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Spotify purchases podcast ad company Megaphone for $235 Million

Amanda Salazar | The Ticker

Spotify is stepping up its game in the booming podcasting industry with a new multimillion dollar deal.

The music-streaming company announced on Nov. 17 that it had come to an agreement to acquire Megaphone, a private podcast advertising company. The Megaphone deal is valued at an estimated $235 million.

Megaphone, formerly named as Panoply Media, rebranded in 2019 after the company laid off its podcasting production team in order to focus on technology. The Spotify deal will give advertisers more scale when it comes to who they reach on the streaming platform, while allowing podcast publishers to choose to have their shows monetized.

The deal between Spotify and Megaphone will not affect Spotify’s own podcasts. While Spotify hosts its own shows on Megaphone, it also means that “more shows will have access to Spotify’s proprietary insertion called Streaming Ad Insertion or SAI,” according to The Verge.

Advertising has served as a small portion of Spotify’s revenue. However, the company remains hopeful about the new deal.

Spotify’s third quarter saw 22% of its monthly average users engaged with podcasts. Podcast ad revenue has increased by nearly 100% over the year. Spotify’s CFO, Paul Vogel, spoke out about the lack of innovation in podcasting.

“I think there’s been very little innovation, particularly on the podcasting side in terms of how to better target advertising and allow creators to actually monetize their product in a much higher way.”

In a Wall Street Journal article, Jason Richman, who serves as Spotify’s head of global advertising business, described podcast advertising as “out-of-home.”

“Podcast advertising today is more like out-of-home — like what you see on a billboard — than digital media,” said Richman. “It’s based on some amount of targeting but there’s no way to measure exactly who drove past it.”

SAI functions work like other podcast ads but in Spotify’s case, the ads are added in real-time before consumers listen.

Spotify has a lengthy history of acquisitions. In just the past two years alone, the company struck major deals with celebrities including Joe Rogan, Kim Kardashian and Michelle Obama.

Spotify’s acquisition history also includes companies like “The Ringer,” a deal that was worth an estimated $196 million, and “Gimlet Media for $200 million.”

Podcasting has now become the go to media platform for the entertainment industry. News organizations have also jumped into the podcasting game as well.

Spotify is expanding its reach in podcasting, a popular trend that sees no end in its future.

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Jahlil Rush, Production Assistant
Jahlil Rush is a Production Assistant to The Ticker.

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