How AI is supercharging a 1.3 trillion ad market (feat. Spotify at Cannes Lions)

Hi, I'm Kate Scott Dawkins. Welcome to the WPP Media Intelligence Podcast. We are back for the second year at the Spotify Beach in Cannes, and I am joined today by Katie English, Global Head of Ad Product. Hello, Kate.

Thank you for having me. It's the Kate and Katie show today. We're going to have some fun. Excellent.

So we're going to talk about a few things. We're going to talk about sort of the state of the advertising industry and the pace of innovation. We're going to get into our advertising intelligence framework a little bit and Spotify's sort of position in that and growth, then we'll end on, well, we can't not talk about AI. We must, yeah.

They kick you out of can. I think they do. Yeah, if you don't mention it at least once. So as a quick reminder to listeners, we just published this year, next year.

We did a podcast on that last week. It's feeling rather ebullient, right? We're at nearly 9% growth expectations for 2026. um audio total audio a little bit less than that we're about flat but of course streaming still growing really strongly and we're talking about what's driving that because obviously when you look at the world economy and sort of the headlines it doesn't feel like it should be quite so positive um but of course we still have a lot of the chinese export engine fueling ads in global markets, we have AI investment, and then just this share shift into channels like streaming audio, like streaming TV.

And I think overall, one of the things that has surprised people or that I've been talking about a lot is just how prevalent advertising is as an industry right now. So the advertising as a share of global GDP is actually its highest in the last quarter century. Yeah, Yeah, I know, right? Higher even than the dot-com boom.

And there's a lot of expansion and innovation behind that. So my first question for you is sort of, how does that feel in your day-to-day, like the pace of innovation, the importance of advertising in the wider global economy, but also within Spotify? And how are you sort of feeling and working within that? Yeah.

I mean, those are some great stats and congrats on the report. I know it's always a A big labor of love, I'm sure, to get that out. Just a lot of really rich data. I think you're right, that pace feels like it's accelerating.

Innovation, we're moving faster. AI, as we said, is certainly helping to fuel that. For us, I think we see it as just an opportunity. It doesn't change the urgency.

It doesn't actually change the speed at which we want to be working. We've always been wanting to move fast, especially in working to modernize audio and to expand Spotify's footprint beyond that. But the stakes are bigger, right? There's more opportunity to capture, and that to me is really exciting.

It represents an opportunity both for platforms like Spotify, where we feel like we have a real right to win with a very large portion of advertisers, but for advertisers themselves as well, where there are tailwinds to capture, it's a great time to capture them. So you're right, it's an interesting economic sort of dichotomy given some of the complexity in the world, but the fact that there is some opportunity to grab there, I think it's very exciting. Yeah, you mentioned platform, Spotify as a platform.

That is something we're also seeing in the data, of course, a lot of concentration amongst those biggest global platforms. And Spotify is the most global of the sort of audio plus platform. Sure. I like that.

Audio plus. I like that. Yeah, that works. We have everything.

Yeah, good. When we're looking at the top three sellers of advertising outside of China, Amazon, Meta, and Alphabet, they're now at 58% of the total industry ex-China. So it is, you know, it's a big deal when we look at the top 10 only, and this hasn't fully closed, but only Paramount Warner Brothers Discovery would be sort of the traditional media owner within that top 10 of ad sellers. Otherwise, they really are digital platforms for the most part and providing services beyond just advertising, like, you know, music streaming or video streaming.

and that was one of the reasons why we wanted to produce the advertising intelligence framework so we've introduced that on the podcast previously when we release the new edition Spotify is going to feature they'll be our newest edition we're happy to be there thank you for having us and so I wanted to just take a couple seconds to talk about sort of if we can use that as a frame, how you see Spotify evolving in that world. So as a quick reminder for our viewers, viewers and listeners, Advertising Intelligent Framework looks at five capabilities across platforms, advertising sellers, including data assets, AI and tech, distributions, how widely they can reach users, commerce and transaction, how much of a purchase journey do they see and and how adept are they at monetizing advertising and then content and media.

And when we look at providers of advertising, they tend to fall into kind of strategic groups. And for Spotify, you sit really nicely in this sort of engines of entertainment sort of group, right, alongside folks like Netflix. So when you're thinking about where you sit in this world and across those sort of five capabilities, where do you see Spotify greatest strengths and where are you building into next Yeah I love this question The framework is great It a really nice way to kind of create a level playing field for understanding all these very different companies but with a shared rubric For us, obviously, content and media is king, right?

