Programmatic Is 25% Of Spotify’s Revenue, Growing Twice As Fast As Direct

If Spotify’s third quarter earnings are any indicator, programmatic audio is taking off with buyers.

The digital audio platform told investors on Thursday that 20%-25% of its revenue comes from its self-serve programmatic platform and other automated buying features. That’s up from 18% in February, when the company went public.

The market is moving aggressively toward programmatic solutions, especially in Europe and the United Kingdom, said CEO Daniel Ek.

“We’ve made it a point of tactical emphasis from a product development standpoint,” he said. “The market is heading there and we’re driving there as fast as we can.”

Spotify rolled out a self-serve programmatic platform in September 2017 and will continue to see benefits from the shift toward that buying model for “many years,” Ek added.

Ad supported revenue at Spotify was up 30% in Q3 to $162 million, while ad-supported monthly active users grew 20% to 109 million. Overall revenue grew 31% year over year to $1.54 billion, and monthly active listeners were up 28% year over year to 191 million.

Average revenue per user (ARPU), however, declined in Q3 by 6% to $5.39.

CFO Barry McCarthy predicted that the rate of decline in ARPU “will continue to decelerate” as Spotify generates more growth through its student and family plans.

As Spotify pushes for more programmatic sales, the company is also ramping up its podcasting efforts, which it sees as a major opportunity. The majority of radio listening has not yet shifted online and it’s still early days for the podcast market overall. Spotify is experimenting with both fixed and variable deals with publishers.

“Our opportunity is gigantic,” Ek said. There aren’t too many companies in the world focused on that opportunity to bring audio online.”

Improving the user experience for podcasting is one way to help Spotify increase its share of podcasts, Ek said, including by fixing podcast discovery as well as adding functionality, such as the ability to fast forward through content.

Spotify, which spends a significant portion of its budget on negotiating deals with music labels, is also looking to podcasts as a way to diversify its revenue.

“If podcasts become a significant portion of the business, that will add its own margin structure and revenue stream separate from the music business,” McCarthy said.

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Dear Programmatic, We’re All-In. Love, Hallmark

Hallmark is greeting programmatic with open arms.

The 102-year-old card company moved all of its media buying to programmatic in 2015, and it’s “one of the best things we’ve done,” said Lindsey Roy, Hallmark’s VP of greeting marketing, speaking at the Mobile Marketing Association Leadership Forum in New York City on Wednesday.

Programmatic allows Hallmark to do more with a flat budget, Roy said, citing cost efficiencies, greater reach and more optimized spend.

Hallmark also wants to buy based on addressable audience rather than targeting websites or broad-based demographic segments, like women 25-54.

“We buy where she engages,” Roy said. “Two or three years ago, you’d have executives saying, ‘I think we should be on this site or this segment or this show’ – but we’re following our users, and that gets us the most value.”

Hallmark, which partners with Starcom on media buying, is sitting on what Roy called a “treasure trove” of first-party data, which the brand has been collecting in earnest since launching its in-store loyalty program in 1994. Hallmark also invests heavily in data acquisition, Roy said.

For the longest time, that first-party data cache remained mostly untouched from an advertising and marketing perspective.

But in 2015, during its Valentine’s Day push, Hallmark put 5% of its spend against first-party data. By Mother Day’s, that was up to 30%. This year, 50% of Hallmark’s digital spend is first-party targeted.

Display CPMs by campaign went down from $5.83 during the 2015 holiday season to $3.25 by Mother’s Day, while video CPMs dropped from $10.71 to $9.29.

Although Hallmark historically has spent around 95% of its marketing budget on seasonal campaigns with short flights, birthdays happen every day of the year, and that presents a scale challenge, Roy said.

But first-party point-of-sale data is changing the economics of targeting individuals at scale. If a mother buys a birthday card for her son or an anniversary card for her husband at a Hallmark store, for example, Hallmark can begin building a time-based element into its targeting strategy.

“This is a new frontier for us,” Roy said. “It means not only understanding the ‘who’ and the ‘why,’ but also starting to get at the ‘when.’”

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https://adexchanger.com/advertiser/dear-programmatic-love-hallmark/

WFA Sees Marketers Rethinking Programmatic Strategies

Ninety percent of members belonging to the European trade body are reviewing their contracts with agency trading desks to gain more control and transparency, the organization said in a report released Monday. The WFA, which represents Procter & Gamble, Unilever and other advertisers, surveyed executives in global media positions at 59 member companies across 18 verticals about their evolving relationships with trading desks.

When programmatic was emerging, many marketers handed budgets to agency trading desks without a formal pitch process or contract in place, said Matt Green, head of global media and digital marketing at the WFA. Now that programmatic is an essential part of the media plan, marketers are looking for more formalities to protect their interests.

“In the original days, people were implying that their agencies had maybe not nudged them into programmatic, but it became a default thing,” he said. “Now people are spending so much money in programmatic, and they recognize a need to put this more formal wrapper around it.”

While more than half of marketers that were surveyed still work with their agency trading desks, many are also working with independent trading desks, which can range from a client licensing and operating a demand-side platform in-house to working with a programmatic shop not owned by a major holding company. Use of these entities has increased 12% since the WFA’s last survey in 2015.

But most marketers aren’t eliminating their agency trading desks completely. Seventy percent of respondents split their spend between independent and agency trading desks, and more than 20% of respondents embrace a hybrid model, whereby they own the technology contracts but the agency manages programmatic spend.

The WFA’s marketers have the scale to feasibly manage media in-house, but leaving the management to their agency is easier from a staffing and flexibility perspective, Green said.

“Some people say it’s easier to pay managing fees and be able to pull the plug on that at any point,” he said. “If I have people on the payroll, it’s a bit more difficult.”

Agency trading desks are adapting their models to fit client sentiment. Forty-two percent of holding companies have expanded programmatic capabilities down to the agency level, as clients often feel more comfortable working with their agency partners than standalone trading desks. Twenty-nine percent of respondents said such changes have made them satisfied with the transparency provided by their agency trading desk.

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https://adexchanger.com/agencies/wfa-sees-marketers-rethinking-programmatic-strategies-transparency-top-mind/