The company said Tuesday it signed an agreement to acquire advertising technology company Megaphone in a $235 million deal. The companies declined to say whether the deal was cash, stock or a combination of the two. Spotify's stock fell nearly 1% after the market opened.
Megaphone offers technology for podcast publishers and advertisers seeking specific podcast space. It offers podcast ad hosting, distribution and insertion tools for podcast publishers such as ESPN and the Wall Street Journal, and advertisers can use the company's technology to find audiences through the podcast content of those publishers.
Spotify has been on a roll of podcast acquisitions in recent years, winning deals for programs from the likes of Joe Rogan, Kim Kardashian and Michelle Obama and buying companies like The Ringer and Gimlet Media. Now, it is taking further steps to monetize all that content with the help of a new acquisition.
Megaphone, formerly called Panoply Media, changed its name in 2019 after laying off its podcast production team to focus on the technology platform side of its business. The company has been owned by Virginia-based Graham Holdings Company.
The agreement should give advertisers greater scale in terms of who they can reach on Spotify and allow podcast publishers to choose to monetize their programs.
After the transaction closes, Spotify said it will make its "Streaming Ad Insertion" tool available to all podcast publishers through Megaphone technology, the first time it will open that tool beyond its own original and exclusive podcasts. The company has said that the tool makes the ads "segmented; relevant to the people who get them; measurable; more easily demonstrated to be effective; and interactive...".
Advertising has been a relatively small part of Spotify's revenue, but the company's leadership has said it is optimistic about the advertising opportunity. During its third-quarter earnings, the company said that 22% of its total average monthly users interacted with podcasts in the last quarter and that podcast advertising revenues increased nearly 100% year over year. The company says its podcast catalog has more than 1.9 million titles.
"I think there has been very little innovation, particularly on the podcast side in terms of how to better target advertising and allow creators to monetize their product in a much higher way," said the company's CFO, Paul Vogel, in his recent Q3 earnings call. And I think our ability to help bring those tools and services into the ecosystem will be excellent for overall business growth, allowing creators to make more money from their podcasts. And I think it will benefit us as well. ”