then interacts with our ad server or via the ads manager and API. And that gives them the best option to really reach us across all of our formats, leverage our optimization target on our data, whether that's over the API, the ads manager, or in a private marketplace. And we believed in providing as much value as we could to our customers and felt this was the right way to do it. And so we're giving them that value. But on the flip side, and this is, I think, something that people don't talk about enough when they talk about owning your own tech. It might get overlooked, but it's really important, you know, if you have a user base that's logged in on the platform as we do at Spotify, that owning your own tech means that you can bring your own models, your own notion of relevance to really protect your users and your listeners. And so that means giving them the most relevant ad that you can at the right time. And so if you're merging the best experience with your advertisers, with the best experience for your listeners or for your users, I think that really brings the two ecosystems that power our platform like ours, where we generate revenue and where we generate time spent as close together as possible in the most elegant way we could.
- [05:33]
Ad Tech God
You guys also announced the rollout of a generative AI solution. You work with big brands, you work with big agencies. Is this something that you've seen as being utilized by both the brands direct and agencies? Are you seeing maybe some potential with small to medium sized businesses as well?
- [05:50]
Per Sandel
Yeah, I've been absolutely kind of blown away by this product and the growth that we've seen. And you know, we've done a number of, you know, customer outreaches already. We've got some pretty great feedback where we're hearing from our advertisers that it's, you know, easy to use, it's free to use. They really appreciate kind of like the broad representation of ages and different types of voices that we have in the product and what we've actually seen. And to kind of give you a sense of the lay of the land is about 40% of the ads that we're making now in Ads Manager are coming from this tech already. And it's, it's pretty much brand new. So the adoption is basically a hockey stick. And you know, I think this speaks to two points, which is one, that our AI work that we've been doing, particularly around text to speech is, is really good. None of this was possible a few years ago. And on the other side of that, a lot of folks I don't think had audio creative in the mix yet and they were looking for a way to do that. And you know, I think we've started to see that that is something that is allowing people to adopt and move audio into their mix in terms of the type of brands that have been using it. You know, we've seen everything from credit unions all the way out to, you know, podcast creators that are making AI generative ads to promote their podcasts and use some of our tech that we have around podcast streams, optimizations within Ads Manager, all the way out to folks at agencies who are starting to dip their toes into it. And so we're thinking about ways to make this more accessible to advertisers across the board right now.
- [07:15]
Ad Tech God
So on that note, you guys really have an incredible audience and people who utilize Spotify or the users with the login data that you have available, I'm sure brings a ton of value to advertisers. You guys have like a cult like following for Spotify. And I experienced this the other day. I think we laughed about it in email. Something about there was a rumor about premium serving ads, and I made a comment that I love ads, we should serve ads on it anyway. And I got killed, like, killed on Twitter. It was absolutely hilarious. So, like, people generally really love Spotify and when they use Spotify, they don't leave it. How do you feel that that strong culture that you've built around content creators and the music and more is being used or in love with the solutions that you have in market, especially when it comes to, like, the creative lab that you guys have?
- [08:03]
Per Sandel
Yeah. Well, first, thanks for doing a little bit of user research for us out there. Sorry, you caught a few trades and.
- [08:09]
Ad Tech God
Yeah, I experienced it firsthand. I could tell you it was crazy. It was like within 15 minutes, it was like 100 people commenting. People were like, dude, are you crazy? We don't want ads. This is insane. I'm like, I'm just kidding. And I'm like, you know, I'm going to lean in, give us more ads.
