Spotify has finalized its biggest podcast purchase to date with the $235 million acquisition of Megaphone, the advertising and podcast technology company, now a done deal. Seller Graham Holdings still has a hand in the podcast business through its ownership of podcast producer Slate and the children’s subscription podcast company Pinna.
“While we continue to be bullish on the future of Megaphone, we are also realistic that the next phase of the company’s growth may be better served with a different owner that can provide it more scale,” said Graham Holdings CEO Tim O’Shaughnessy. He told investors during the company’s annual investor day last week he views the $235 million paid by Spotify as “a fair price” for the business. He said it was also “an excellent return on our cumulative invested capital,” telling investors Graham had put $45 million into building and growing Megaphone during the past five years.
Launched in 2015 as Panoply Media, the company renamed itself Megaphone in March 2019 as it shifted from a podcast creator to focus on advertising and ad tech. It has been widely believed to be a takeover target since earlier this year when Andy Bowers, one of the co-founders, left the company. Based in New York, it has about 70 employees including Megaphone CEO Brendan Monaghan.
Megaphone says more than 20,000 publishers and advertisers already use its platform. Clients have included iHeartMedia, Westwood One, Entercom/Cadence13, ESPN, Vox Media, and Slate, among others. Some of those companies may look elsewhere rather than working with a firm now seen as controlled by a rival.
Advertisers will now be able to buy Spotify’s Original podcasts and platform exclusives while scaling reach for ad buyers through the Megaphone Targeted Marketplace (MTM). For podcast publishers, it would help them earn more from their work by opting-in to have their content monetized on MTM. Megaphone said it will be the first time the technology will be made available to third parties. The technology is expected to work alongside Spotify’s own Streaming Ad Insertion (SAI) system that debuted earlier this year and clients will be able to buy across both platforms.
Interest among advertisers for podcast inventory has made ad tech the hottest sector in industry deal-making this year. In late October, iHeartMedia announced a $50 million deal to buy Voxnest. This past June SiriusXM struck a $28 million transaction to buy Simplecast and it followed that up with a deal valued at as much as $325 million to buy Stitcher and its ad unit Midroll.
The Megaphone acquisition is the latest in a two-year string for Spotify. It is also the biggest, with a price tag that tops the $190.7 million it paid for Gimlet Media, the $150.8 million it paid for Anchor FM, and the $54 million it paid for Parcast.
“If you see us continue to spend aggressively in podcasting, it's probably a good indication that we feel like there are benefits to the overall business, both from an advertising standpoint, but also from a user growth and retention standpoint,” CFO Paul Vogel told an investor conference last month. He said that the “successes and learnings” Spotify has from its current investments will help dictate how much it continues to spend on podcasting in the years to come.