Audio Advertising Capturing Marketers' Attention, Led by Spotify and Pandora

By The Myers Report Archives
Cover image for  article: Audio Advertising Capturing Marketers' Attention, Led by Spotify and Pandora

As the television and digital video Upfront season swings from presentations to negotiations and from sizzle reels to activation discussions, marketers and their agencies are also paying closer attention to opportunities in digital audio and radio advertising. Spotify in particular is not only capturing the attention of marketers and agency execs, but is leading the media industry in innovation and creative opportunities, while lagging in measurement and performance metrics, according to a new survey conducted by MyersBizNet among 300 marketers and agency media buyers and planners. Premium and Platinum members of the MyersBizNet best practices industry cooperative have access to the full detailed reports.

Among survey respondents who have a relationship with Spotify, 86% rate the organization 4/5 on a five point performance scale for providing innovative and creative opportunities, among the highest positive scores received by any of the more than 200 media companies rated by MyersBizNet in its annual surveys. Pandora, with a larger respondent base, also performs positively, with 62% positive ratings. Spotify, Vevo and Pandora all receive excellent performance reviews from ad execs for the quality of their sales teams and customer service

Advertising revenues generated by Internet Originated Audio suppliers such as Pandora and Spotify are projected by MyersBizNet to increase an average 30% annually through the end of the decade, growing from an estimated $880 million in 2013 to $4.2 billion in 2020. Radio ad revenues are forecast to increase from a projected $16.5 billion in 2014 to only $17.1 billion in 2020, with 20% average annual growth in digital revenues slightly more than offsetting an average 2.5% decline in legacy ad revenues.

Both Pandora and Spotify are struggling, as is radio, with marketers' and agency execs' perceptions that the category does not justify premium pricing. While music content is among the most highly produced and appreciated in the world, audio advertising remains over-supplied and under-valued. In response, Spotify, Pandora and Clear Channel are investing significantly in promotional and event initiatives that deliver marketing opportunities beyond media exposure.

Jeff Levick, Spotify's Chief Business Officer, explains that Spotify is "not a passive listening experience. Our audience uses Spotify to build playlists, share and actively engage. We allow marketers to use our content to sponsor relevant and customized playlists – for the car, workouts, shower, parties, etc." Marketers can associate their brands with specific music genres and even with moods, such as Coca-Cola's sponsorship of 'happiness.'

Yet, the value equation for marketers remains cost-per-thousand, with currency based on engagement metrics and return-on-investment still in the distance, especially as agencies place increasing emphasis on programmatic and automated buying systems. "We've all been talking about programmatic buying and the race to the bottom," comments Levick. Content platforms should offer creative solutions. To effectively compete for traditional media budgets, Spotify, Pandora, IHeartRadio, Sound Cloud and other audio media vendors will require more sophisticated research tools than the industry currently offers. Spotify recently acquired The Echo Nest, a ten-year old Boston-based firm specializing in machine learning around music-related attributes. "We're on a fast track to deliver insights on what music discovery means to consumers and what marketers can learn to inform their creative solutions."

The recent acquisition of Arbitron by Nielsen will finally bring radio media into the 20th Century and enable Clear Channel, CBS Radio, Cumulus and other radio companies to compare TV and radio metrics. Digital audio companies can be expected to ramp up quickly with enhanced metrics and improve on the low performance scores the industry currently receives in the MyersBizNet survey for advanced research insights and support.

For additional details on the MyersBizNet surveys on advertisers' perceptions and methodology, contact Jack Myers at jm@jackmyers.com.

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