U of Digital Newsletter - 10/23/24 (free)

Author

Shiv Gupta
October 23, 2024

October 17th-October 22nd

Below is a roundup of last week’s notable industry news, with summaries and our opinions. Q3 earnings started trickling in. And Spotify made some noise with SAX.

Top Stories 👁️ 

Summary: The streaming audio giant is going after more ad spend by making it easier for advertisers of all sizes to buy its inventory programmatically, beginning with video ads before expanding to audio ads soon. The new Spotify Ad Exchange (SAX) has begun testing its plugin with The Trade Desk, the largest independent demand-side platform (DSP) that will connect North American advertisers directly to Spotify's video ad inventory.

The Trade Desk is the first DSP to access SAX, and Spotify will integrate with Unified ID 2.0, The Trade Desk's cookieless identifier. Spotify will also be one of the biggest audio publishers to use OpenPath, The Trade Desk's product that directly connects advertisers to publishers without a third-party supply-side platform (SSP). Previously, advertisers who wanted to buy Spotify ads programmatically had to set up programmatic direct deals through Spotify's ad sales team. 

In addition to investing in ad tech, Spotify is also bulking up its ad inventory by expanding its music videos to nearly 100 markets globally. Last year, it launched video ads for its connected TV apps through Roku.

Opinion: Good name. A SAX is a musical instrument. Spotify streams music. We dig.

Spotify is going from selling programmatic on a ‘direct’ basis (you had to call up a Spotify rep to setup a programmatic deal within your preferred DSP) to selling programmatic on a ‘walk-up’ basis (only through TTD for now, but eventually through many DSPs). Doesn’t seem like a big deal on the surface, but could open up opportunities for Spotify in the following ways:

  1. Eliminate its SSP fees (we’ve heard that they were using Magnite and GAM as primary SSPs)

  2. Increase demand, and consequently increase sell through rates and CPMs

  3. Decrease the need for salespeople and consequently decrease overhead cost

Why now? Spotify cut a significant number of ad sales and account folks earlier this year to better manage cost and prepare for a shift towards programmatic monetization. Spotify has also been pushing hard into video, but its not known to be a video player and doesn’t have the sales chops to sell video. The shortcut to video monetization is programmatic demand. 

This is yet another example of a major publisher cutting out SSPs and going direct to the industry’s spiggot of programmatic demand: the DSPs. While this is not an exclusive deal, it’s another first-to-market opportunity for The Trade Desk. The Trade Desk’s ‘Premium Internet’ strategy seems to be working on the supply side, as they’re getting more big publishers and walled gardens (like Disney, Roku, and Spotify) to bring down their walls, cut out the SSPs, adopt UID 2.0, adopt OpenPath, and monetize programatically through their platform. All while they continue to accumulate demand by being the go-to purveyor of high-quality, brand-safe, MFA-free programmatic inventory. 

We’ll see if their strategy is truly working in a few weeks when they report Q3 earnings…

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