Spotify wants advertising to make up 20% of its total revenues, but it has some way to go to hit that goal. In 2022, ads accounted for 12.6% of its revenue, up from 10.2% five years before, in 2017.
Spotify’s latest plan to speed up that growth is to target small and medium sized businesses (SMBs). The company has poached Snap’s global director of small and mid customer sales, Samuel Bevan, who previously worked in SMB-focused roles at Meta and Google.
It has also launched a ‘Spotify Advertising Academy‘ with a partner certification program aimed at these businesses and their agencies. It’s live in the US, UK, Canada and Australia so far, and aims to teach people how to create, optimise and measure Spotify ad campaigns.
The opportunity is clear: McKinsey & Company estimates that SMBs account for 44% of GDP in the US economy, while The Data Catalyst Institute reckons that 61% of these companies spend more than $10k a year on advertising, and 29% spend more than $100k.
However, Spotify has plenty of competition for those dollars. TikTok has been energetically pitching its merits to SMBs in recent years for example. This recent blog post set out its stall for smaller businesses, while the TikTok Academy that it launched last October went live with a course specifically focused on SMBs.
At January’s NY:LON Connect conference, TikTok’s music boss Ole Obermann talked about the importance of its Commercial Music Library for SMBs who want to use music in their videos. “We have over a million advertisers, most of them small-to-medium businesses,” he said.
The argument there was that SMBs micro-licensing music could help to “double, triple, quadruple” the size of the sync market. Spotify, meanwhile, is angling for SMBs to help it increase its advertising revenue, with a knock-on effect for the royalties it pays to music rightsholders.
The competition between the two platforms – and, of course, all the other ad-supported music or music-related services out there – to woo small and medium-sized businesses is thus good news for the music industry.
The biggest brands will always hog the spotlight, but the SMBs could play a key role in boosting music’s advertising economy in the years to come.