Spotify plans to split with its longtime ad agency as it looks beyond music streaming for growth
- Spotify is looking for a new advertising agency while parting with its agency of six years.
- The company, with a $240 million estimated ad budget, has been moving beyond music streaming.
- It’s now moving into the audiobook space dominated by Amazon.
Spotify is quietly looking for a new ad agency to handle its media planning and buying as it expands its business beyond music and podcasts and expands into performance marketing.
According to two knowledgeable sources, the audio streaming company intends to part ways with its global agency of record since 2017, ad holding company IPG Mediabrands’ UM.
“Today, UM is Spotify’s agency of record,” Spotify said in a statement. Spotify is constantly evaluating its marketing objectives as well as larger media trends.” A UM representative deferred comment to Spotify.
According to marketing research firm COMvergence, Spotify is expected to spend $240 million on global media in 2023, including $50 million in North America. Spotify also has its own advertising agency.
Spotify reported an operating profit in October, its first since 2021, as user and advertising growth, as well as price increases, boosted results. During the company’s earnings call, CEO Daniel Ek stated that the company was able to demonstrate growth by reducing marketing spend and shifting the mix toward performance marketing.
Spotify expects to make a decision on a new agency in December; according to one source, Publicis is in the running.
Publicis did not respond.
Spotify has expanded beyond its roots as a music streaming service, spending $1 billion to build a podcast division through acquisitions of Parcast and Gimlet, as well as deals with celebrities such as Joe Rogan and Michelle Obama.
However, profits have failed to materialize, resulting in three rounds of podcast layoffs, including 200 people this year. In addition, the company laid off 600 people in a separate cut as CEO Daniel Ek admitted the company was overly aggressive in scaling up. Dawn Ostroff, the company’s head of content and advertising, left as part of the layoffs. Spotify has since shifted away from heavy podcast spending and made some of its shows available on other platforms in order to increase audience growth.
Spotify’s latest act is an expansion into audiobooks, a market dominated by Amazon-owned Audible. In October, it began offering 15 hours of audiobook streaming per month to US and UK premium subscribers, or about two audiobooks per month, in the hopes that listeners will pay more. (Previously, the company had introduced a pay-as-you-listen model.)
