Spotify Streaming Intelligence Creates New Brand Opportunities

Global brands like Smirnoff and Adidas are taking advantage of Spotify's reach to connect with audiences in ways never thought possible.

The digital world is a highly visual one. Guided by vivid product marketing imagery, text-rich social media content, and videos most users leave on mute as they scroll through, audio is largely secondary when it comes to entertainment, relaxation, and marketing.

Valuing video and visuals above audio is a hard habit to break, but Spotify is perfecting the art. The audio streaming platform is the largest of its kind, with over 232 million users. What might be even more surprising is that after 13 years, the company is finally profitable, posting a positive revenue in its recently-released 2019 Q3, only its second-ever profitable quarter. There are numerous reasons behind the surge, but according to Spotify’s director of creative solutions Rob Walker, it all comes down to the times, and how they-are-a-changin’.

“We’re starting to see a renaissance and the second golden age of audio,” he says. “For a very long time, people didn’t really think about audio. People thought about television and video. I’m starting to see now, with connected speakers and in-home devices, as well as the rise of screenless moments and burnout, there’s this new welcoming of creativity in audio.”

With this new Spotify-proclaimed golden age of creativity in audio, the Swedish company is productizing the listening experience. Spotify is leveraging audio—along with the data every listener provides simply by streaming their favorite songs and podcasts—to redefine consumer relationships. It all starts with pressing play.

Changing Spotify’s business model

Whether it’s podcasts, music, or calming ocean sounds, hundreds of millions of people use some kind of platform to stream audio, and that number is growing. Spotify’s listenership of 232 million users represents a 29 percent year-over-year increase (double the rate of other platforms like Apple Music, according to Spotify CEO and founder Daniel Ek), and although only 108 million of those users pay for the premium Spotify service, it’s the remaining listeners that allow the platform to flip traditional audience engagement models on their head.

Over the past decade, Spotify’s business model would best be described as one predicated on collecting subscription fees and then paying streaming royalties to record labels, with additional income generated from fairly static advertisements. Now, the platform’s business is completely driven by one of the most unique advertising models on the market. The difficulty comes in ensuring that the new model does not come at the cost of alienating users.

“We are a two-sided marketplace business,” says Walker, describing the freemium model. “We are spending a lot more time thinking about how to create experiences on the free side of the business that are not primarily focused on just advertiser goals, but also the consumer experience. It’s about creating that happy marriage between those two things by bringing in interesting and legitimate content approaches, the best UX, and top talent, all in one place.”

Paid Spotify subscribers are not subject to ads, at least in the traditional sense. Free users are fed ads in different ways, depending on the music they listen to, the playlist they chose, or even their location. These decisions are all powered by what Spotify calls its “streaming intelligence,” a data trove made rich due to the fact that Spotify is not tied to a massive parent company. Apple Music, Google Play (with sister service YouTube Music), and Amazon Music all at one point had restrictions in terms of cross-platform availability, even as recently as early 2019 when Google Home devices would not integrate Apple Music. Platform agnosticism has now become a bit of a norm, but not before Spotify had the chance to collect its industry-leading intelligence, amounting to well over 100 billion data points per day.

“I call it the ubiquity strategy,” says Walker. “The reality is that we exist in all places consumers can find us, which actually makes it exciting from our standpoint. We can target by divides, so we know if people are in the car, or listening at home on a speaker, or with a certain type of phone, so that’s really powerful knowledge. That’s streaming intelligence. Our creative teams can think about what contextual messaging we want in that place.”

That means Spotify isn’t just on phones or computers. Users can listen to Spotify apps built into cars, airplanes, and even a Proctor & Gamble smart toothbrush.

“When you exist across every place, you tap into more moments,” explains Walker. “Those moments are really exciting for us because you can target someone anywhere.”

“When you exist across every place, you tap into more moments. Those are exciting for us because you can target someone anywhere.”

– Rob Walker, Spotify’s Director of Creative Solutions

Streaming intelligence enables Spotify to highlight creativity as a competitive advantage, which means the platform can locate receptive audiences for any kind of creator or company. That’s the “lifeblood of what Spotify does,” according to Walker, and as Spotify moves towards becoming a central platform for brands to connect with audiences in unique and rewarding ways, the way consumers interact with audio will completely change as well.

