Audio giant Spotify saw a new record for its ad-supported revenue in Q4 2023 after 12% year-on-year growth, according to the company’s recent financial results, with podcast advertising particularly growing in the “healthy double-digit range”.
Growth in ad-supported revenue was seen across both Spotify Original and licensed podcasts as well as podcasts across the Spotify Audience Network, the platform’s audio advertising marketplace. The network expanded into wider regions last year, including India, Japan, Brazil, Mexico, and Sweden.
In comparison to the year prior, ad-supported revenue for Spotify amounted to €449 million (£383 million) in Q4 2022 and has since increased to €501 million (£427 million) in Q4 2023. During that one-year period, Spotify slowly began to widen the distribution of its hit shows, including Gimlet originals and talent-driven podcasts like Anything Goes with Emma Chamberlain, in an effort to grow its audiences, which has led to growth in its ad-supported revenue.
After facing an operating loss of €224m (£198m) according to its Q4 2022 report - brought on by heavy podcast investments - Spotify has made a number of moves to return to profitability, including downsizing its global workforce with three separate rounds of layoffs.
The latest round of layoffs affected 17% of its staff - amounting to 1,570 employees - while the first two affected 6% in January and 2% in June. Despite paying severance charges in Q4 2023 which amounted to €4 million (£3.4 million), Spotify still experienced 16% growth in revenue year on year - amounting to €3,671 billion and achieved a new record of monthly active users (602 million) and premium subscribers (236 million).
However, after a rocky 2023, Ek has expressed confidence that the podcast arm of Spotify’s business will reach and maintain profitability this year.
“I think when we had our Investor Day last year, everyone was probably expecting our podcast business to be a net adder to the business,” Ek said, “and obviously, as we outlined then, podcasting was a drag to the business, but something we were committed to turn around.”
“And I'm pleased to say in Q4, we were very close to breakeven on that business, which gives me a lot of confidence that as we get into 2024, we will achieve the full year profitability target on podcasting.”
Following the recent news that Spotify’s two biggest chart-topping podcasts - The Joe Rogan Experience and Call Her Daddy with Alex Cooper - will no longer be exclusive to the platform, Spotify’s CEO Daniel Ek commented during the company’s Q4 earnings call about Spotify’s exclusivity strategy going forward.
“What we've seen is that while exclusivities were net positive on the side, it's not driving as much as the opportunity that we see on the ad side,” said Ek. “And so by broadening distribution, we think we can accomplish a number of different goals.”
Ek also added that the new strategy means that Spotify will be more aligned with creators who want to be across all podcast platforms and widen their audience as much as possible. He also made a point to remind listeners that Spotify did not intend to follow an all-exclusive strategy “similar to that of Netflix” but that it was taking the approach more as an opportunity to try many different things.
“We care equally about consumers, and we care equally about creators,” said Ek. “So I feel like with this new strategy, we're actually even better aligned with the creator because we're not asking the creator to trade one for the other.”
“And because advertising is in such a strong growth position for us, I feel I'm really excited about the opportunity we can bring both the creators and to Spotify itself with that strategy.”
In October 2022, Spotify was previously criticised by members of staff from the Gimlet and Parcast Unions, two podcast networks that were acquired by the platform in 2019, for cancelling 11 of its original podcasts due to low performance, which was supposedly caused by the company’s decision to make the shows exclusive to the platform.
According to a statement from both unions, exclusivity on its podcasts led to a “steep drop” in listenership which was reportedly as high as three-quarters for some of the shows, and the shows were not given marketing support or clear audience goals to meet. In addition to cutting the podcasts, Spotify also laid off “at least” 38 employees across the studios at that time, before merging the two organisations into Spotify Studios last year.