Spotify has tripled the number podcasts on its platform in past year from 700,000 in Q4 2019 to 2.2. million today, the company announced on its Q4 earnings call Wednesday.
Why it matters: Spotify CEO Daniel Ek told investors that podcasts and podcast usage are "highly correlated to user attention and growth" overall on Spotify, which is still primarily used to stream music.
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Details: "Based on the behavior we see when users first join Spotify, we are confident that podcast usage has been a factor in the accelerated [monthly active user] net additions," the company said in a statement.
Spotify said its primary focus is turning its massive existing user base into podcast users to increase engagement.
"We want to make our platform the de facto platform for podcasts for Spotify users," Spotify's CFO Paul Vogel said on an investor call.
By the numbers: Spotify said that 25% of its total monthly active users engaged with podcast content in Q4, up from 22% in Q3 2020.
Podcast consumption hours in Q4 have nearly doubled since Q4 2019.
Ek said more people at the company are focused on producing podcasts now than ever. "Three years ago, fewer than 30 people were actively producing content for the service," he said on the call. "That number is now closer to 1,000 people."
Spotify's enormous investments in original and exclusive podcasts are driving an uptick in engagement, Ek said. In the past year, the company has inked exclusive deals with major personalities ranging from Michelle Obama to Kim Kardashian.
Vogel noted that Spotify's exclusive podcast deal with popular podcaster Joe Rogan in particular has "contributed positively to user growth on the platform."
"Part of the strategy when we bring someone like that on the platform is that it brings new people on, and it creates a better experience for those on platform whereby attention increases and churn (cancelled subscriptions) goes down," Vogel said.
Catch up quick: Spotify has also made huge investments in podcasting infrastructure over the past two years, leaving the platform poised to become a leader in audio production and advertising.
One area the company will focus on is making it easier for podcasters to make money through Spotify's ad infrastructure.
Ek said that the company is experimenting with monetization efforts for its independent podcast platform Anchor, which it acquired in 2019.
Spotify sees its best opportunity to make more money on podcasting in converting advertising dollars from linear radio into digital podcasting. "That is the one we are chasing," Ek said.
Yes, but: Podcasts aren't a profitable revenue stream for Spotify yet. Vogel said Spotify is "not at the point yet where revenue is outpacing continued investment," but that it is seeing a compounding impact from those investments.
Asked how large investments in podcasting by rivals like Apple and Amazon impact his thinking, Ek said he's not surprised that audio will "capture the attention of big companies."
The big picture: Spotify had a banner year during the pandemic, thanks to more people staying home and streaming audio content. By the end of last year, the streaming company had 345 million monthly active users, up 27% year over year.
The company also said it's making more money per user now than it was a year ago as a result of increased engagement from content investments and better ad tools.
What's next: The company said that it's in the "early days" of investing in podcast content and expects to bring on many more exclusive podcasts in 2021.
While Spotify is committed to striking more content deals, Ek alluded to the fact that we should expect fewer investments in podcast studios and monetization companies.
"It's about ramping up the capabilities in studios we have already acquired," Ek said, though he noted that the company isn't opposed to more acquisitions.
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