“We aren’t the biggest advertiser in the world, but we are the biggest in terms of how we stay on top of consumer relevance and think about cultural trends. That’s where we think about our competitive advantage,” says Walker.

Spotify’s next practices

A best practice brands typically follow to engage with their audience is to invest in video, because those investments are about 10 times more effective than investments in other forms of advertising such as audio. That’s not the case for Spotify. The streaming platform instead focuses on ‘next practices,’ because when it comes to something like video, Walker asks, “Are our eyes really worth ten times more than our ears?”

The new golden age of audio is not just powered by the expanding sea of content streaming providers, but also from audience reach and growing sentiments involving device usage. Over half of Spotify’s audience is Gen Z and Millenials, and as audiences become more consumed by digital experiences (spending up to 11 hours per day with screens according to Nielsen), burnout is becoming very real. Spotify exists in the realm of “screenless” moments, which are the other hours everyone spends away from their devices—cooking, cleaning, exercising, and even sleeping (or trying to get to sleep).

“It’s interesting to think about the power of Spotify,” says Walker. “We took streaming and the way music is consumed and transformed it to become a little more one-to-one. We’re doing that now with advertising as well by understanding those contexts of screenless moments and applying that to how we think about connecting with audiences.”

“As a music platform, everyone kind of thinks it’s probably just like listening to a streaming version of radio,” Walker says. “That’s not true. We’re actually more like a consumer behavior platform, where people are soundtracking everything that they do in their life.”

“We’re actually more like a consumer behavior platform, where people are soundtracking everything that they do in their life.”

– Rob Walker

One example of this ‘best vs. next’ involves Spotify literally flipping a modern advertising standard on its head by ‘designing for sound off.’ The platform worked with Marie Claire for the International Day for the Elimination of Violence against Women. Free Spotify listeners heard a completely silent ad, prompting them to pull out their phones to see if the app stopped working. Instead, they saw a message reading “Unlike this ad, when it comes to violence against women, silence won’t draw attention.” The link led to a Marie Claire article and generated millions of positive impressions and conversations.

That advertisement was directed at a wide range of listeners, but Spotify can get dig even deeper to connect brands with their perfect consumer. In a visual world, companies are not considering screenless moments that offer the ability to really spread a message to someone in an unintrusive way.

Better yet, Spotify can connect with listeners when they’re in the middle of a targetable activity. A campaign with Adidas allowed Spotify to tap into a phone’s accelerometer while someone was out for a jog, calculate a stride rate, then mine Spotify’s content to find songs with the correct BPM and intensity to match the pace of the run. “For the first time, instead of runners listening to music, music will listen to runners,” the release read. Free users would also be given advertisements related to Adidas along with other athletic brands.

The next-generation customer profile

Streaming intelligence creates user profiles no other platform can mimic. Spotify and the brands it works with can truly transform how messages reach consumers.

With typical social media channels, users present a carefully-curated version of themselves to the world. Take the above example of running—if someone were to post a photo of a marathon they ran on Instagram and tag it #jogging, they might be fed ads about running even when they’re scrolling through their feed over dinner, hours or days after the fact.

Spotify users are not streaming content to impress anyone—they’re doing it because they enjoy it. Those listening to a ‘running’ playlist are either actively exercising or thinking about exercising. Spotify taps into this ‘true self’ to connect brands with users in the exact place they need to be. For example, a free meditation playlist may feature a Sonos ad with 25 seconds of ocean breezes, followed by a “This calming moment, brought to you by Sonos” ad read.

“The power of our platform is that it’s so emotional in terms of the content that’s used, whether it’s music or podcasts. All of the content on our platform has some meaning in it,” says Walker. “That means people spend more time on our platform, and when they do that, we learn more about them. That allows us to find out more about them than other research methods. “

“The power of our platform is that it’s so emotional. All of the content has some meaning in it.”

