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Can Spotify Become a Bigger (Video) Ad Player?
00:14:09
Next in Media sat down with Chloe Wix, Head of Global Product & Commercial Growth at Spotify at the company's beach venue in Cannes, to talk about AI-generated audio ads, why Spotify is leaning more into monetizing non-subscribers, and whether the 'background' medium can graduate into the video ad market.
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- [00:00]
Narrator
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Mike Shields
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Narrator
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Mike Shields
Hi everybody. Welcome to nexty Media. I'm Mike Shields. My guest this week is Chloe Wicks. She's the global Director of Monetization Product Marketing at Spotify. Hey Chloe, thanks for being here.
- [01:28]
Chloe Wicks
Hey, great. Thanks so much for having me. Happy to be here.
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Mike Shields
I'm happy to be here. We're at the, we should say we're at the Spotify beach in Cannes. This is definitely nicer than my playroom setup at home. I'm excited to be part of this moment with you guys. Want to ask you about I think people were always interested in Spotify's thinking on advertising. Early on. I think the anticipation was you're gonna be a subscription business. For the most part. Advertising will fit in and definitely seems to be changing. Can you maybe talk about the evolution and where you're seeing things headed?
- [01:57]
Chloe Wicks
Yeah, absolutely. So I think this is a common sort of conception across the board because many folks are very familiar, of course, with the premium service as well. But I think for us, what it really all comes back to is the fact that Spotify is a platform for creators first and foremost. We are a place where we want to empower musicians, podcasters, authors, et cetera, to live off of their art. And the premium subscription service and the advertising business are both really meaningful parts of us furthering that mission. And so for us, yes, advertising in terms of the overall focus, perhaps in the public sphere has been a little bit smaller than the focus on premium. But I think some of the investments that we've made over the last couple of months have definitely started to demonstrate to the contrary and really show the world how committed we are to the ad side of the house.
- [02:41]
Mike Shields
I want to ask you about some of those investments, but I'm curious, when you, when you talk about that evolution and trying that like where, where, where were you maybe in the. You get stuck in buckets in this industry. You were the audio bucket. This is even like the radio money. Mo one point. Where are you now when you're beyond that kind of initial stage?
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Chloe Wicks
Most definitely. So for us, I think that we are very proud to own the background we have for a very long time. We do currently. But two things can be true. We can have that.
- [03:09]
Mike Shields
That's not a bad thing to do.
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Chloe Wicks
But you can be bigger, correct? Exactly right. And we feel so fortunate because when you own the background, you have this opportunity. And one of the things that we've really become is that essential daily companion to the end user. And when you are owning the background that allows you to be present for moments in their day, it is a long term relationship.
- [03:27]
Mike Shields
Frequent.
- [03:27]
Chloe Wicks
Exactly, exactly. But with that said, it's undeniable that our own users, our creators alike, have this expectation that they have the opportunity to engage with us in a deeper way. And I think particularly with podcasting, what we've seen across the industry and what I'm sure you've seen yourself, is that podcasters in general, there's this incredibly strong relationship that users develop with their favorite podcaster. And from there there's this innate desire to really understand on a deeper level who that person, what their set design looks like, what their mannerisms are. And that I think was really the catalyst to a lot of engagement with video podcasting overall. And that is really what started the explosion of video on Spotify. And it's something that we've seen continue to grow over the last few months.
- [04:11]
Mike Shields
So I want to ask you about that because like, like you said, you're, you were a background medium for a lot of people. You want to get into video more.
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Narrator
How do you maybe shift.
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Mike Shields
There's a couple of. You try to pull off a few things, get people to think of you as a viewing vehicle, getting people to produce stuff that is meant for that. Like how do you kind of pull off a things at once there?
- [04:29]
Chloe Wicks
Oh, it's such a good question. So I think when it comes to the user space, the creator space. For us, and I think for creators, there's no question that having video as a part of the choice that we give users when it comes to listening versus watching is an obvious one. And so for us, it's really just about introducing the right technology that makes it easy to get that video onto Spotify. On the advertising side of the house, we are fundamentally breaking the traditional media plan. And we hear this from marketers all the time. They have folks that are very much assigned to buying audio. They have folks that are assigned to buying video, social media. You're screwing up the plan, all the buckets. Exactly. But that said, if you talk to any marketer, any media buyer, the other thing that is innate to what they do is wanting to be as native to a given platform as they possibly can be. And that's an area where we're having a lot of really fruitful conversations with agencies and brands alike is to give them the data and the stats to make sure that they understand the prevalence of viewing in addition to listening on Spotify, and really giving them the tools to be able to join that conversation as seamlessly and easily as possible.
