Spotify is beefing up its ad technology with a $235 million deal to buy Megaphone from the media conglomerate Graham Holdings. The podcast technology company provides hosting and ad-insertion capabilities for publishers and advertisers. The companies say by joining forces they will help advertisers “realize the full potential of podcasts.”
Advertisers will now be able to buy Spotify’s Original podcasts and platform exclusives while scaling reach for ad buyers through the Megaphone Targeted Marketplace (MTM). For podcast publishers, it would help them earn more from their work by opting-in to have their content monetized on MTM. Megaphone said it will be the first time the technology will be made available to third parties. The technology is expected to work alongside Spotify’s own Streaming Ad Insertion (SAI) system that it debuted earlier this year and clients will be able to buy across both platforms.
“We are incredibly excited to join Spotify to help advance the podcast medium for publishers and advertisers alike,” Megaphone CEO Brendan Monaghan said in the announcement. “We believe that Megaphone and Spotify’s shared value in innovation will drive the podcast ecosystem forward around the world.” Megaphone says more than 20,000 publishers and advertisers already use its platform. Clients of Megaphone have included iHeartMedia, Westwood One, Entercom/Cadence13, ESPN, Vox Media, and Slate, among others. Some of those companies may look elsewhere rather than working with a firm now seen as controlled by a rival.
Launched in 2015 as Panoply Media, the company renamed itself Megaphone in March 2019 as it shifted from a podcast creator to focus on advertising and ad tech. It has been widely believed to be a takeover target since earlier this year when Andy Bowers, one of the co-founders, left the company. Based in New York, it has about 70 employees.
“Spotify will be a great home for Megaphone. I am proud of the Megaphone team and what they have built, and we look forward to their continued success,” said Timothy J. O’Shaughnessy, President and CEO of Graham Holdings in a statement. Graham reported last week that Megaphone’s revenue has “increased significantly” during the first nine months of 2020. Even so, the business is still operating in the red. “As an investment stage business, Megaphone reported operating losses in the third quarter and first nine months of 2020,” said Graham’s update to investors. “However, such losses were down significantly from the prior year,” it said.
The deal still needs to secure regulatory approval.
The acquisition is the latest in a two-year string for Spotify. It is also the biggest, with a price tag that tops the $190.7 million it paid for Gimlet Media, the $150.8 million it paid for Anchor FM, and the $54 million it paid for Parcast.
“We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant,” said Dawn Ostroff, Chief Content & Advertising Business Officer at Spotify. “We look forward to Megaphone joining Spotify on our mission to accelerate smarter podcast monetization for advertisers and podcast publishers powered by a scaled audience and state-of-the-art technology,” she said in a statement.
Interest among advertisers for podcast inventory has made ad tech the hottest sector in industry deal-making this year. Earlier this month iHeartMedia announced a $50 million deal to buy Voxnest and this past June SiriusXM struck a $28 million deal to buy Simplecast and it followed that up with a deal valued as much as $325 million to buy Stitcher and its ad unit Midroll.