Google's making a move to dominate advertising on platforms like Spotify, Pandora, and SoundCloud — and it represents a $1.6 billion opportunity

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Google is plugging into Spotify, SoundCloud, and Pandora to open up buying for programmatic ads.
The programmatic audio space is small, but several ad-tech firms like The Trade Desk and AppNexus aim to crack it.
Pandora recently acquired an ad-tech company called AdsWizz to build out its programmatic chops.

Radio advertising is going digital thanks to streaming-music services like Pandora and Spotify, and Google wants a piece of the small but growing space.

The tech giant has plugged its programmatic buying platform into Spotify, SoundCloud, Google Play Music, and TuneIn so that advertisers can buy audio ads directly from DoubleClick Bid Manager the same way they do for display and video ads. It says ad inventory from Pandora, which is building a version of a programmatic platform through the $145 million acquisition of AdsWizz, will also be added in the next couple of months.

Buzz around programmatic audio advertising has been slowly building up for a few years, but the market for digital audio advertising represents only a fraction of overall radio ad spending. According to the Interactive Advertising Bureau, $1.6 billion was spent on audio ads within the US last year. To compare, advertisers spent about $18.2 billion on radio ads in 2017.

Streaming audio is a tiny but potentially lucrative market

While the market is small, there's significant opportunity to crack into the space as more programming shifts to streaming, said Payam Shodjai, the director of product management at Google.

"Radio advertising has existed for 95 years — it's a little bit different from how digital ads have been auctioned," he said.

In terms of targeting, programmatic audio ads can be targeted based on demographic and age but are "not as complicated or involved as programmatic in general," he said.

Part of the reason it has taken marketers so long to go in on programmatic audio is because radio buyers are hesitant about digital's shaky conversion metrics that track whether someone purchased a product after hearing an ad for it, said John Rosso, the president of market development at Triton Digital, a supply-side platform that helps broadcasters shift to streaming.

Instead, the programmatic audio industry leans on many of the same metrics used to track digital ads, such as completion rates, impressions, and time spent, as well as stats that measure whether someone pauses a song.

"Programmatic has always been conversion-driven whereas audio and traditional radio [measures] more upper-funnel and branding activities," Rosso said. Big brands that have run ads through Triton's programmatic audio marketplace include Ford, McDonald's and Walgreens.

Another challenge: The inventory for audio ads is far smaller than for display ads that can appear in every nook and cranny of a website.

"Unlike display advertising, there's not an endless supply," Rosso said. "In audio, even though the business is growing, the publishers don't just add more units."

Google Play Music

Ad-tech firms are getting into the space

Meanwhile, the programmatic audio space is getting crowded for ad-tech firms that all want a bigger slice of advertisers' budgets. For example, Triton Digital works with 300 vendors — including The Trade Desk, AppNexus, and MediaMath — that essentially help marketers transact with streaming apps and services, Rosso said.

Then there's Pandora, which is building its programmatic pipes through the acquisition of AdsWizz. In addition to Pandora, AdsWizz also works with Spotify and Cox Media Group.

The streaming app is beta testing programmatic buying through AdsWizz, The Trade Desk, and MediaMath and plans to integrate with Google to "leverage demand through DoubleClick Bid Manager," said Chris Record, the senior vice president of platform and partner operations at Pandora.

On top of the growth in voice-enabled devices like Amazon Alexa and Google Home, "there's a fairly constrained supply of quality video" inventory online, Record said.

"More and more audiences are in front of their connected TV or are in front of a connected speaker," he added. "It's going to be important for advertisers to tap into that growing audio inventory."

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