Spotify is buying Chartable and Podsights, two podcasting-focused analytics companies, for an undisclosed amount of money. Spotify said it would use the Podinsights technology in its broader advertising-oriented network in a news release. 

For those not familiar, these companies work with podcasters and networks to include unique tags that give them insights into podcast listening behavior. Podsights help advertisers understand the effectiveness of their advertising, while Chartable provides valuable insights into the listeners and their behavior. 

Both these acquisitions add up to a smart move by Spotify. The company is trying hard to become the most significant player in the “hearing” attention economy and build a sizeable advertising business. Podcasts are a vital part of this business as they cost less and allow the company to keep a significant chunk of its revenues. In comparison, it has to share the money with record labels, who continue to have a draconian hold over the company.

The record labels get about 70 cents on a dollar from Spotify. In a way, Spotify is smartly using music as lead generation. It takes the user’s attention because the listener wants to stream music and channels it towards other audio forms. It is podcasts today and AI-generated sounds and audiobooks in the future. The longer people stay glued to Spotify’s stream, the more opportunity it has to sell some advertising against the stream. After all, advertising-monetized attention doesn’t discriminate between Joe Rogan, Michelle Obama, Neil Young, or machine-generated lo-fi sounds.

“We want to be the No. 1 global streaming audio player, and that means having everything as much as you could possibly think in audio,” Spotify CFO Paul Vogel said at the MIT Sloan CFO Summit. “In the next five to 10 years, there’ll be 3 [billion] to 4 billion smartphone-enabled phones — why shouldn’t every one of those phones have a streaming audio app on it?” “And if they’re going to have a streaming audio app, let’s make ours the best.” 

In many ways, Chartable and Podinsights acquisitions remind me of Facebook’s under-the-radar purchase of Onavo, the VPN/data tracker. It paid $200 million in 2013 for a company that allowed it to gather deep intelligence into what was happening with various apps — who was hot, who was not, and what was going to be hot. Many sources over the years told me that Onavo allowed Facebook to figure out the potential of Snap even before Snap founders knew what they had on their hands. Onavo data was crucial in making deals for Instagram and Whatsapp, amongst other things.

Podsights and Chartable would allow Spotify to know which podcasts are most effective or have tailwinds and could get famous shortly, giving them an excellent opportunity to either lock up that content into exclusive deals or bring them in-house. And remember, they could use the same data to create copy-cat podcasts — much like how Netflix creates copypasta versions of hit shows from other networks that get popular on its platform. Since Spotify controls the “attention spigot,” it can direct it at in-house podcasts and turn them into big hits. 

“Spotify isn’t just trying to become the biggest name in podcasting (which has heretofore been, but may no longer be Apple),” writes John Gruber. “They’re trying to usurp podcasting as we know it — one of the last and brightest bastions of the open, simple, private, transparent internet — and turn it into a privately-owned, gated, complicated, invasive, utterly closed platform. Spotify is trying to do to podcasting what Facebook did to “having your own website.”

The flipside of the argument is that podcasts and all audio content are existential for Spotify, where the larger platforms, Apple and Google, see them as “nice to have a feature.” Apple, which for the longest time was the leader in the podcasting space, was lazy and never took podcasting seriously. It is not surprising that we are all waking up today and finding Spotify determines how and what we will listen — Neil Young, notwithstanding. 

Daniel Ek, co-founder of Spotify, and Reed Hastings, co-founder of Netflix, have learned from the master — Mark Zuckerberg: attention is a zero-sum game. If you have it, hoard it, and most importantly, use it to grow your business and destroy your competitors. In a few years, we will wake up and realize the immense impact of these two small tuck-in deals announced today. 

It is always the little things that have a significant impact.

February 17, 2022. San Francisco.

Additional Reading:

  1. Why Spotify needs Joe Rogan and podcasters. Ironically, the Spotify share price has halved over past 12-months and that makes it an acquisition target for a larger company
  2. Young vs. Rogan: Spotify chose audio over music, but even bigger decisions lie ahead [Mark Mulligan]
  3. After reading his 24 points, I get a feeling Anil Dash is talking about Spotify, but in fact, it applies to pretty much every major “platisher.”