Spotify to buy ad tech firm Megaphone to monetize podcasts

Sweden-based Spotify Technology SA has agreed to buy podcast advertising and publishing platform Megaphone, it said on Tuesday, the latest in a series of a deals to boost its podcast platform.

The deal is worth $235 million, a Spotify spokesman said.

The company will use Megaphone's technology to create targeted ads, it said, and will also make its proprietary ad monitoring tools available to third-party podcast publishers.

Spotify, which earns revenue from paid subscriptions and by disseminating ads to non-paying users, saw its advertising business return to growth in the third quarter after it was hit by the pandemic earlier this year.

Executives have said ad growth will accelerate in the current quarter.

Also read: Spotify might be rolling out a subscription podcast service soon

Its heavy investments in podcasts, in an effort to become the Netflix of audio content, have helped drive subscriber growth at a time when many people are homebound due to the coronavirus outbreak.

Since last year, Spotify has spent hundreds of millions of dollars to buy companies like Gimlet Media, a podcast producer, and Ringer, the sports and entertainment podcast network founded by sports writer Bill Simmons.

The company said the new technology will help podcast publishers earn more from their work.

"We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant," Spotify's Chief Content & Advertising Business Officer Dawn Ostroff said.

Spotify now has 1.9 million podcasts, up from 1.5 million in the second quarter, boosted by big launches such as "The Michelle Obama Podcast" and "Mama Knows Best" by influencer Addison Rae.

Reporting by Supantha Mukherjee in Stockholm and Ken Li in New York.