Spotify has acquired video discovery startup MightyTV for an undisclosed price, the music streaming company announced on Monday.
The MightyTV app acts a bit like a Tinder for video content. Users swipe through a list of movies or TV shows from video services like Netflix, Hulu, and HBO, and the app then suggests which new ones to watch based on your choices. The company had raised $4.25 million in funding, according to CrunchBase.
MightyTV's team will join Spotify as part of the deal. MightyTV founder and CEO Brian Adams has become Spotify's VP of technology, following the acquisition.
Adams is perhaps best-known as being the founder of Admeld, a real-time bidding company that helped publishers make money from online ads. Admeld sold to Google for $400 million in 2011. Adams stayed on at Google as a group product manager and was promoted to become product management director, before founding MightyTV in 2015.
Spotify is doubling its investment in its free tier
Speaking to Business Insider, Spotify's VP of product Jason Richman, explained the acquisition is another sign that Spotify is "getting really serious" about its ads business. Spotify users can either opt to pay $9.99 per month for an ad-free version of the service, or choose not to pay and be served ads.
"The big story for Spotify is us doubling our investment in making 'free' a standalone, standout business. It feels like much of the market looks at Spotify as a premium business model and free as being a path-to-paid," Richman said. "I've been at Spotify for four years and mission one was to keep 'free' free and protect it from existential threats. Over the last year we pivoted to focus around Spotify free as a standalone business and that's what we are really focused on. This acquisition and Brian is a very strong signal towards our investment in this space."
As for how MightyTV will help with that investment, Richman explained that "recommendation" is the concept around which Spotify focuses its advertising offering.
"If you think about all the intelligence that goes into making a Discover Weekly playlist [where Spotify generates a list of around 30 songs you may be interested in, based on your previous listening habits], philosophically that's how we feel about messaging of all types and is the engine powering our marketing and promotional capabilities today," Richman said.
Spotify started making its audio ad inventory to a larger base of programmatic ad buyers last year, having struck deals with ad tech companies including AppNexus, Rubicon Project, and The Trade Desk (previously it only offered audio ads via audio-specific ad exchanges or via deals directly sold by its sales team). Programmatic is the means by which ad buyers use automated systems to target a large audience of consumers that fit their desired segment — 18-to-35-year-old men, based in the US, in the market to buy a smartphone, for example. Richman said there will be more ad announcements toward the back half of this year.
Audio is Spotify's "anchor" format as the company hopes to steal ad dollars transitioning from terrestrial radio to digital.
Richman said: "Paradoxically, we need to build audio as a truly digital, cross-platform, native ad product — not just evolve it from its terrestrial radio roots. I say paradoxically because if we don't build a standard that savvy digital marketers find easy to buy, easy to measure, and performs on what they care about, then when the ad dollars start to transition from radio, it's not a default they will go to digital audio. Once they've made the decision, they could go to any other digital format."
Spotify's biggest rival for digital ad dollars is Google, which has been rocked in recent weeks by a huge advertiser boycott after brands found their ads appearing next to extremist and other unsuitable content on YouTube. One analyst predicted the fall-out could cost Google $750 million in lost revenue this year. Meanwhile, other digital ad players — such as Facebook, Twitter, Snapchat, and Pinterest — are being called on to provide marketers with more metrics from third-party accredited measurement firms.
Richman said "a few bad actors" have given rise to the ad verification sector, but that the call for third-party measurement and verification has actually helped Spotify, even if it was a little "slow to adopt" them at first.
"We are quickly and aggressively catching up to support [third-party verification] and I think there's a real benefit and boon to that. Our audience is logged-in, registered, available across multiple platforms, and our ads are severed in an environment that's pristine. Having that verified by a third-party ... we are verifying what we already know to be true. And having Spotify show up on a spreadsheet with other publishers and platforms — we stand out," Richman said.
Spotify grew its revenues by 98% year-on-year to $219 million in 2015, according to the company's most recent financial filing. The company offers a number of ad formats, including homepage takeovers, branded playlists, audio ads, and display banners.