Spotify is first and foremost a content platform. Our music, yes, sure. Our podcasts are growing. But we also have an ever-growing library of new content.

So recently bringing on fitness, for example. We're starting to bring concerts and other live events, things like that. So I think there's a really big opportunity for us to think about ourselves as more than just a media and a music platform. We certainly internally think about ourselves as much more than that.

Distribution also stands out to me. I mean, we have 761 million global users. It's a massive user base. And about two-thirds of those are ad-supported.

So there's a really, really big reach opportunity for advertisers. where I think we're investing is in the data side of things. So we have something that's really unique in our data sort of signal population, which is consumption data. What are folks listening to?

What are they fans of? And we think about that as so uniquely different than just an audience of, right? They're not passively consuming. Fandom is really, really engaged, right?

You are picking to watch or listen to this podcast. You opted in, right? We hope. You want to be here, right?

Same with the music you consume, same with the fitness you consume, right? So that intent behind how folks actually engage on Spotify is a really powerful data signal. And it tells us a lot about the mindset that they're in, what they might be interested in, what they might not be interested in. So I think that data piece is actually quite unique relative to some of the competitors in the space.

And coupled with our distribution and our content makes for a really powerful trifecta. Yeah. I mean, the fandom piece you can see with something like Spotify wrapped, which has just massive fans and supporters at the end of the year, I think because people are tuned into exactly that, right? This is something that they're passionate about.

They like to see it represented, um, at the end of the year. Yeah. Uh, I love it. Like, does that surprise you at all?

Or is there, um, surprising, but like, is there anything that, uh, when you get your Spotify wrapped, you particularly look at? I mean, I, I'm such a data nerd, so I get really excited about it. A product person liking data, that's new information. We've never had one of you before.

I find it so fun. And I also find it really interesting how creative the Wrapped team can get with telling a really compelling story about your entire year of listening. I'm often reminded of, oh yeah, I went through that dark time. Or like, oh, I did play that sad song on repeat a few too many times.

Like don't tell anyone, right? But I really love that. I think it's a really great way to reflect on sort of my relationship with the platform over the year. When you think about the advertising opportunity and what that means to actually understand each of our users on such a personal and intimate level, I think it really creates a lot of very rich signal.

Yeah. How are advertisers of this rich signal, you talked about the data dimension with the ability to understand a lot of context and mood and things like that. How does that message translate to advertisers um you know what what does that value proposition look like for them and how are they utilizing that a little bug decided to visit the podcast um so we're investing really heavily actually in our biddable channels which we're really excited about so we've got the spotify ad exchange for anyone who wants to buy through programmatic partner um we have integrations with over 40 partners so come you know meet us where you know we meet you where you are yeah um come through whatever DSP you want and buy us there.

We've also invested quite heavily in Spotify's ads manager. Both of those environments are more, you know, bid and outcome focused. And I think that's a really great way to sort of introduce advertisers to a way to buy audio as well as video and display. So we are multi-format in an environment that's a lot more focused on the outcome you're trying to drive, which inherently relies on understanding the user and delivering them a highly relevant ad.

So we're really excited about the investments we're making there to kind of introduce real true performance buying into both our audio, video, and display environment. Yeah. I mean, the performance element, the outcome-based element, that's where the entire industry is headed. It really is table stakes, I think.

Yeah. Yeah. That's very exciting. The other element of the framework that you picked up on was the content and media side.

And you've just talked about how diverse that content offering is now with things like audiobooks and video. One of the things that we think about in terms of the framework is also IP lock-in, like how much of it is exclusive versus user-generated, where it's on multiple different platforms at the same time. And what does that look like, that sort of mix for you, the intent around how advertising sort of takes advantage of or maybe influences some of those content decisions across the platform as well?

Oh, that's an interesting question. I mean, I think that Spotify, obviously we have sort of hosting businesses for, let's say the podcast side. So Megaphone or Spotify for creators, but our focus there is actually distribution, right? We don't want to sort of gatekeep content when we're sort of working on behalf of, let's say, a podcast host like yourself, right?

You want folks to be able to access your podcast wherever they want. What we focus on within the Spotify experience is the experience, right? And we talk a lot about that in our ads business as well, how important it is for us to make sure that the user experience on the platform is first and foremost, the most important thing. That actually is really great for the core Spotify business So it less about where you get the content It more about where you like the experience of consuming that content And that ends up producing better results for advertisers as well Advertising is meant to be a complement to your experience.

It's meant to flow seamlessly. It's not meant to disrupt your listening. It's not meant to take you out of the moment. And ideally, it's meant to sort of fuel that moment and sort of engage with that fandom more thoughtfully.

