Spotify to buy podcast advertising company Megaphone for $ 235 million

Spotify makes another podcast acquisition.

The company said on Tuesday that it has reached a deal to acquire ad technology company Megaphone in a $ 235 million deal. The companies declined to say whether the transaction was in cash, stocks, or a mixture of the two. Spotify shares fell more than 5% on Tuesday morning.

Megaphone offers technology to podcast publishers and advertisers who are looking for targeted niche podcast niches. It offers podcast hosting, distribution and ad insertion tools for podcast publishers like ESPN and The Wall Street Journal, and advertisers can use company technology to find audiences for the content. podcast from these publishers.

Spotify has been on a podcast acquisition tear for the past two years, making deals for shows from those like Joe Rogan, Kim Kardashian and Michelle Obama and buying out companies like The Ringer and Gimlet Media. Now he’s taking extra steps to monetize all that content with a new acquisition.

Megaphone, formerly Panoply Media, was renamed in 2019 after laying off its podcast production team to focus on the technology platform side of its business. The company was owned by Graham Holdings Company, based in Virginia.

The deal is expected to give advertisers a greater scale in terms of who they can reach on Spotify and allow podcast publishers to accept monetization of their shows.

After the deal closes, Spotify said it will make its “Streaming Ad Insertion” tool available to all podcast publishers via Megaphone technology, the first time it will open this tool beyond its own. own original and exclusive podcasts. The company said the 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 made up a relatively small portion of Spotify’s revenue, but company executives were optimistic about the advertising opportunity. During its third quarter results, the company said 22% of its total monthly average users engaged podcasts in the last quarter, and podcast ad revenue grew nearly 100% year over year. other. The company says its podcast catalog has more than 1.9 million titles.

“I think there has been very little innovation, especially on the podcasting side, to better target advertising and allow creators to monetize their product much higher,” said the chief financial officer of the company. , Paul Vogel, in his recent third quarter earnings call. . “And I think our ability to help integrate these tools and services into the ecosystem will be great for the overall growth of the business, it will allow creators to make more money with their podcasts. And I think that will benefit us as well. ”