- [08:24]
Per Sandel
So I think to your point, and you talked a little bit about, you know, kind of like a cult, like, falling. And I think this really comes down to fandom as one part of it. And in my personal opinion, the emotion that is music. And if you think about audio and you think about that, it's. It's a very emotional product. It's very personal. You hear it in your ears and it's right there with you. And, you know, it's like you kind of have built your Spotify to be like the vibes of your day, your life, and that's in your pocket with you all the time. Everything becomes so personal when it comes to listening. And, you know, if you think about some of the products that we've been building on the consumer side Things like your day list, you know, like that basically, you know, within the office approach, like it replaced the idea of hello, people are just like, show us what's on your day list today. And I think that's like a, it's a great way to meet people and kind of build these connections around the product that we build on the audio you hear and the music that's out there. And you know, it is an incredibly emotional thing. And you know, that's really what we've been thinking about both with our Creative Lab and also with ox, kind of our in house consultancy. And what we've been trying to do with both of those is basically take everything that we know about creators, about music, about events, and figure out how to merge that in with a brand. And you know, one that I, I've been a really big fan of that Creative Lab has done is around the Coke and Oreo collaboration where they're kind of leaning into this idea of finding your, your bestie and kind of merging two things that seem different but at the same time make a wonderful and pretty exciting collaboration. And we really did that in the strategy that we leaned into there, merging our data with these iconic brands and you know, it's a 10 out of 10 from that perspective. And you know, if you look at OX and this is something that, you know, we've really started to ramp up on our side, it's, it's really our in house consultancy and this allows us to actually work with clients and kind of consult with them directly. And one of the activations that I've been pretty excited about, we're kind of watching from the sidelines there is, we partnered with the folks over at Samsung Galaxy. They came to us actually talking a lot about Gen Z and how to get Gen Z excited about the new device lineup. And so as we were looking kind of into the area of music and the consumption, we started to work with them really on the idea of how can we bring some of these playlists to life. And one of the ones that we felt was really exciting for kind of like this new focus, new device lineup was to merge it with like our Fresh Finds playlist. And so we actually took that whole experience that usually you feel in your pocket and you know, kind of listen to on a daily basis and we brought it into real life. So we brought local events highlighting emerging talent and we brought people to these actual events and these spaces to listen to kind of this experience. And so we brought that playlist with their partnership out of the phone into an experience that people were able to have in real time. And I think that's really exciting because, you know, music is one of those things that you can listen to it at home, you can listen to it in the car and you can listen to it live. And each one of those presents really a different emotional feeling and that's something that's really unique. And you know, I think you miss a lot of that if you're not really leaned in to kind of thinking about how your data and how your brand actually makes consumers feel at the moment.
- [11:33]
Ad Tech God
You know, you touch upon a really good point that the emotion behind music is such an important part in the creative as well. It's something that I use myself like when I, when I do my cheesy videos that I post to promote some of our own internal posts. You know, it looks like a 15 year old did or maybe even less did it, but the reality is that the, the music is where I start, everything else follows. So it depends on the, the vibe I want to deliver. So I, I could understand how when, when you're targeting an audience, such a large audience of truly Gen Z, you know, these brands have to lean in and understand how, how they address that audience in the right way because Gen Z is a great audience to target, but they're not going to be quiet if they don't like it. So really focusing in on what is relevant to them today is super important to the Exchange piece. With the Exchange, you're obviously onboarding additional inventory, you're onboarding additional buyers. For the media buyers out there, how can they feel assured that the inventory quality is what they want and how do you give that control to advertisers are using in house solutions or using third party inventory quality solutions. What are some of those controls you have in place?
- [12:41]
Per Sandel
You know, we have some in house controls for sure. We're also been partnered kind of with all the industry standards that are there in the third party space. And when we think about Spotify, and this is one of the points that, you know, when I talk to advertisers a lot that I stress is that Spotify is a hundred percent logged in user platform. You can't actually use Spotify if you're not logged in. And you know, actually as a side note, maybe this is a topic for a different side, but I've always wanted to add kind of like the logged in user bit to the RTP protocol. And so it's like, oh, you get a bid request and now you know that user's logged in kind of Changes the way that you might think about that piece of supply or that individual impression shows that there's a real relationship there. Anyway, back to what we're thinking about. We have placement controls across all of our tools, whether that's the Ads API, Ads Manager or the Exchange. And you can basically know the placement, know what format it is, know if it's going to be a sound on or sound off placement, know if it's in the foreground or background. And we've also added a lot of control to understanding the type of content it is, if that ad is going to show up in pods, understanding from LLMs what the type of content they're speaking in or the context that's there. So we've really turned over all of this control that we possibly can to our advertisers to allow them to understand the quality of an inventory, the quality of our audience, and pairing that really well with, I think, the measurement tech that we've wanted to release to market and get out there. And so, you know, we are happy to work with anybody kind of from a third party perspective. But you know, today we've really partnered kind of with the industry leaders there and hope that that is going to help build up a lot of trust with what we've been bringing to market. But you know, with programmatic control is really the name of the game. And if we're not providing that to advertisers, that's a problem. But you know, we think we've done above and beyond that and think that from our perspective everything that we've done is very transparent, adding things around, you know, UID to pair id, working with a few other ID vendors as well. And so there should be trust in the audience, trust in the nature of the platform and trust in the format as well.
