I'm an Advertising Executive. And Yes, I Think Spotify Can Live on Ads Alone...

Friday, June 08, 2012
by paul

Could streaming services like Spotify, Pandora, Last.fm and Grooveshark live entirely on advertising alone? Seems like a seriously speculative bet, but not to Alexis van de Wyer, president at Adswizz. He thinks that Spotify and its streaming peers have been so focused on audience growth that they haven't really wrapped their heads around sophisticated ad-based monetization. "What this industry has seen is a huge amount of audience growth," van de Wyer told Digital Music News. "But so far we haven't necessarily seen the monetization. Or when there is monetization, the costs are growing faster than the revenues."

Which has led to van de Wyer's theory that ad-based companies like Spotify and Pandora could totally survive on advertising alone - and be profitable - if they successfully dedicated the resources and brainpower to making this happen. "I've seen it, I know that it's possible," van de Wyer told us.

"It's good to have different revenue streams, but I know it's possible on advertising only."

In fact, van de Wyer sees three major reasons for the failure of these companies to successfully reach ad-based profitability.

(1) They need real sales forces.

"Most of those players don't necessarily have their sale forces in place, and Pandora is a little bit of an exception here."

(2) If they have a sales force or sales partners, they are often geographically limited.

"Obviously the internet doesn't have borders, so there are all sorts of opportunities in remote parts of the world, in different continents and even different parts of the US. But they don't have people in those regions."

(3) They haven't figured out their audiences as it relates to ad sensitivity and proper targeting.

"There aren't too many companies doing this well, we've seen some companies getting there; for example, instead of showing 6-7 ads an hour, they're doing 2-3 and doing it in a very targeted way. That includes multimedia, combining video and audio in really smart ways, really raising the CPM."

In other words, 'hyper-targeting' across audio, video, and visual aspects. But wait: there's a seriously dark side to all of this targeted monetization. Earlier, Spotify was caught red-handed dropping nefarious cookies on listener computers. And its life partner, Facebook, mercilessly crams cookies down the throats of its visitors to leverage ad dollars. In fact, we've heard from investors that the only way companies can successfully leverage ads is by vacuuming as much information from user computers - and selling all that data back to companies.

Van de Wyer might have been dancing around that one, while pointing to alternative data-grabbing methods like IP identification. In reality, freebie experiences frequently compromise privacy - and, your hard drive.

Comments Closed

Comments (13)

Jim Friday, June 08, 2012

There's no way any of them can survive on advertising alone with the way their deals are structured...

FarePlay Monday, June 11, 2012

Aside from the fact that this is really a self-serving post; let me hijack this to a new conversation, sorry its' Monday Morning...

When we talk of profitability, you can't leave out operating expenses. So let's use Spotify as an example.

Their path to profitability is based on their ability to acquire "product" at the lowest cost possible. So the question becomes when you negotiate the deal of the century for content and there are still concerns for profitability, perhaps the real question becomes is this a valid, sustainable business model or number crunching for VC investments.

Now to your point, I know there are a lot of musicians who can't afford to work anymore. Perhaps they could sell advertising for Spotify and everyone can make a living.

steve Friday, June 08, 2012

This article is application. move it to the Jobs section

Prince Pauper Friday, June 08, 2012

You need the big sponsors too like Coke. Not everyone can do that but it could make the ad 100% supported vision a reality.

steveh Friday, June 08, 2012

Targeted ads:- bah humbug!

Remember Spiral Frog?

QSDC Friday, June 08, 2012

Spiral Frog was for permanent downloads, not streaming. Apples and Oranges

R.P. Monday, June 11, 2012

Can you use "apples and blackberries" instead? Thanks.

steele Friday, June 08, 2012

And...

AdsWizz gets $6 mln in funding in 3..2..1..

Daniel_MC Saturday, June 09, 2012

So you've got someone in advertising to boast how good the advertising could be for Spotify. Come on.

AdProGoldman Monday, June 11, 2012

None of this article touches upon the reality that the record labels/rights owners have a huge impact on the success of streaming music. The license fees dictate the success (or failure) of any streaming music service (see Pandora).

Ad innovation is paramount in this space and I can agree that better targeting and leveraging consumption data to provide more efficient ROI is a start. As marketers, it is our task to apply our knowledge of consumer behavior to the new digital media tool sets to engage users in a way that gives them value for their time.

Ads that can provide brands the opportunity to be included in the content will be far more effective than ads that float around the content.

p.s. Editors @ DMN ... proof your articles before they are published ... "What this industry has SCENE is a huge..." if you want to be taken seriously you need to take your business seriously and tiny mistakes like this make a big difference in your creditability.

Pedant to pedant Monday, June 11, 2012

Did you mean credibility?

Morgie Tuesday, June 12, 2012

Hahahaha, snap.

joker Monday, June 11, 2012

I've never heard of Adswizz and know something about advertising, being my dad has been in the business for 35 years.

Spotify has a massive sales team in every territory they are in, it's probably close to 30%, if not more, of their 800 employees.

Users do not want more advertising and for Spotify to be successful, they need to graduate people to paying subscribers, on mobile.

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