In many cases, consumers worry about sharing too much of their personal data with digital conglomerates. But those concerns seem to go out the window when it comes to their personal listening preferences, if the popularity of Spotify’s annual Wrapped initiative is any indication. Each year, the audio streaming service gives listeners a summary of what they heard over the course of the year, then offers them an easy opportunity to share the insights—an opportunity that most of its users embrace happily, so they can show their friends the collection of tunes that caught their ears.

But as marketers well know, these sorts of data are invaluable, offering personal insights into consumers’ moods, preferences, and habits. Accordingly, Spotify is partnering with an advertising agency called WPP to leverage data about which songs, podcasts, and audiobooks its users have been consuming, in ways that can benefit the agency’s clients, as well as Spotify itself.

In detail, these data can help advertisers determine what sorts of content appeals most to consumers, which they can then include in their own advertising campaigns. Noting evidence that earworms (i.e., those tunes that simply will not leave listeners’ heads after they hear them) are more effective at establishing brand recall than video ads, many advertisers are looking to increase their focus and spending on audio advertising. The data obtained from Spotify and precisely analyzed by WPP can ensure that those resources are used in the best way, such that their own audio campaigns are sure to appeal to consumers and remain in their heads forever.

In turn, Spotify anticipates substantial increases in its advertising revenue, in ways that should appeal especially well to its users and subscribers, because the ads they hear will be based on data about their own preferences. Although Spotify continues to attract users—a recent count posts 551 million active users—its revenues in recent quarters have not met expectations, suggesting its need to find new sources.

Sufficient revenues are unlikely to come solely from subscriptions, in that less than half (220 million) of its users pay to subscribe, which offers them streaming content without any ads. Making money off the advertising that the majority of users encounter thus seems eminently logical. Furthermore, if the data show that a particular podcast is extremely popular, Spotify can use those insights to increase the rates to advertise during that content. In this way, all users provide some form of revenue, signaling Spotify’s strong positioning.

Discussion Questions

1. Do you share your Wrapped data each year? Why or why not?
2. How can WPP market the data it can access from Spotify to its own clients? What benefits can it promise them?

Sources: Peter Adams, “WPP Tunes into Spotify’s First-Party Data with New Global Partnership,” Marketing Dive, August 3, 2023; Jack Neff, “Audio Ads Outperform Video for Attention and Brand Recall, Dentsu Study Finds,” AdAge, August 1, 2023; WPP, “SJR: Spotify’s for the Record,” May 2023, https://www.wpp.com/en-us/featured/work/2023/05/sjr-spotify-for-the-record