– Rob Walker

Walker says that more often than not, the companies Spotify works with are surprised to find out just how robust a profile the streaming platform can build based on the audience they want to reach. Spotify also understands distinctions between when and where to spread a message.

One example Walker describes is when a massive car manufacturer worked with Spotify to obtain specific analysis for their audience. They found that their drivers were over-indexed on spending time with kids, but also over-indexed in terms of listening to aggressive music—an odd dichotomy. Spotify sifted through the data to understand that when parents spend almost every waking moment with their kids, driving alone becomes a release, meaning they will listen to expressive, often aggressive music.

Spotify’s streaming intelligence can differentiate car models, music genres, potential indicators of parenthood (like children’s playlists), and other factors, then place the best possible ad for a new parent driving in their mid-level income car listening to fast-paced music. Normally, an ad for diapers may not roll during the Heavy Metal playlist—but now it could.

“You shouldn’t have homogenous messaging for everybody,” says Walker. “What is the culture of your audience? What do they like, talk about, or listen to? We understand that culture more because of the way people listen to Spotify. That allows us to do really amazing work for both artists and brands.”

This hyper-understanding of culture has proven Spotify as one of the most in-tune platforms in the world when it comes to bridging the gap between cultural nuance and connection. One more example would be Spotify’s recent work with Smirnoff. The liquor company worked with Spotify to create an equalizer function to balance the number of female artists users listen to in an effort to promote gender equality. Smirnoff learned so much from working with Spotify that they took their results and built other massive campaigns outside of audio with the findings.

“Smirnoff was interested in understanding gender,” says Walker. “Gender for us should not be a tentpole you talk about. We want to talk about culture and conversations around gender. We developed an experience that allows users to understand their gender bias in music listening. That campaign was an opportunity for brands to talk more about culture in an everyday sense, as opposed to a tentpole ‘Capital C’ culture moment.”

Smirnoff took those findings and used them in out-of-home, online video, and social campaigns. Tapping into culture organically instead of waiting for those tentpole moments is vital to building a real message and it’s a sea change Spotify is leading the conversation around.

Brought to you by Spotify

Above all, Spotify is helping the biggest brands in the world to discover new ways of representing themselves that will connect with customers in a meaningful way. As screenless moments increase with the ubiquity of smart assistants in the home and more people begin to explore ways to dissociate themselves from screens, brands will continually strive to discover better ways to digitally connect with consumers outside visual mediums.

Interestingly enough, Spotify does a lot of work in sonic branding when they first engage with potential partners. Huge brands like McDonald’s, Mercedes, HBO, Intel, and others excel with audio ads because their sonic identity is so recognizable. Sonic branding punctuates screenless moments and Spotify will provide streaming intelligence to see what their audience cares about. Music genres, podcast topics, and more can guide the development of a sonic brand.

With Spotify’s recent acquisition of podcasting giant Gimlet and its continued push into the space, the streaming platform is beginning to understand what it means to engage with listeners through long-form content as well. As many companies look to shorten their engagements to the YouTube standard of six seconds or less, Spotify is finding success with advertisements that last up to four minutes long, as long as they’re placed in the right environment and read by a host listeners connect with.

“For music, brands can sponsor 30 minutes of interrupted music or role a typical ad,” says Walker. “It’s a different exchange for a podcast host read. They have an influential voice, where they have a big following, they’re trusted, and people listen all the way through. Podcasts are expanding how we think about audio creativity. Does the ad have to be polished? Should hosts be the creative director? Brands that are brave and want to try something new can engage audiences in a different way there as well.”

Visual advertising is quickly becoming overcrowded; too many companies are competing for screen time, so much so that they lose the sense of how consumer’s palates have evolved. There’s room for a drawn-out branded experience, as long as it’s trusted. Screen burnout is real and it should factor into marketing budgets. And cultural relevance is not about tapping into one touchstone moment, but embedding within an entire movement. Spotify is not only helping companies realize who their audience is but why their audience is there in the first place, all through a meticulous understanding of audio.

“It’s all about the way we can tap into culture and the way we can guide brands towards this new and exciting way of audio advertising,” says Walker. “I think we’ve created great experiences and it will only get better as we grow the landscape of audio creativity.”