Spotify is making yet another podcast acquisition.
The company said Tuesday it has agreed 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. Spotify shares were down 6.5% on Tuesday afternoon.
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 Joe Rogan, Kim Kardashian, Michelle Obama and others, 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 Co.
The deal should give advertisers more scale in terms of whom 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," CFO Paul Vogel said on its 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."