- [05:30]
Mike Shields
How has, like, there's been just a lot of noise in the last six months about video podcasting, the people realizing how big it is in YouTube, how big Joe Rogan's audience is video, all that stuff. Has that changed the perception among brands? And do they want to come to you and say, I want to do big upfront deals now with some of these big names, it's a little bit different than the way they might have used you before.
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Chloe Wicks
You know, I will say this. The. The idea of having more of a sort of upfront deal or an annual plan with a major podcaster is actually something that we've offered for the better part of three or four years. So that part isn't as new. There's still a lot of brands that really fundamentally believe in the value not only of podcast advertising, but also that innate relationship that they can form with a creator when that relationship is authentic. And so I would say today we are probably doing more of those annual style plans than we ever have before. And one of the things that's really been a catalyst to that is the introduction of baked in ads within video podcasting suite. So, of course, a podcaster like a Joe, for example, has their video podcast that's on Spotify. As an advertiser, you can not only run just standard ads within that environment, but you can also work with the creator directly to bake in that more sort of native advertising opportunity. And that's definitely something that we've seen incredible growth around and a lot of demand for in the ad space is that, that's.
- [06:43]
Mike Shields
I think that's always a trick with any creator that brands want to get in the show as much as possible, but they want to, they want to make that, you know, it's hard to do a million of those kind of deals. Is there any way to bring some level of automation or is it by nature always going to be complicated?
- [06:56]
Chloe Wicks
I love that you said automation. I would say that automation is the number one goal that we have on the advertising side when it comes to technology. Because while we will always offer up larger sponsorship oriented, brand oriented deals, things like creator partnerships, things like big takeovers, we also know that in order to move further down the funnel, expand and deepen our partnerships with advertisers, that we need to show up as more than just a brand player. And so for us, we've launched a couple of different tools to help really legitimize those, those moves. Number one, we launched our Spotify Ad Exchange just a couple of months ago back in April. And that is really direct connections with all of the leading DSPs in the programmatic space. So that's the trade desk, that's DB360, that's Magnite and more to come. And then in addition to that, we have our ads manager tool, which is really a self serve entry point to be able to buy media on Spotify at very low minimums, oriented around performance. I share those things with you because podcasts play a very meaningful role in terms of the inventory that shows up inside of them. Of course you can buy all of Spotify, you can buy across music and soon pods. This is a big deal because it allows folks to enter into the world of podcast advertising at a much lower cost, a much lower minimum spend, and then also alongside all of the rest of their digital media. The benefit there is that the data, the measurement, you can compare everything in the same place exactly. It's an apples to apples conversation, which, with a more bespoke integration on the podcast side, it's inevitably harder to do that.
- [08:20]
Mike Shields
Yeah, it's not the easiest space to measure. Right. And then you guys are your own platform, so I think that's probably the easier position. How are you in this, in the what brands want spectrum of measurement and how is that evolving?
- [08:33]
Chloe Wicks
It's a great question. We are definitely on the rise as it relates to investing in measurement solutions across the space. So not Just for podcasts, but for all media on Spotify. I think for us, the philosophy that we take is first and foremost we need to be able to offer a robust set of first party tools. So things that are free, things that are accessible. So that includes solutions like our brand Lift products, that includes solutions like our Pixel or Spotify ad analytics as we've called it in the past, but then also really deep third party partnerships with all sorts of folks in the space, from Claritas to podscribe to arts AI. We have very, very strong relationships and ties to the industry when it comes to the third parties that have really built businesses around measuring the whole industry, but also pods. And those are relationships that we only want to deepen.
- [09:16]
Mike Shields
All right, I want to ask you. Everybody in video and television is trying to get. The dream would be to have way more advertisers than we used to. And a lot of that, the promise of AI is like all these different brands could get on like you can in Google and Facebook. How are you maybe playing in that space? And how does maybe, how do your gen AI tools help?
