Can Spotify Beat Clubhouse at Its Own Game?

Spotify wants to be all things audio. That means leveling a charge at popular social audio-platform Clubhouse this week through its purchase of sports-focused audio app Locker Room and its parent company, Betty Labs. The acquisition cost between $50 and $80 million, a price range reported by The Wall Street Journal. Already a giant in music streaming and podcasting—through major audio acquisitions like Gimlet, Anchor and The Ringer—the meteoric interest in social audio over the last year has been impossible for Spotify to miss. Clubhouse has popularized a new social audio format that, while reminiscent of the in-person conferences of yesteryear, is shaking up the way companies like Twitter, Discord, Facebook and LinkedIn are thinking about the future of communication. Spotify—with its tiered audience, deep data pools and proven results with marketers—gives it a huge advantage in the social audio space, and ad buyers are bullish about its chances. “A logical next step for them is to capitalize on the new user behavior that Clubhouse has created,” said Bridget Jewell, social creative director at the media agency Periscope. Spotify’s Perch: Essential on any audio ad plan Claiming 345 million monthly active users, Spotify has become an essential piece of any audio advertising plan, media buyers and analysts said in interviews this week. The company also boasts 155 million subscribers, who pay to bypass ads entirely with Spotify Premium. “Spotify is the player to beat in the audio space,” said Collin Colburn, senior analyst at the market research firm Forrester. “They're setting the pace for innovation in audio, particularly around advertising and the kinds of improvements needed for marketers to gravitate towards online audio as an ad channel.” In the past year, the company has been expanding its self-serve ad platform into new markets internationally, beta-testing programmatic podcast ad buying, and building up what it’s now calling the Spotify Audience Network. “Audio as a whole has become increasingly important,” said Bre Rossetti, chief strategy officer for the media agencies Havas Media Boston and Arnold Worldwide. “Advertisers follow the eyeballs—or in this case the ears—and it’s clear that consumer adoption has skyrocketed.” U.S. podcast advertising revenues approached $1 billion last year, according to the IAB, and the total U.S. digital audio ad market raked in $3.7 billion according to eMarketer. Locker Room has a smaller audience than Clubhouse, but advertisers will likely view it as a bolt-on to the larger Spotify community, making it an appealing option, said Paul Bland, the head of biddable media at Havas. "The acquisition just expands their reach." A Spotify spokesperson did not immediately say how the company plans to integrate Locker Room into Spotify’s existing infrastructure. In announcing the acquisition, Spotify's research and development chief, Gustav Söderström, said there was strong demand from creators and fans alike for live formats on the platform. The next Clubhouse, but with ads While Clubhouse has risen quickly, claiming 10 million monthly active users, that figure pales in comparison with Spotify’s 345 million, most of whom are already paying. But invite-only, iOS-only Clubhouse hastened the social audio craze that major players like Spotify, Facebook and Twitter are clamoring to replicate. Clubhouse has said it’s not interested in ads. Spotify “could potentially add some live audio content to the ad-supported version for things like live events, and keep some content reserved for premium users,” said Forrester's Colburn. Ad buyers anticipate new audio ad formats like sponsored conversations, live event packages and more interactive features. “Unlike with YouTube or Instagram content, podcasting by nature doesn’t have the traditional DNA of a community-driven ecosystem where listeners can not only listen, but also interact with branded content or ask questions,” said Agnes Kozera, cofounder of the podcasting ad marketplace Podcorn. “Social audio presents an opportunity to bring brands that are brave enough to go live into those community conversations.” While these experiences may be hard to price out and ensure brand safety, success could pay dividends, Kozera noted. “Saving live social audio and then repurposing it on other audio distribution platforms and social media channels in various formats could open up more opportunities to monetize social audio,” she added. Apple, Spotify's top contender While social media giants like Facebook, Twitter and Discord are in the mix, Spotify’s primary rivalry is with Apple Music, which trails Spotify with only 72 million subscribers. And while Apple is expected to lose its long-held advantage in podcast listenership this year, according to a new eMarketer report, it may roll out a subscription service around podcasts in the near future. But Apple has arguably had a leg up in experimenting with different types of audio content. Whereas Spotify has spent the last several years downplaying the importance of real-time audio, Apple has built out a miniature empire of synchronous content, including artist-curated radio stations and round-the-clock video content. Even in late February, Spotify executive Courtney Holt told CNN that the company was focused more on on-demand content rather than live experiences. “Apple has embraced that linear content would be a key source of differentiation for them,” said Cherie Hu, a music-tech analyst who writes the newsletter Water & Music. “Spotify has never really cared about that, until now.” Spotify Unveils a New Look for Its Desktop, Web Apps