Audio streaming service Spotify has reached a deal to buy the podcast publishing and advertising company Megaphone for $235 million.
In a statement, Spotify said using Megaphone’s technology would make streaming ad insertion (SAI) available to third-party podcast publishers for the first time. The SAI technology allows ads to be inserted based on listener data in real-time rather than being determined ahead of time.
“We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant,” Spotify chief content and advertising business officer Dawn Ostroff said. “We look forward to Megaphone joining Spotify on our mission to accelerate smarter podcast monetization for advertisers and podcast publishers powered by a scaled audience and state-of-the-art technology.”
The companies would not give specifics on financial terms of the deal. Megaphone, which was previously known as Panoply Media, is owned by Graham Holdings.
Spotify, in its third-quarter earnings report, said 22% of its monthly average users engaged with podcasts and ad revenue from podcasts was up 100% year-over-year. Advertising has made up a small portion of Spotify’s revenue historically.
“I think there’s been very little innovation, particularly on the podcasting side in terms of how to better target advertising and allow creators to actually monetize their product in a much higher way,” chief financial officer Paul Vogel said in the company’s third-quarter earnings call. “And I think our ability to help bring those tools and services into the ecosystem will be great for the overall growth of business, it will allow creators to actually make more money off of their podcasts. And I think it will benefit us as well.”
Spotify shares were down 6.5% on Tuesday afternoon but rose modestly on Wednesday morning.