Every day, millions of people tune in to podcasts around the world. And it can be a lucrative business as the U.S. podcast ad revenue market hit $314 million in 2017 — which represents 86% year-over-year growth according to IAB and PwC Research. This is why Swedish music streaming service Spotify announced it acquired two podcasting companies: Gimlet Media and Anchor.
Mike Elgan of ComputerWorld pointed out that podcasts are popular in China, but the revenue is driven by subscriptions, memberships, and tips rather than advertising. In China, the podcasting market is believed to be valued at more than $7 billion. And since China-based Tencent Music is a major investor in Spotify, there could be some potential for expansion into a more lucrative market.
With these acquisitions, Spotify pointed out that it is positioned to become both the premier producer of podcasts and the leading platform for the creation of podcasts.
“These acquisitions will meaningfully accelerate our path to becoming the world’s leading audio platform, give users around the world access to the best podcast content, and improve the quality of our listening experience as well as enhance the Spotify brand,” said Spotify co-founder and CEO Daniel Ek. “We are proud to welcome Gimlet and Anchor to the Spotify team, and we look forward to what we will accomplish together.”
Gimlet will be bringing Spotify a podcast studio with dedicated IP development, ad capabilities, and production. Some of Gimlet’s podcasts include The Pitch, Reply All, Crimetown, StartUp, The Habitat, and The Cut on Tuesdays.
Gimlet also has an in-house ad agency called Gimlet Creative, which helped brands like launch eBay, Tinder, Gatorade, and Mastercard launch official podcasts.
“Spotify is poised to become the largest audio platform in the world and we are excited for Gimlet’s award-winning podcasts to connect with new audiences around the world,” explained Gimlet Media co-founders Alex Blumberg and Matt Lieber. “The medium of audio is uniquely great at creating human connection and understanding. We are thrilled that Gimlet is joining Spotify to do that at a global scale, on the platform and beyond.”
And Anchor is bringing its platform of tools for podcast creators to Spotify. Anchor makes it easier to create, distribute, and monetize a podcast. And the company offers an end-to-end podcasting platform available for free on iOS, Android, and the web. With the acquisition of Anchor, Spotify could potentially start launching its own series of exclusive podcast programs.
“We are incredibly excited to introduce Anchor’s industry-best podcasting tools to Spotify’s massive user base as we continue our journey, now with even greater resources,” added Anchor CEO Michael Mignano. “We look forward to continuing to empower creators all over the world to build an audience, generate revenue, and most importantly, have their voices heard.”
Currently, Spotify has 200 million users, of which 96 million are Spotify Premium subscribers. The company offers access to over 40 million tracks for free.
The terms of the deal were undisclosed. But it was rumored that the Gimlet deal alone was valued at more than $200 million. These transactions are expected to close in the first quarter of 2019.
Spotify also plans to make further aggressive acquisitions in 2019. Specifically, the company said it has earmarked between $400 and $500 million for acquisitions in 2019.