Spotify recently announced that it plans to start selling its free users' identifiable information to major ad companies using pattern recognition and other data mining techniques to profile fans before packaging them for resale.
Guest post by Chris Castle of Artist Rights Watch
Spotify announced today that it is selling its [actually the artist’s] fans to several different “ad tech” companies. Here’s the Spotify press release:
Today we have officially enabled programmatic buying across our audio ads globally. We’re partnering with three of the largest and most established platforms in the programmatic space – AppNexus, Rubicon Project and The Trade Desk – to give buyers access to over 70 million music fans on Spotify Free.
Here’s the deal: we’ve launched Private Marketplaces for our best in-class audio advertising platform on mobile, allowing access for :15 and :30 second audio spots. This makes Spotify the first publisher to enable Deal ID/PMP access across audio inventory in a true, real-time bidding environment. Buyers will also have the opportunity to access Spotify’s authenticated first party demographic data and unique playlist data.
This is available globally across Spotify’s 59 markets. Buyers can target audiences by age, gender, genres and playlists – all in real time.
Today’s release rounds out one of the most diverse programmatic offerings in market, now expanding across display, video and audio, with industry-leading viewability topping 95%. We’re now one step closer to our goal of making all of our innovative ad experiences available programmatically. To learn more about Audio PMPs, email email@example.com.
If you don’t know about “real time bidding” read this post I wrote in 2012, nothing has changed for the better from an artist’s point of view (“A New Meaning for Real Time Bidding: An artist’s guide to how the brands and ad agencies profit from advertising supported piracy“) It looks something like this:
Previously, [Spotify] sold audio ads through audio-only ad exchanges at a fixed price, and completed transactions through manual insertion orders.
The company has already inked mobile audio spending deals, and is in talks with major media agency networks, said Les Hollander, global head of audio monetization at Spotify. One of those networks is Omnicom Media Group, according to people familiar with the matter. OMG and Spotify declined to comment on the nature of the relationship.
“We didn’t have the real-time optimization last year,” said Jana Jakovljevic, head of programmatic at Spotify and former Rubicon staffer. “We were waiting for a programmatic standard for audio.” That came in January when the IAB released its “Programmatic and Open-RTB Protocol 2.4,” she said. “It gives the buyers more control in terms of optimization,” she said.
The goal is to get its mobile audio inventory included in more programmatic buys with “video, display and audio all together” and to tap into the fast growth of mobile programmatic ad spending, he said. “Programmatic channels, and money set aside for new concepts and investments — ultimately that’s where the money will come from.”
What this comes down to is that you are driving fans to Spotify, Spotify is capturing their identifiable information, scraping that into data categories through pattern recognition and other data mining techniques and then profiling your fansto be resold to brands. It’s hard to believe that Google is not involved with this deal somehow. (Don’t forget that Kara Swisher reported in Re/Code that then Google head of business development joined the Spotify board.)
How much do you think Spotify makes from selling your fan’s information out the back door? According to Ad Age it’s about $10 million:
Spotify has 100 million global monthly active users, according to the company. Among them, 70 million are free, ad-supported users, and 71% of total streams are mobile, said Mr. Hollander. In the U.S., Spotify has close to 50 million monthly active users, of which 75% are free, ad-supported users.
This year, mobile programmatic spending will reach $15.45 billion in the U.S. alone, and next year, mobile video programmatic spending will exceed its desktop counterpart, according to eMarketer.
The audio programmatic opportunity for Spotify is global, said Mr. Hollander. “I wouldn’t make the assumption the U.S. is leading the way here,” he said.
This year, global programmatic ad revenue from display and video ads will near $20 billion, according to IPG’s Magna Global ad spending forecast. Spotify is hoping to capture at least $10 million of that revenue through its programmatic audio, video and display ad sales, Mr. Hollander said.
How much do you think Spotify wants to give up freemium?