Highlights for advertisers from Spotify’s Q1 2023 earnings
This week, Spotify released its first quarter 2023 financial performance—our strongest since 2018. The strength we saw exiting 2022 continued into 2023, as nearly all of our Q1 KPIs surpassed expectations. The platform now has 515M monthly active users (MAU) globally (up 22% YoY), of which 317M million are ad-supported (up 26% YoY) with ad-supported revenue growing 17% YoY.1
These increases across both the Subscription and Free tiers of the business show how Spotify's continued growth is fueled by our best-in-class audience engagement and the strength of the content we offer across music and podcasts.
Last month at Stream On, Spotify unveiled a new, dynamic and interactive foreground experience that makes the discovery of new music, podcast and audiobook content faster, easier and more engaging than ever before. We also launched the beta version of AI DJ to users in North America, strengthening our efforts in personalization.
Here are the top highlights from Q1, with a focus on opportunities for advertisers on Spotify:
1. Spotify continues to develop its global product offering for brands and advertisers of all sizes
There were several product milestones for Spotify Advertising in Q1 2023, from the introduction of new dynamic ad formats in European markets, to an increased number of ways to track performance and measure success.
Earlier this month, we announced the expansion of interactive call-to-action cards (CTA cards) for podcast ads to the German market. CTA cards combine visuals and customisable text to deliver a clear and simple message, along with a first for podcast ads: a clickable call-to-action.
Since we started rolling out CTA cards for podcasts in the U.S. last year, we’ve increased the number of places where listeners can find them in the Spotify app—both during and after an audio ad is heard—and seen outcomes like increased traffic to advertiser-specified URLs.
In addition, our self-serve ad manager Spotify Ad Studio made great strides in Q1 2023, with the global launch of the Click optimization goal—allowing advertisers to optimize for mid-to-lower funnel outcomes—and CTA cards for music. Like its podcast counterpart, music CTA cards show up across various surfaces of the Spotify app up to eight hours after an audio ad is heard—creating multiple opportunities for Spotify users to take action. Ad Studio also launched in Brazil, lowering the barrier of entry for advertisers in Brazil to create audio and video ads, and giving international advertisers the ability to target the Brazil market through music inventory.
2. Spotify research reveals further evidence that digital audio is a sound marketing investment for advertisers
In February, we launched volume two of Sonic Science—a first-of-its-kind biometric research report on how digital audio on Spotify (including ads) engages listeners throughout their daily lives. We examined how engagement, mood and ad recall are impacted while listening to Spotify, and how listeners’ real-life physical contexts are reflected in their streaming choices.
Results revealed that people engage with digital audio across a wide range of activities—from eating and working to commuting and exercising—and that regardless of the activity, listening to Spotify improves listeners’ moods, and ads are likely to be recalled.
*“This research shows that digital audio ads work, even in realistic conditions when people are engaged in everyday activities—they remember the brands they’re exposed to during ads served via Spotify.
It also shows that streaming audio is different from traditional media in that people can and do customize their listening experience. Advertisers could leverage this customized functionality, delivering content that fits what people are doing and listening to. To me, this seems like an underutilized opportunity.”* — Josh McDermott, Ph.D, Sonic Science Vol.2 Advisor
3. Radio broadcasters can now turn existing audio content into on-demand podcast content—helping them to reach new, younger listeners, and giving advertisers the chance to connect with immersed audiences
Recently, we launched ‘Broadcast-to-Podcast’ (B2P) on Megaphone—our podcasting platform for enterprise publishers and professional podcasters—to give radio broadcasters the ability to turn existing audio content into on-demand podcast content. The technology gives broadcast publishers—whether they’re already in the podcast game or new to the medium—the means to leverage existing content to reach new, younger audiences who are increasingly turning to digital radio listening2 and extend their revenue potential via the Spotify Audience Network.
It’s great news for advertisers, too—this means they’ll be able to target even more immersed audiences streaming podcasts on and off Spotify. It’s a win-win-win.
You can hear more about our record-breaking Q1 growth on the Spotify: For The Record podcast.
Interested in reaching global Spotify listeners? Connect with a Spotify rep, or get started right away with Spotify Ad Studio, our self-serve ad manager.
Sources: 1. Spotify Q1 Earnings Report. April 2023 2. Share of Ear®, Edison research Q4’21–Q1’22