Ad revenue to surge by more than 30 percent during festive season: Spotify

Riding the wave of premiumization in India, Spotify expects ad revenue growth of over 30% during the upcoming festive season. According to Comscore report, Spotify India had around 55 million monthly active users (MAUs) in 2023, reaching 80 million MAUs in 2024. The audio platform is seeing an increase in advertisements for premium product categories.

Recently, Spotify launched ‘Creative Lab,’ an in-house creative agency, to help brands reach its audience more effectively. This service is available in 11 markets, including India, the US, Brazil, Mexico, Japan, Singapore, Australia, the UK, Germany, France, and Italy. Additionally, Spotify introduced its ‘Creative Lab’ team in India, providing local and nuanced insights to help brands and agencies create campaigns through workshops, inspiration sessions, and collaborative ideation.

Growth during Festive Season

Spotify reported Q2 2024 revenue of €3.81 billion, up 20%, and a net profit of €274 million. Spotify’s ad-supported revenue in Q2 grew 13%, reflecting double-digit growth across all regions.

Discussing the rising ad revenue for the audio streaming platform, Arjun Kolady, Head of Sales at Spotify India, said, “Last year has been fantastic. We are experiencing significant sequential growth, both quarter-over-quarter and year-over-year, across various categories. We have notably expanded our advertiser base, nearly doubling the number of partners we had last years."

Kolady added, “We are seeing strong momentum on the user side and high demand from brands. We are actively focusing on festive sale campaigns starting from Independence Day through October and November, and we anticipate a surge in advertisements on the platform.”

Commenting on the growth in advertisements during the festive season, Kolady said, “We expect more than 30% growth in revenue from ad sales compared to last festive season, exceeding market expectations by a significant margin. We anticipate strong, world-beating growth.”

Kolady further explained, “For the festive season, we are witnessing a lot of interest and demand from e-commerce, retail, tech, and consumer packaged goods (CPG) sectors. These three categories are driving most of the large-scale conversations.”

Sectors Driving Ad Revenue

According to official data, Spotify has 602 million monthly active users globally as of Q4 2023. As of the end of Q2 2024, the company had 626 million total monthly active users, it reported 246 million Premium subscribers, adding 7 million premium subscribers.

Kolady highlighted that Spotify India is organized by verticals and has significantly invested in its team, growing it nearly tenfold over the past year. “We did this to deepen our engagement with the most strategic advertisers and partners in the country,” he said.

He elaborated, “Our primary verticals contributing most to ad revenue includes media & entertainment, FMCG, technology, e-commerce and online services, automobile, and finance. We are experiencing strong growth across all these sectors.”

When asked if the platform faced a dip in advertisements due to brands cutting down on ad spends, Kolady responded, “We haven't encountered that issue much, for two reasons. First, as a premium urban platform, our focus has always been on brands targeting an urban audience with purchasing power. The rural slowdown didn't impact us.”

Increase in Ad Spends by Premium Brands

Explaining why advertisers choose Spotify for their premium products, Kolady noted, “Advertisers are focused on premiumization, aiming to move consumers up the value chain by increasing average selling prices and basket sizes. They understand that to achieve this, they must target audiences with the right purchase behavior and consumption patterns. Spotify fits well into this premiumization journey across all categories we work with.”

“For instance, if an FMCG conglomerate wants to advertise low-priced or non-premium products, Spotify may not be the best platform. We typically operate at the higher end of brand products in all the categories we engage with,” he concluded.

Agency business

Spotify India is working with top holding media agencies in India contributing significant chunk of revenue to the ad business, Kolady said, “Agencies are our most important and most strategic partners in the business. We have noticed that business has really accelerated due to our partnership with four or five holding companies and a lot of the new age independent agencies in the last one year. We are seeing faster adoption there.”

“We continue to invest in working with them to give our common clients a more diversified and meaningful and impactful set of solutions.”