Spotify’s Rak Patel on Turning Advertising into a Sonic Boom

Since launching in 2006, advertising has been something of a backup singer for Spotify’s subscription-based business model. In 2023, though, advertising is taking centre stage. Past figures show how advertising was just around 4-5% of the streaming giant’s revenue - these days that figure’s up to 14%. With a playlist of products that offer personalisation and scale, measurement tools and an ambition to forge really creative connections between brands, creators and audiences, the hope is to drive that figure to 20%.

So, for Rak Patel, EMEA head of sales at Spotify, this year’s Cannes Lions was certainly a busy one.

For brands looking to connect with people where other platforms can’t quite reach, Rak’s certainly got an attractive pitch. According to 2023’s Q1 results, the platform has 515 million users worldwide, with 317 million users on the ad supported stream. But it’s not just about volume, Spotify’s own research is showing that people are listening at all sorts of points during the day, and can engage with the platform while doing other activities like working out and cooking.

“Consumption is at an all time high, continuing to accelerate, which we saw in our Sonic Science study. It actually showed that digital audio, Spotify, is with everyone 24/7, whether you’re on the commute on the train, with a screen in front of you, or you really want to lean into it from a podcast perspective. The consumption is absolutely there. So that has definitely caught brands’ interest, because they have to be where the audiences are to be able to tell their story.”

Growing that advertising revenue has seen a team shake up, with new talent coming on board. Back in December, Ed Couchman joined Spotify from Snap, to head up the UK and Nordics and there have been a number of other hires across the globe. Podcasts in particular are seen as a key growth driver for advertising revenue. In 2020, Spotify acquired podcast advertising and publishing platform Megaphone and since then has forged partnerships with big publishers. There are major international publishers, like The Atlantic, LinkedIn and Paramount - but they’ve also plugged in locally. In France, that’s publisher Bababam and Chose a Savoir, in Italy they’ve partnered with Voices, and in the UK the likes of Keep It Light Media and Goalhanger are on board.

But, from Rak’s perspective, the key to keeping brands engaged is measurement. “If brands are going to use us as a must-buy, we have to have a really strong measurement suite, which we’ve now built. Part of that measurement suite is Spotify Pixel, which is really important for brands to know how they can get the insights and measurement they need on an ongoing basis. You add all of these things, all those innovations within the podcast space and the music space, and those give us the tools to go on and have conversations with all of those brands.”

Of course, the tech trend that’s occupying many marketers now is AI and the brand are currently trying to figure out their AI strategy. That’s a space in which Spotify has been building experience for years. 

“Spotify, we’re not new to this,” says Rak. “If you think about the last decade or so, machine learning is driving the products that you listen to on Spotify, whether it’s Discover Weekly, or Wrapped. That’s clearly driven by the way that we are really personalising that experience for all our users too as well. When it comes to AI, that’s something we’re very excited about. Clearly, we’re at a stage where it’s about exploration, we really need to understand what impacts it could have. But what we definitely see is that there could be a real strength of AI to support creators. I think that’s a really key component for us as a platform and an organisation.”

And of course, back in February this year, Spotify revealed its very own AI DJ, with a voice based on Rak’s colleague, Spotfy’s head of cultural marketing, Xavier Jernigan. Since rolling out in the UK in May, Rak’s been letting DJ X surprise and delight him with selections from his beloved ‘90s house and new suggestions to mix things up. The AI DJ uses data around listening habits to put together sets based on old favourites and new discoveries, and generative AI to allow DJ X to chip in with responsive commentary.

When it comes to generative AI creating music, Rak’s a bit more circumspect, insisting that the key question is what any application would mean for musicians. “From our perspective, it’s a stage of education. It’s a really key moment. There are AI artists coming out now, so what that means is: how do we make sure that we’re building something that’s right for creators? That’s really something that’s always been at the heart of everything that we’re done.  We understand our role here and the responsibility that we have so that’s something that I think, particularly over the time ahead of us, we’ll take very seriously.”

But beneath the tech and data, Rak also believes it’s important for brands and creatives to appreciate the emotional and creative potential of a digital audio platform. He recalls a campaign for the movie Paranormal Activity that used Spotify’s 3D Audio product to create a truly chilling soundscape that, Rak says, played with the sensory impact of audio and set the hairs on the back of his arms on end.

That’s a message that Rak feels has really got through at Cannes, with the iconic Spotifcy beach packed not just for its hot ticket Foo Fighters gig but its deep dive daytime content. “We’ve got a lot of creatives joining us because they’re really wanting to step up where they want to be too.”