- [14:40]
Ad Tech God
So when, when you talk about the format and the outcomes that that clients are looking for, historically audio has been a little bit more brand focused. So you've been securing that those brand dollars from brands and agencies. How are you guys leaning into performance? Because I did read something about more of a performance product being made available. Where do you guys sit? Where do you sit in the funnel today or do you sit in multiple parts of the funnel? Yeah.
- [15:03]
Per Sandel
So, you know, I think outside perspective, I think we're definitely still today, you know, we're early in this journey of kind of moving to full funnel and down funnel. But I think the perspective of Spotify is very much just a upper funnel brand play. But the products and the tech stack that we've been Building are really designed to support full Funnel and us moving down Funnel in Ads Manager and the Ads API, we've launched optimization models very similar to like OCPM products that you've seen from some of the walled gardens that are around app install, around Pixel events. We've been working to strengthen the algorithm, the measurement solutions that we have first party as well as the partnerships that are there. But when it comes to outcome based audio, I think this is an area where we've done a lot of innovations with the team and even our audio products, we allow kind of a URL to be attached that, you know, if you have the app in the foreground, you can click on that, go immediately to the target, whether it's an app, a webpage. But we also kind of leave what I guess I would say is like a CTA leave behind. And so as the user comes back into the application and brings that back in foreground, we're going to give them a reminder about those ads they just heard, allowing them to actually click through to the destination to drive that performance. And so for us, it's really been an investment in the way that we make formats more visible as a user interacts with us in the foreground. We know that audio can be a background product, but we wanted to do that one, to kind of follow up, to make sure that we can drive them to the conversion or the business outcome that the advertiser is trying to achieve. And then on top of that, that's allowed us to actually have a lot more on platform signal to better understand our audience, make smarter targeting segments and also really feed that back into the algorithmic models that we have in place. And so I think, you know, from my perspective, we've also been trying to do a lot more with our formats that are on screen. And so I think you should stay tuned for a fair number of advancements over 2025 for us in that place. In terms of formats, what's there kind of in the display nature and the video nature. And you know, from our side, we're pretty excited about the future as we move down funnel. And I think this is an area with the products that we've been working on. The measurement side is really going to show the power of audio. I think that's something that goes underserved in today's media plans. There's an unbelievable amount of time spent on audio and that is sound on and it's right there with the user listening to that ad in the exact moment. And I think it's a miss for any advertiser that's not really leaning into that. We have the power to make these CTA cards drive to any business outcome or any sort of target that you want want to put in place.
- [17:33]
Ad Tech God
Per. I'd be lying if I didn't agree with you. If I said I didn't agree with you. Podcasting has been such a powerful tool for myself from architecture, our advertisers, you know, we do, you know, host, read scripts often. We run Programmatic as backup. We have seen an incredible, incredible reaction from, from listeners and we've seen great numbers because of it. So I'm definitely bullish on Programmatic Audio. So I'm really excited for you and the team at Spotify for rolling this out and I wish you guys the best of luck.
- [18:04]
Per Sandel
Yeah, thanks. We're incredibly excited and if you've got any feedback that you hear from the industries, please send it my way. We're definitely open to any and all feedback. Keep it coming.
- [18:13]
Ad Tech God
Creep up in your DMs pier. I'm looking forward to what I'm hearing. Awesome. I appreciate it. Thank you. Thank you to the Spotify team for having you here as my guest. Have a great week. Cool.
- [18:24]
Per Sandel
Thanks a lot.
- [18:24]
Ad Tech God
Take care.