Spotify has entered into a definitive agreement to acquire podcast advertising and publishing platform Megaphone.
Megaphone provides hosting and ad-insertion capabilities for publishers and targeted ad sales for brand partners.
Founded in 2015, the company is headquartered in Reston, VA and also has offices in New York, Chicago, San Francisco, and Los Angeles.
Variety reports that Spotify is acquiring the company for $235 million in cash, which is more than Spotify itself generated in total advertising revenues in the whole of Q3 ($185m).
At the close of September, Spotify had $1.18bn in cash/cash equivalents on its balance sheet.
The Megaphone platform connects enterprise-level podcasters and media companies with tools to publish, monetize, and measure their audio content.
Together, according to a press release, Spotify and Megaphone will make Streaming Ad Insertion available to third-party podcast publishers for the first time.
The acquisition follows Spotify’s launch of Streaming Ad Insertion in January.
MBW suggested in July last year that an audio ad-tech acquisition could make total sense for Spotify in order to scale its podcast advertising business.
Interesting to note, that Sirius-owned Pandora got there first, by acquiring AdsWizz – a former Spotify advertising network partner – in a $145m deal in 2018.
Today’s news also follows the recent $325m acquisition of Stitcher by SiriusXM.
Advertisers will now be able to activate across Spotify’s Original & Exclusive podcasts while scaling reach through the Megaphone Targeted Marketplace.
Spotify revealed on October 29 that as of Q3 2020, it had 1.9 million podcasts on the platform (up from more than 1.5m podcasts in Q2) and that 22% of its Total MAUs engaged with podcast content in Q3 (up from 21% of MAUs in Q2 2020).
For podcast publishers, Spotify claims that the acquisition will unlock tools to help them earn more from their work, including the opportunity to opt-in to have their content monetized.
“We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant.”
Dawn Ostroff, Spotify
Dawn Ostroff, Chief Content & Advertising Business Officer, Spotify, said: “We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant.
“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.”
“We believe that Megaphone and Spotify’s shared value in innovation will drive the podcast ecosystem forward around the world.”
Brendan Monaghan, Megaphone
Brendan Monaghan, CEO, Megaphone, added: “We are incredibly excited to join Spotify to help advance the podcast medium for publishers and advertisers alike.
“We believe that Megaphone and Spotify’s shared value in innovation will drive the podcast ecosystem forward around the world.”
The closing of the transaction is subject to customary regulatory approvals.
The $235m spend on Megaphone means that Spotify has done podcast-related acquisition deals worth over $800m since February 2019.
Spotify spent $375m in cash on buying podcast companies last year – across three deals with a total value of $404m.
Those other companies are New York-based Anchor FM Inc, an online platform which enables users to both create and distribute podcast content, which SPOT bought on February 14 for a total consideration of €136m ($154m).
Next came podcast producer Gimlet Media, for a total deal price of $195m. Spotify acquired the firm on February 15 for a total consideration of €172m ($195m), consisting of €170m ($193m) in cash. The remainder of this purchase price (€2m) was “related to the fair value of partially vested share-based payment awards replaced”.
Founded in 2014 by Alex Blumberg and Matt Lieber, Gimlet creates podcasts like Startup, Crimetown and The Pitch.
After Gimlet and Anchor came Parcast, which Spotify acquired in April 2019. The company was founded in 2016 and has launched premium podcast series including Serial Killers, Unsolved Murders, Cults and Conspiracy Theories and the studio’s first fiction series, Mind’s Eye. The total price of that deal: $55m.
Spotify has also spent over $200m to acquire Bill Simmons-founded sports media outlet, the Ringer, which was announced in February.Music Business Worldwide
