Daniel Ek, chief executive officer and co-founder of Spotify AB.
Akio Kon | Bloomberg | Getty Images
Spotify is making yet another podcast acquisition.
The company said on Tuesday it has entered into an agreement to acquire ad tech company Megaphone in a $235 million deal. The companies declined to say whether the deal was in cash, stock or a mix of both. Spotify shares were down more than 5% Tuesday morning.
Megaphone offers technology for podcast publishers and advertisers seeking targeted slots on podcasts. It offers podcast hosting, distribution and ad-insertion tools for podcast publishers like ESPN and the Wall Street Journal, and advertisers can use the company's technology to find audiences across the podcast content of those publishers.
Spotify has been on a podcast acquisition tear in the past couple years, striking deals for shows from those including Joe Rogan, Kim Kardashian and Michelle Obama and buying companies like The Ringer and Gimlet Media. Now, it's taking steps further to monetize all that content with the help of a new acquisition.
Megaphone, previously called Panoply Media, rebranded in 2019 after laying off its podcast production team to focus on the technology platform side of its business. The company has been owned by Virginia-based Graham Holdings Company.
The deal should give advertisers more scale in terms of who they can reach on Spotify and let podcast publishers opt-in to have their shows monetized.
After the transaction closes, Spotify said it will make its "Streaming Ad Insertion" tool available to all podcast publishers through Megaphone's technology, the first time it will open that tool beyond its own original and exclusive podcasts. The company has said that tool makes ads "targetable—they'll be relevant to the people who get them; measurable—we'll more easily prove that they're effective; and interactive…"
Advertising has constituted a relatively small portion of Spotify's revenue, but the company's leadership has said it's optimistic about the advertising opportunity. During its third quarter earnings, the company said 22% of its total monthly average users engaged with podcasts last quarter and that podcast ad revenue was up nearly 100% year-over-year. The company says its podcast catalog has more than 1.9 million titles.
"I think there's been very little innovation, particularly on the podcasting side in terms of how to better target advertising and allow creators to actually monetize their product in a much higher way," the company's CFO Paul Vogel said on its recent third quarter earnings call. "And I think our ability to help bring those tools and services into the ecosystem will be great for the overall growth of business, it will allow creators to actually make more money off of their podcasts. And I think it will benefit us as well."