Spotify today announced a significant partnership with Coke in tandem with the opening of its app platform to brands like McDonald’s and AT&T. The soda brand will sponsor free listening as Spotify enters new markets globally, and it will have a larger presence within the Spotify app and Spotify integration on its own Facebook page.
Is this a move away from the traditional radio ads and takeover banners that the company has been using to monetize its non-subscribing users to date?
“Yes and no,” Spotify’s Chief Advertising Officer Jeff Levick told me. “None of us particularly love ads as they are. So a big part of this journey with Coke is exploring different ways to do that.”
Spotify’s CEO Daniel Ek emphasized that the partnership shouldn’t invade the user experience. Plenty of of social media buzzwords like “leverage,” “amplify,” and “experiences” were bandied about.
Part of the problem is that the vast majority of Spotify’s user base does not pay to subscribe to the music service. Free users are hit with ads every three songs or so, with giant takeover banners covering the unmanned app.
Spotify has wrangled some big brands into buying those spot and banner ads, but ad dollars aren’t exactly pouring into online radio. The segment brings around $800 million a year in ad dollars, compared with the $15.7 billion or so that traditional radio brings in. Pandora is aggressively courting those radio ad dollars. Spotify may be smarter to go for money already allocated to digital ad spend — sponsorship buys, “engagement,” and digital branding.
Thus, branded apps. Thus, a partnership with Coke. Coke-sponsored Spotify Hackathons. Coke playlists. Spotify inside Coke’s Facebook page.
A representative from Coke emphasized that the partnership isn’t “an advertising deal.” Fine, call it engagement, or branding, or whatever you want. It’s a way for Coke to get some cool points, while Spotify earns money without forcing users to subscribe. As we’ve seen time and time again, we’re willing to put up with a lot to keep our favorite Internet content free.