- [09:35]
Chloe Wicks
So I would say there's two major advertising oriented investments that we're making at Spotify. So first and foremost is what you'd expect, which is AI powered ad delivery. So this is really the idea that when you come to advertise on Spotify, instead of just saying, hmm, I think I want to run against this audience or on this particular date, you actually say what your goal is. Maybe your goal is to spend as much money as possible. Maybe your goal is to reach as many unique people as possible. Lately, maybe your goal is to drive purchases or app installs. We are now building out models that allow those ads to be delivered to the people who are more likely to take a certain action. So people who are more likely to watch a video, people who are more likely to stream a podcast, people who are more likely to download an app. And so that I would say is very much table stakes in terms of advertiser expectations when it comes to the way that they deliver their ads. On the flip side of that, and something that's very unique to Spotify is a new tool that we've introduced called our Gen AI Audio tool. Really what this does is it allows you to, from scratch, create a new audio ad. It can generate a script for you, or you can bring your own script. We have a myriad of AI voice talent that you can choose from. Tonality shifts from energetic to chill depending on the way that you want your ad to come across. And then, of course, in keeping with best practices, full music library to be able to add in and mix into your ad. On average, from start to finish, it takes about 17 minutes for a given user to create an ad, which is pretty incredible if you think about the.
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Mike Shields
So a small business, you're not asking that much. You don't have to be incredibly savvy about advertising.
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Chloe Wicks
Not at all. And the tool itself is free to use. You can version as many ads as you'd like. And so for us, the goal here is really to make it as easy as possible to create an audio ad, but also to then demonstrate that that audio ad performs well.
- [11:20]
Mike Shields
Now, do you think, is there a future where you could use that kind of tool for video? Is that like, you know, that's the kind of the dream for everybody? I don't know if we're going to be there yet.
- [11:27]
Chloe Wicks
It's such a great question. And I think you're hearing and seeing a lot of that at the moment. For now, we are focused in the world of audio, given how unique and innate that is to Spotify.
- [11:36]
Mike Shields
You kind of hinted at this. Your algorithm, you're known for having a really good recommendation management, understanding what people's tastes and where they're going. Can that be applied to your advertising? Is that a whole different kind of wing of the company that doesn't kind of connect?
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Narrator
How does that work?
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Chloe Wicks
I would actually say it's very interconnected. So there's a couple of different ways that those two things play together. First and foremost is a very unique sort of targeting segment or set of targeting segments on Spotify is that of artist affinity. So people who love and listen to certain artists or certain genres, such as country music versus rock and roll, this is an area where we build out targeting segments so that advertisers can reach fans of certain artists or genres in a very explicit way. And we see a lot of really interesting creation with advertisers making ads that are bespoke to those fandoms. So that's something that we very much sort of tie together in terms of the data of folks listening to, actually allowing the advertiser to speak to the end user in a very unique way. But then on the AI side and the personalization side, I would say a very similar engine to what we use to recommend content is what we actually use to deliver ads. When an advertiser comes and says, I want someone who's more likely to watch a video, or I want someone who's more likely to stream a podcast, those things are very much interconnected and sort of built off of the same Data Foundation.
- [12:49]
Mike Shields
Lastly, WordCan. I gotta throw in the question about what are you talking about? Can't. What are you hearing about what are you hearing from clients? What's kind of the vibe right now?
- [12:57]
Chloe Wicks
I think you hit it on the head in terms of AI. Everyone wants to know what we're doing in AI, AI and creativity. This is a festival of creativity. And so there's so many questions about, number one, what are the tools that are emerging in terms of making it easier and faster for creatives to push forward? But then also healthy and understandable skepticism about the role that AI should play. That, I would say is number one. Number two, automation. For us at Spotify, automation is a relatively new path. It's only about six months old. Everyone that's coming to Spotify beach right now is asking us questions about what are the partnerships we're brokering, what are the measurement?
- [13:30]
Mike Shields
How do I do things faster, more efficient?
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Chloe Wicks
Exactly. And I think just a lot of enthusiasm. You know, it goes back to the very beginning when we were talking about the dichotomy between audio and video. It's a tough thing for us to go to someone and say, we've been audio for a long time. Trust us, we're really good at video. But if we're making tools that make it easy and quick to make assets, and we're introducing automated capabilities that make it very nimble and efficient to test new units, that, to me is really the secret sauce that allows folks to. To not just see, but also believe.
- [13:56]
Mike Shields
You can have a legitimate conversation.
- [13:58]
Chloe Wicks
Exactly. In the changes that we're making, which has been really exciting.
- [14:01]
Mike Shields
Awesome stuff. Chloe, thanks so much for your time here. Let's see.
- [14:03]
Chloe Wicks
Awesome. Thank you for having me.