SoundCloud amps up advertising with programmatic buying in the US

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On the heels of hiring a new CTO from Yahoo and trying to position itself either as a stronger acquisition target or standalone entity, SoundCloud is getting a lot deeper into the business of advertising. Today the audio startup — which streams both licensed music tracks and is also a go-to platform for user-generated content (similar to YouTube) — announced that it would be turning on programmatic ad buying in the U.S.. Programmatic ad buying makes it possible for marketers to target users on the platform based on parameters like location, music listening habits and other demographics like age.

The programmatic play builds on SoundCloud’s existing advertising platform, which has been in place since 2014 (launching first in the U.S. in August of that year).

SoundCloud’s partner in the venture is Triton Digital, an audio advertising platform that works with Pandora, Spotify, iHeartRadio and others and sells programmatic through its a2x platform. SoundCloud had already launched programmatic with Triton as in smaller markets, specifically Australia, New Zealand and Canada — a testing ground of sorts before turning it on in the U.S. The U.S. is by far SoundCloud’s biggest market, accounting for 75 percent of its 175 million users, or 131 million listeners.

And it looks like SoundCloud, is preparing to close off the gap globally — it’s currently hiring in programmatic ad sales to be based out of the U.K. or Berlin.

The move to turn on a more targeting form of advertising comes at a key time for SoundCloud. The company posted a loss of $52 million on revenues of just $22 million in 2015, the most recent year for which its financials have been released. In 2014, SoundCloud’s revenues were $20 million and losses were $44 million. In other words, its losses are growing faster than its revenues, and so it needs to start generating more of the latter, pronto. (SoundCloud must report financials in the UK, where it is incorporated.)

If revenues versus losses are its rock, runway may be SoundCloud’s hard place. The company has raised just over $193 million in funding (most recently $70 million led by Twitter last summer) and has been in acquisition discussions with Twitter, Spotify and now, reportedly, Google. If there is an exit in sight, it’s not come to pass yet. Combined with SoundCloud’s losses, this is likely putting the company under pressure to raise more money — which would be another reason why it’s amping up its revenue-generating abilities with a more advanced form of advertising.

It’s also unsurprising on another level: programmatic advertising, which taps into troves of data to connect ads with people who are more likely to respond to them, has become widespread online, and it could be argued that any media company serious about making revenues from ads has offer it to ad buyers. This is especially the case for reaching certain segments of consumers, especially younger consumers; and SoundCloud says that the “Gen Z demographic” accounts for 75 percent of its audience.

While audio ads are a relatively small part of the digital advertising pie, programmatic is more recently growing in this segment, too, for example with Spotify launching its own programmatic play in June 2016.

“Audio is a fast growing area of programmatic advertising, and we’re excited to expand our partnership with Triton to add our premium audio inventory to the U.S. market,” said Peter Diamond, SoundCloud’s head of brand partnerships, North America, in a statement. “Triton’s technology makes it easy for advertisers in the U.S. to access prime SoundCloud ad inventory in an automated fashion to connect with our unique, highly engaged audience.”

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