Spotify’s ad business grows in Q2

Programmatic is driving growth, while the company reports bigger demand for podcast solutions.

Ad-supported revenue from Spotify continues to outpace subscription revenue.

The global music streamer announced in its quarterly earnings on July 31 that it had brought in €165 million (approx. CAD $241 million) in subscription revenue, representing a year-over-year rise of 34% and a quarter-over-quarter lift of 31%. While subscriptions, which typically costs around CAD $10 per month, are the majority of the the revenue stream (€1.5 billion, or CAD $2.2 billion this quarter), subscriber  growth was outpaced by growth in advertising.

Direct ad revenues outperformed Spotify’s previous forecast, primarily due to strength in the U.S. Audio advertising was up 38% year-over-year, while programmatic and ad studio revenue growth rose to 71%. Programmatic and self-serve ads now account for 30% of ad-supported revenue.

Spotify also reported an increased demand for podcast advertising following its recent acquisition of podcast prodco Gimlet.

Monthly active users grew to 232 million (up 29%), outperforming the high end of Spotify’s previous guidance of 222 to 228 million. Of that 232 million, 108 million are premium subscribers, meaning 124 million people still listen to Spotify with ads. Premium revenue grew by 31% year-over-year and 8% quarter-over-quarter. While Spotify doesn’t break down its subscribers by region, North America is home to 28% of the service’s total users, and 30% of its premium subscribers.

The company’s operating loss is reducing by the quarter, now at only a 0.2% negative margin.

Spotify attributed this growth to the timing of “certain global music releases” as well as various console integrations launched globally. It also acknowledged its continued updates to the product capabilities and features, such as its Spotify Lite, which rolled out into 36 markets (including Canada) and the beta test of Spotify Stations.