Spotify has begun testing a new type of ad in Discover Weekly, its personalized playlist of music that’s the streaming service’s flagship feature. The company says that, for the first time, it will allow a brand to “sponsor” this playlist as opposed to just running ads. It believes many advertisers will be interested in this opportunity due to the playlist’s ability to reach heavily engaged Spotify users, and because it allows advertisers to “own the personalized listening experience” on Spotify.
According to Spotify, Discover Weekly listeners stream more than double the amount of users who don’t listen to the playlist because of the personalized experience it offers. That will make the ad product more compelling, compared with brands’ existing ability to sponsor other editorial playlists on the service.
With Spotify’s Sponsored Playlist ad product, brands can surround Spotify’s free listeners with audio or video messages in ad breaks, and gain Spotify’s help in building a collaborative marketing plan.
Microsoft will kick off the launch of branded ads by running an A.I. ad campaign called “Empowering Us All.” This will explore A.I. across sectors like Education, Healthcare and Philanthropy. Spotify says it was a good fit for the launch, as Discover Weekly is customized for each user by taking advantage of A.I. technology.
“At Microsoft we are focused on empowering every individual and organization to do more. Our work in AI is a central part of that mission to unlock human ingenuity,” said Erin Bevington, General Manager of Global Media at Microsoft, in a statement. “Our partnership with a technology innovator like Spotify offered a way for us to effectively share that message within a personalized entertainment experience powered by AI.”
Spotify recently passed 200 million monthly active users, but is now looking to new ways to generate revenue from its user base beyond simply converting free users to premium subscribers.
The company has been growing its subscriber base at a steady pace, but Wall St. hasn’t been happy with its financials. One issue is that its newer promotions, like its low-cost student and family plans, have seen its average revenue per user dropping – as of Q3 2018, it had fallen 6 percent year-over-year to $5.50. A more valuable ad product could help bring these numbers back up.
“Personalization has quickly gone from a nice-to-have to an expected consumer experience that delights audiences and marketers are craving opportunities to be part of it” said Danielle Lee, Global Head of Partner Solutions at Spotify, in a statement. “Our new Discover Weekly ad experience positions advertisers for success and ensures that our fans are hearing messages that embody the ethos of discovery.”
Brand sponsorships for Discover Weekly are currently in beta testing, says Spotify.