The most dominant streaming music service Spotify is adapting the way they think about digital advertising and media with the programmed ads that they play for their free members. They are putting out hyper-targeted ads now because they’re looking to add a new layer to the way they do business.
Obviously, Spotify isn’t just dishing out the the same ads to large swaths of their listener base like a traditional radio station or even network might. The idea here being that you can limit the amount of ads that fall on deaf ears. This is much more of a targeted approach than a wide net approach and may be setting advertisers on a path to resolving an age old issue once summed up by department store magnate John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Here’s a simple breakdown of how the targeting works. The user who signs in to Spotify starts listening to music, creating playlists, and engaging in other activities that begin to form a digital identify that Spotify can use to target them. The music they listen to and playlists they create are all used to create an ad profile for the person who is listening, and then they get the ads that would be most helpful for them. People don’t generally like their music to be interrupted by advertising but Spotify has been able to cultivate a large and loyal free user base. Perhaps this is a result of the fact that they don’t barrage people with ads that are totally irrelevant or even irksome to certain individuals.
In short, people don’t mind ads that make sense for them quite as much. Who knew?