This story previously said that Spotify had disabled Google’s ad stack. A spokesperson for Spotify said the company got it wrong and only turned off Google’s order management system, Google Sales Manager.
Friction caused by the Google Sales Manager migration in July caused Spotify to report around $ 10 million in third-quarter revenue, the company said in its earnings call on Monday.
Despite growing 20% year-over-year to $ 189 million, Spotify’s ad-supported revenue fell short of expectations, said CFO Barry McCarthy, who will resign in 2020, at the ‘call. About 80% of those failures were due to “self-inflicted implementation and integration issues that we encountered with the deployment of new order management software,” the company said in a press release. .
“The underperformance in the quarter was related to our abandonment of the implementation of a new operating system,” said McCarthy. “We left the Google ad stack. I admit, miss, it’s embarrassing, but it’s not related to the strength of the company.
Spotify typically sells 99.5% of its inventory, but the digital audio platform currently supplies 97.5% of its inventory due to the deactivation of Google’s order management system, Google Sales Manager, which resulted in a combination. lost orders and insufficient deliveries. on other orders. He expects to return to normal sales figures by the fourth quarter.
The migration hit programmatic sales particularly hard, pushing programmatic growth from 65% yoy in the second quarter to 48% yoy in the third quarter. The success was mainly related to a slowdown in revenues from the private video market.
“The main thing I want you to know is that there was a demand for this product, but we just couldn’t deliver it on the site,” McCarthy said. “The advertising sector is very efficient today. “
Overall, Spotify’s revenue grew 28% year-on-year in the third quarter to $ 1.9 billion, with premium subscription revenue increasing 29% year-on-year to $ 1.7 billion. Monthly active users (MAU) grew 30% year-over-year to 248 million. Average revenue per user fell 1% to $ 5.18 due to changes in product mix and the company’s geographic spread.
The podcast boom
It’s still early days, but Spotify is seeing positive trends thanks to its major push into podcasting earlier this year.
Podcast hours streamed on the platform increased 39% year over year, with 14% of Spotify MAUs listening to podcasts on the platform. Spotify now has 500,000 podcasts on its platform as well as 22 original and exclusive titles from Gimlet and Parcast.
Podcast engagement is also driving an increase in conversions from ad-supported listeners to paid listeners, although it is too early for Spotify to attribute causation rather than just correlation.
With positive momentum, however, Spotify will continue to invest aggressively in podcasting, harnessing data on music listening habits to create better recommendations for users.
“We’re still experimenting with formats and it’s still just a start,” said Daniel Ek, CEO of Spotify. “You should expect us to innovate on all forms of merchandising and discovery tools available to us so that we can dramatically increase that number. “