Media buyers confident in Spotify’s ad biz despite Dawn Ostroff departure

Spotify is laying off 6% of its global workforce, which is just under 600 people, CEO Daniel Ek announced in an all-staff memo on Monday. Affected employees were informed that morning and are receiving an average of five-month severance.

Also leaving the company is Dawn Ostroff, chief content and advertising business officer, who joined Spotify in 2018. Ostroff’s content, advertising and licensing duties will now be handled by Alex Norström, chief freemium business officer. 

Spotify made a number of high-profile podcasting deals under Ostroff, such as Joe Rogan, Barack and Michelle Obama and Prince Harry and Meghan Markle. The company also acquired The Ringer, Gimlet and Parcast for hundreds of millions of dollars.

Ostroff was instrumental in growing the company’s podcasting business and increased podcast content by “40x,” CEO Daniel Ek said.

Despite losing its top ad sales executive, however, media buyers aren’t concerned about Spotify’s commitment to its ads or podcasting businesses. 

“The percentage of revenue at Spotify that comes from advertising has increased in recent years, and we expect that to continue going forward,” said Robert Hunt, senior director of audio at Hearts & Science. “There is no reason to think that is going to change.”

Alex Stone, SVP of advanced video & agency partnerships at Horizon Media, added that agencies are familiar with Spotify’s offering, how it's innovating and where podcasts play a role – and Ostroff’s departure won’t impact relationships too much.

“They seem to be set up to succeed, at least in the near future,” he said. “I don't think this is a sign that Spotify is in trouble. I think that this was probably a strategic move — maybe looking at some cost savings.”

Hearts & Science’s Hunt added that podcasts allow Spotify to make ad revenue on premium users, who still hear ad reads while listening. 

He also said that despite her influence in building out the streamer’s podcast content library, podcast creators likely won’t be hurt by Ostroff’s departure as they have more platforms to choose from compared to “a Youtuber [who] lives at the whims of Google and an Instagrammer [who] lives at the whims of Meta.”

“One thing we could see happening is Spotify moving away from its partial ‘television’ model of high-profile shows with small episode runs toward more of its ‘radio’ model of consistent, habitual listenership,” Hunt said. “Advertisers are increasingly asking to take advantage of established fan bases because it takes so long to build one.”

Spotify’s ad revenue grew to $383 million in Q3 2022, up 19% YoY compared to $360 million in the previous quarter. The growth was led by double-digit gains from its podcasting business, according to CFO Paul Vogel.

Spotify will report its Q4 and full-year earnings for 2022 on Jan. 31.

Spotify’s layoffs are part of a restructuring effort to increase efficiency and cut costs, Ek said.

It’s the most recent major tech company to announce layoffs, following major cuts att Google, Amazon, Microsoft and Meta, where tens of thousands of employees will be let go.