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Leaked Spotify Deck shows how it competes for video advertising dollars

Spotify has made great efforts to improve its offering for advertisers.

The music streaming service is relying on automated sales to broaden its appeal to small and medium-sized businesses. It has a new in-house advertising agency and a generative AI advertising product to simplify the creation of audio ads. And it held its first NewFronts presentation this spring to promote its growing video inventory, including video podcasts and music videos.

Spotify just reported the most profitable quarter in its history, thanks to a 13% increase in ad revenue and a 12% increase in subscribers to its premium (non-ad) services.

But advertising revenue growth slowed from an 18 percent increase in the first quarter. Advertising accounts for 12 percent of Spotify's total revenue, although Spotify has been trying to increase that share to 20 percent.

Spotify is also a small player in the advertising market. Emarketer predicted Spotify will generate revenue of $2.06 billion this year, putting it behind other long-tail players like Pinterest, which is expected to bring in $3.65 billion, and advertising giants Alphabet and Meta, which are expected to bring in $204.92 billion and $154.16 billion, respectively.

During Spotify's second-quarter earnings call, executives attributed weakness in the advertising business to the volatility of the advertising market and strong subscriber growth, which led to a shift in the company's revenue mix in favor of subscriptions.

Spotify's automated and self-service advertising offerings are gaining popularity among advertisers, but the company may need to do more to be seen as a competitor for social media ad revenue, says Andrew Sandoval, vice president of biddable media at Croud, a digital advertising agency.

“Audio is a different space than Snap/Pinterest,” he said in an email. “Sure, they compete for those dollars, but Spotify isn't necessarily competing for users' attention.”

Spotify's current advertising pitch to brands, laid out in a 50-page ad deck obtained by Business Insider, touts a GWI study that shows 92% of Spotify users use Spotify as part of their daily routine, giving advertisers plenty of opportunities to reach consumers. Spotify says its ads outperform TV and social media on metrics like reach and attention and can convince users to buy.

Spotify wants advertisers to know that it sells not just audio but also video and display advertising, and that it offers advertisers multiple ways to buy and measure advertising in a brand-safe environment. It touts its popularity with Gen Z and its home to well-known artists such as Taylor Swift and Trevor Noah.

Scroll down to view selected slides from Spotify's ad deck.

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