Spotify may have turned a profit in 2024, but its ad business isn’t growing as expected. The streaming giant has long positioned advertising as a key revenue driver, yet its ad revenue growth has slowed significantly. According to The Information, Spotify’s ad revenue grew by 15% in the first half of 2024 but dropped to just 6.4% in the second half.

This slowdown shows a growing gap between Spotify’s subscription and ad revenues. Three years ago, the company projected that ads would be a €10 billion business. However, recent data indicates that reaching this target may be more difficult than expected.

Advertisers struggle with Spotify’s limited reach

A concern for advertisers is Spotify’s ability to deliver ads to a large enough audience. The Information reported that in December 2024, Spotify told several advertisers it was struggling to find enough listeners for ads during the holiday season.

Advertisers, especially small businesses, have also raised concerns about Spotify’s ad effectiveness. Many say its ads don’t reach enough listeners and the platform lacks key features on its self-serve ad manager. Additionally, the nature of audio advertising itself presents challenges. Unlike digital display ads, audio ads are harder to track since they don’t rely on traditional metrics like click-through rates.

Spotify’s ad-targeting technology lags behind competitors like Meta despite introducing several updates to boost its ad business. In July 2024, the company rebranded its self-serve ad platform to Spotify Ads Manager, introducing a new interface and additional tools. 

Spotify has also invested in video podcasts and AI-driven features to increase the time spent on the platform, which could create more ad opportunities. In another move to expand its ad business, Spotify partnered with The Trade Desk to launch Spotify Ad Exchange to improve its automated ads solution.

Spotify’s ad revenue is still growing, but subscriptions dominate

Despite these challenges, Spotify’s ad business is still growing—just not as fast as expected. According to eMarketer’s projections, its US ad revenue is expected to reach $1.35 billion in 2025, up from $1.21 billion in 2024. However, the majority of its ad revenue still comes from non-podcast content.

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