The Swedish online music streaming company Spotify has made two big steps towards podcasting this week by buying the Gimlet Media Podcasting Editor and the Anchor Podcasting Apps Company.
Superficially, acquisitions are meaningless. After all, podcasting does not yield money, right? The entire US podcast industry generated only $ 314 million in advertising revenue in 2017.
Spotify's acquisitions, however, are part of a wave of $ 500 million in podcasting promised by the company for this year.
Gimlet raised approximately $ 28.5 million in venture capital funds valued at approximately $ 70 million. Yet, Spotify would have paid about $ 230 million for that. (Anchor collected approximately $ 14.4 million and its purchase price at the time of publication was unknown.)
Does this sound like a good deal?
Here's what Spotify may know others do not.
Show me the money
Podcasting is a strange industry. Apple started supporting iTunes podcasts nearly 14 years ago, but the support seems quite new and emerging. Nobody knows what a mature podcasting industry will look like, how advertising works, or how big the audience will be.
A small number of American podcast networks (including Gimlet) derive revenue from subscriptions and subscriptions, but most of the money comes from advertising – that's why podcasting is a relatively small business in the United States. United.
In China, the story is different. Subscriptions, subscriptions and tips complete the advertising on podcasts. Due to more variable and aggressive monetization – as well as the huge popularity of this medium – podcasting could be worth more than $ 7 billion in China.
Spotify may be looking to enter the potentially more lucrative Chinese market. Tencent Music, which is part of the conglomerate of Tencent Holdings, is a major shareholder of Spotify and could attract Spotify to the Chinese market. Spotify has had designs on this market for years. New acquisitions could fuel the launch of a Chinese presence in podcasting.
More interestingly, the podcasting space has considerable room for new business models.
Years ago, music downloads and streaming were considered lucrative activities, while podcasting was an activity facilitated by companies such as Apple. But it is now possible that Spotify considers podcasting to be more monetizable.
A song is a song is a song and the music is increasingly trivialized by the primacy of streaming on downloads. However, a podcast with valuable professional content that managers can spend, for example, could command more than any album. While music is largely a consumer product, podcasts are also important for business audiences, as well as for education, training, marketing, and so on.
Spotify will likely adopt the Chinese model of multiple sources of revenue in China and around the world.
Paid podcast subscriptions are clearly emerging. A company called Substack, which makes tools that allow writers to charge subscription fees for their newsletters, for example, launches podcasts.
And even in the podcast advertising space, there is plenty of room for growth. To date, in the US market, podcast advertising has been dominated by a short list of companies.
Spotify may wish to use its newly acquired asset to attract more wealthier advertisers and go beyond the current list of companies selling mattresses, job boards and hosting services. blogs. Premium podcasts can attract high-end advertisers such as automakers, expensive wristwatches, and high-end alcohol.
Most importantly, podcasting would benefit massively from better metrics, regionalised and personalized advertising targeting, and other aspects of advertising common to other media but rare in podcasting.
Spotify also wants to control the revenue streams generated by music streaming and podcasts. The company plans to update its terms of service on March 1 to allow it to terminate the accounts of users who use ad blockers. (The free version of Spotify is supported by advertising.)
Spotify is also likely to boost the audience of podcasts by matching listeners to new podcasts as it does with music. (The company claims to use about 16,000 "signals" to customize the music recommendations.) It could follow Facebook's pattern of using powerful algorithms to gain hours spent on the platform and personalize the commercials.
Oh, and one more thing.
The future of the media is mobile
The clear trend in content and media is generally towards the mobile. And audio is the ultimate mobile medium. While teenagers and young people under the age of 20 spend hours watching YouTube videos, many people of all ages want to listen while driving, jogging, cleaning and going about their daily lives. .
Over the next 15 years, smartphones could be gradually replaced by ubiquitous, intelligent devices such as smart glasses, smart speakers and smart screens. The first generation of smart glasses will be mainly audio, the sound being delivered by innovative means, such as bone conduction. Most of our interaction with the Internet will be via wizard-mediated virtual conversation interfaces. And our favorite content will be the word.
This trend towards mobile and audio will enhance the monetary value of podcasts, allowing dominant players to create lucrative business models. And Spotify intends to play with Apple as one of the two major global players.
Yes, the many important expenses of Spotify's podcast sites may seem unwise. But I think he's ahead of the curve and on the right track. Or at least, I think it's just that podcasting is about to become a very big company.
We may be finally seeing the first sensible commercial strategy for podcasting.