Corporate News

By Cathy Rose A. Garcia, Associate Editor

How Spotify is wooing brands

Posted on April 17, 2017

DON’T BE surprised if you start hearing ads about coffee while listening to the “Chillax Ka Muna” or “Morning Stroll” playlists on Spotify.

The world’s largest music streaming service is ramping up its efforts to attract advertisers in the Philippines, where its recent TNS-commissioned study showed two in five Filipinos with Internet access listen to music on Spotify.

Joanna Wong, head of business marketing for Spotify in Asia Pacific, shared some insights on how the tech company is trying to woo brands in the Philippines.

“Moments-based marketing” is one key trend that Spotify believes will go mainstream this year.

“It really allows marketers to really send the right message to the right audience at the right time,” she said in a recent interview with BusinessWorld.

In the past, Spotify users would choose musical genres such as pop, jazz or rock. Nowadays, users are streaming “moments” or curated playlists that are appropriate for what’s happening in their lives right now, such as “Commute sa Umaga,” “Music for Malling” or “Songs to Sing in the Shower.”

Benjamin Chelliah, Spotify head of public relations for Southeast Asia, said they saw a change in the listening habits of users in the last two to three years.

“People are now starting to ‘playlist’ their life, basically creating playlists based on what they’re doing and making sure it’s related to that moment. That’s why moments are so important. It’s one way of people understanding what’s happening in their lives and making it relevant,” he said.

For instance, one of the most popular playlists in the morning is “Jeepney Joyride,” which indicates many users listen to Spotify while commuting.

This is why Spotify says it can help brands target consumers more effectively, since they can identify what audiences are doing when they listen to playlists for particular “moments.”

“Imagine a workout (playlist), you can send a message about workout tips because I know you’re working out at this moment. I’m a workout apparel brand and ‘hey, have you considered trying this?’ And you’re in the right mind-set to accept that message because you’re working out... When people are trying to party and you send a message about working out, it doesn’t quite work,” Ms. Wong said.

A rise in audio advertising on streaming services this year, but not at the expense of radio ads, Spotify says.

“Our second prediction for this year is: ‘Radio is great, but audio is even better.’ For radio, people traditionally listen during commuting hours. But we offer streaming that is turned on throughout the day,” Ms. Wong said.

“Traditionally, audio advertising is really synonymous to radio advertising. But now with the streaming generation and with music streaming, it’s recently evolved.”

A 2016 report conducted by Spotify and GroupM found that half of Internet users worldwide are now streaming, and over 60% of streaming is now mobile.

Spotify, which is available in 60 markets globally, has more than 100 million active users, including over 50 million paying subscribers.

While subscriber data for the Philippines is not available, Spotify said Filipinos have streamed at least 30 billion minutes in 2016, spending an average of 154 minutes per day on the app.

“This is opening up a new market and audience that advertisers really have to understand how to market to. We found currently that the ad streaming revenue is worth $1.5 billion. We forecast it will be worth $7 billion by 2030,” Ms. Wong said.

The study also found that “workout moments” are worth $220 million in new ad revenues in the seven markets surveyed, including the United States, Germany, Australia, United Kingdom, France, Canada and Sweden.

So why should brands choose to advertise on Spotify?

“We found as an audio platform compared to radio and streaming, Spotify is the number one platform in the Philippines. Radio is great and we will always be complementary to them. Some listen to radio, others radio and Spotify, and now because we have two out of five people with Internet access listening only to Spotify, we have a 19.6% incremental reach to radio,” Ms. Wong said.

If advertisers want to reach the full audio audience, Ms. Wong said they should buy ads both on radio and Spotify.

Spotify is also looking to help brands “market to people, not the machines they use.” Using its first-party data, Spotify knows who its users are and what they’re listening to.

“We are following them through their cross-platform journey. When we talk about the targeting capability, we also offer the opportunity to re-target. If I know you’re that one person, I follow you on different devices. So I can send a sequential message, I can do that. It allows advertisers a lot of creativity to work with the data we have,” Ms. Wong said.

In the Philippines, Spotify recently rolled out sponsored playlists. Brands can sponsor selected playlists operated by Spotify, which already have a built-in fan base, for either two to four weeks.

Among the popular playlists available to sponsor now are Top Hits Philippines, with around 1.5 million followers; #Hugot, with over 950,000 followers; and “It’s a Hit!,” with 877,000 followers.

“For Chilax Ka Muna -- if you’re a coffee or confectionery brand, you can take advantage of this... Morning Stroll could be for cereal brands or brands serving breakfast... These are the 10 most-followed playlists in the Philippines, so you already have a strong following and you can buy ad space, native advertising in Spotify to drive to the playlist,” Ms. Wong said.

The music streaming company will also work closely with the brands to ensure the ads will be relevant to the users.

“We are working with brands so we can understand what their marketing objectives are. If they are pushing a breakfast product, we can recommend Morning Stroll,” Ms. Wong said.

But will these audio ads be effective?

“Users streaming are 1.75 times more likely to buy something. Purchase intent is higher... This (ad) is more of a prompt or nudge, like here you go, check out this. It is effective and it’s a way for brands to leverage on as well,” Mr. Chelliah said, citing a Spotify report.

While paying subscribers don’t have to listen to ads, the subscribers who listen for free should not worry that their playlists will be flooded with audio ads.

“We are also users, we understand how much we can push the limit for advertising. In an hour, we only allow four minutes of advertising so it’s spread out, and you don’t feel it,” Mr. Chelliah said.