- Spotify’s $235 million purchase of Megaphone, a podcast hosting and advertising company, as well as its deals with companies like Gimlet Media and Anchor, show the company is serious about becoming the default podcast hub.
- The current default option? Apple, which arguably brought podcasts to the mainstream and operates the primary directory that almost every podcast app uses.
- Columnist Jason Aten says that while podcasts have acted as a sort of side project for Apple, they’re now center stage in Spotify’s business strategy — allowing the streaming company to possibly dethrone the tech giant.
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But podcasts have had an especially good year, with listenership doubling on platforms like Spotify as people are spending more of their time consuming entertainment during the pandemic. Right now, more than half of all households say they listen to podcasts.
Historically, podcasting has been Apple’s thing. Apple didn’t invent the podcast. However, it wasn’t until Apple added the ability to download podcasts into iTunes in 2005 that they really started to become widely available to almost anyone.
Apple even operates the primary directory that almost every podcast app uses, making it the most dominant distributor of podcasts. It even has a team that reviews new shows to be sure they aren’t spam or don’t contain explicit content.
For anyone who wants to start a podcast and grow a following, Apple has been the most important place to start for more than a decade. If you want your podcast to be available to the largest number of listeners, you submit it to Apple. If you want it to be found by more people, you encourage your listeners to subscribe and leave a rating using Apple Podcasts.
Despite that, Apple has never really made any move to monetize the technology or its platform. It doesn’t charge content creators to submit their podcast to its directory. It doesn’t operate its own content network. It doesn’t offer advertising services. It doesn’t offer any subscription service in the way it does for music and video content.
Meanwhile, Spotify has spent $500 million over the past year acquiring both talent and companies to bolster its attempt to be the dominant player in the podcasting industry. It seems clear that the company is very much looking to take Apple’s place as the default when it comes to podcasts.
It’s hard to imagine any other way of looking at the company’s announcement that it just spent $235 million to purchase Megaphone, a podcast hosting and advertising company. That comes after previously buying up companies like Gimlet Media, a podcasting network, and Anchor, a platform for creating and publishing podcasts.
Of course, perhaps Spotify’s most well-known acquisition came in May when it said it would spend over $100 million for the exclusive rights to The Joe Rogan Experience. The streaming company already has exclusive deals with Michelle Obama and Kim Kardashian.
It seems pretty clear that Spotify is making a serious play to own not only content, but the distribution and monetization of podcasts as well. That’s one of the reasons the acquisition of Megaphone is so significant — Spotify will now be able to generate revenue from ads even outside of its own network.
Maybe even more importantly, it will be able to collect data about podcasts and listeners outside its app when they’re hosted on Megaphone. That information is extremely valuable for both fine-tuning how it targets ads as well as how it makes decisions about the types of content deals to pursue.
One of the more difficult things about podcasting is that it’s harder to tell who your audience is than other forms of content publishing. As a result, it’s hard to target your audience with relevant ads. That’s why most ads on podcasts amount to the traditional, scripted, host-read plug for a sponsor.
Spotify, as a service, has a massive advantage since it knows far more about you as an individual. If you subscribe to Spotify, it knows who you are, your location, your age, your gender, and your listening habits. As a result, Spotify uses its proprietary streaming ad insertion (SAI) technology to serve you ads in much the same way YouTube or Facebook would.
That technology will benefit from expanding the set of data it has about users listening habits as well as which shows cater to specific audiences, even when that audience isn’t using Spotify. That’s the type of data the company gains with Megaphone.
The company also recently sent a survey to users asking them what price point they would consider paying for a podcast-only subscription service. While there’s no indication when or even if such a service will ever launch, the fact that Spotify is exploring the possibility only reinforces that it’s taking podcasting very seriously.
Ultimately, that’s the biggest difference. Podcasting has always been sort of a side project for Apple. Sure, it’s pretty much owned the distribution space, mostly by default. In fact, because Apple has never really tried to monetize podcasts, and has made its directory open to both podcasters and developers who make listening apps, both groups have never had much reason to consider an alternative.
The fact that podcasts were so easily available to Apple’s users was sort of a side benefit, but not something it takes particularly seriously. Spotify, on the other hand, appears to be deadly serious. Spotify wants very much to change that equation by gaining control over all three aspects of podcasting — creating the content, distributing it, and monetizing it.
In fact, Spotify is taking it seriously enough that it’s spending big money to dethrone Apple. You might even say it’s planning a coup.