Spotify brought in “close to” €200 million, or roughly $215 million, in podcast revenue last year, according to Dawn Ostroff, the company’s chief content and advertising business officer.
Speaking at Spotify’s investor day presentation in New York on Wednesday, Ostroff noted that the company — which has spent $1 billion for its podcast expansion — is still in “investment mode” but expects podcasts to be a “$20 billion opportunity.”
“Our bet in this space is already starting to pay off, beginning with improvements in ad products and, in turn, monetization,” Ostroff said.
But it may take a few more years before Spotify sees a profit from its podcast bet. Spotify’s chief financial officer, Paul Vogel, noted that podcasting had a €103 million negative impact (about $110 million based on current conversion rates) on gross profit and is expected to remain negative this year.
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“But this drag will not last,” Vogel said. “Based on our current forecasts, we believe 2022 will be the peak in terms of the negative impact on gross margin, with podcast gross margins turning profitable over the next one to two years, with meaningful ramp from that point on.”
Podcast ad revenue in the U.S. reached $1.4 billion in 2021, and revenue is expected to surpass $4 billion by 2024, according to a report last month from the Interactive Advertising Bureau. To boost its podcast ad revenue, Spotify has expanded its ad network — the Spotify Audience Network — and experimented with new mediums, such as with video podcasts. The company has also gone on a acquisition spree in the last few years, picking up podcast tech companies like Whooshkaa, Megaphone, Anchor, Chartable and Podsights.
Last month, Spotify also reshuffled its podcast leadership ranks, elevating Max Cutler and Bill Simmons to new roles overseeing creator partnerships and sports content, respectively, and keeping Julie McNamara in charge of the company’s original content, in-house studios (including Parcast, Gimlet and The Ringer) and major partnerships with outside studios like Prince Harry and Meghan Markle’s Archewell Audio.
To date, Spotify has more than 4 million podcasts on its platform. The company said it had 182 million paid subscribers at the end of its first quarter.
