Spotify Technology S. A. (SPOT) is continuing its acquisition approach, this time with Megaphone, an advertisement and publishing site for podcasts, which will be the company’s latest acquisition.
For the latest acquisition, Spotify will pay $235 million. This implies that in recent months the cumulative amount of acquisitions of all podcasts reached $800 million. And adding partner programs with famous people, the overall investment rises to nearly $1 billion.
Because of the aggressive acquisition strategy, question arises around importance of content and partner programs for Spotify to invest in.
The main reason for such investments is the high competition in the streaming services industry. This suggests that to attract listeners, Spotify needs to deliver exclusive services. The business has deals with influential podcast authors like Joe Rogan, Kim Kardashian, and the Barack and Michelle Obama-owned Higher Ground production centre.
In other words, Spotify already has high-quality content, but the issue of monetization of that persists. Megaphone, which will supplement its own advertisement business with Spotify, will assist the company do this. A streaming ad insertion (SAI) technology for podcasts appeared on the streaming site at the beginning of this year.
Traditionally, ads are read out manually by hosts or podcast producers, but these ads may not be presented to all listeners. Based on listener data, Spotify can use the SAI service to better target ads. The acquisition will extend the reach of Megaphone to more than 20,000 advertisers and publishers.
Introducing a podcast subscription is another way to monetize Spotify. The company is currently conducting a customer survey on their stance on subscriptions which could cost them from $3 to $8 per month. If users kept their loyalty to the new idea, then Spotify will have another revenue-enhancing tool.
Spotify Technology S. A. (SPOT) stock was up 1.03 percent on Wednesday and settled at $253.029. Company’s current market capitalization stands at $47.88 billion.