So we take that very seriously in our ads business. We spend a lot of time thinking about each ad experience, a lot of measurements, a lot of experimentation, a lot of guardrails, frankly, to make sure that the ad's experience really is as natural and organic as it can be. Any particular examples of that seamless, sort of trying to build that? I mean, that's, you know, interruptive ads are something that we were used to for a long time.

Um, I've talked for years about ways of using new tech and innovation to make things more seamless and a better experience for, um, people. And especially as we get into a world where we think advertising is going to support more kinds of things and subsidize more kinds of things like great access to great content and podcasts and music. So are there any specific examples of things that you've seen in the recent sort of passes you've been developing things that have driven that forward?

Yeah. Yeah, a great example, we just released a revamped version of our sponsored playlist product. And I really love that product for a number of reasons. One, what we've revamped just puts the brand first and foremost all across the playlist.

So if you are sponsoring like New Music Friday, you can have your brand sort of ever present, but it's less disrupted listening. So if the user's in focus, if they're scrolling through the playlist, you're going to see your brand sort of participating and saying, hey, we are here sponsoring a limited disruption listening experience. there are these sort of micro moments in between every few songs where we say, and this, you know, this is brought to you by Kate and Katie's podcast, right?

I've rebranded the podcast just for this example. Don't worry, just for this moment. And you get right back to your listening. So it's a really great way for brands to kind of be present and create this value exchange with our users in a very tangible way, but still give users the core listening experience that they've shown up for.

So it's just one example. I mean, we think about that with our podcast ad experience, with even just the in-stream ads that sort of exist throughout the listening experience, we're really focused on making sure we understand each individual and really kind of tailoring their volume of ads, the number. The volume should be consistent as well, as well as sort of the content of those ads to really take advantage of making it feel as personalized as possible. Yeah.

One of the things that struck me when I was putting together this year, next year, and sort of back on the AI thread as well was how prominently Suno ranked in the list of... Is it wild? This is like Cloudflare's list of most popular generative AI services. I think I've got that right.

Yeah. And Suno's frequently in the top 10 over the last six months or so. Yep. Which I've used the product, I think, two years ago and for this year and next year.

We actually created a this year and next year theme song. Oh, fun. Yeah. Oh, I love that.

I didn't know that. That's great. I love it. So how are you seeing that?

I mean, not on the product side per se more broadly, but also within the advertising side and you're looking into generative creative and things like that. So how do you see that influencing sort of where you're also headed in the next six months or how are you taking advantage of some of these new tools and tech? Yeah. So Spotify at large is a company that's really embracing AI.

That's very clear. you can sort of see lots of announcements and news around even our workforce, how we're using those tools to really power what we do, but also bringing AI into the core experience. And of course, letting that flow through into what it means for advertisers. I think we see an opportunity here to accelerate and to amplify human voices with, you know, a lot of creativity.

So the barriers to create are lower. Suno is such a great example. And I found that stat so interesting as well when I learned about it. I think we like that.

Like, great. Like you've seen announcements where Spotify is embracing AI-focused music creativity with our label partners and thinking about how we can make this good for the industry and make it feel fun for everyone. So specifically within ads, we of course are using AI to help generate audio ads right now. We see that as a really big opportunity to actually solve a real problem for advertisers, right?

Everyone has a six-second video. Not everyone has an audio ad that is really tailored to be performant. And not everyone, I think, is willing to necessarily make the investment in making that audio ad to sort of see, should I test and learn here? So we say, let's leave that to us.

We are experts on audio ads. We know what works well on our platform. So our Gen AI tools, which exist in our ads manager platform today, have created, let's see, over 20,000 ads right now for thousands of advertisers globally. We've expanded languages recently, new markets, things like that.

So we see really, really strong adoption. close to 70% of the ads that we make on behalf of partners who come into Ads Manager are actually made using AI. So it's become the default choice. And it's quick.

It's easy. It also gives advertisers true control, right? We help them craft the script. They prompt it.

They can edit it. When they're selecting the voiceovers or the music, they have full choice, which is great. And we actually are just now releasing the ability to download those assets and bring them into your programmatic buying with Spotify as well. So we are embracing AI as a tool to amplify and to solve problems Um but no performative AI right Nothing just to put sparkles in the UI and say there AI We really want to focus on solving problems for advertisers Yeah.

I have been struck by that in conversations with Spotify, gosh, over the last like five, six years now. From the very early days of talking to the product team to now, there's definitely been, I think, that early embrace. Yeah. But with Cardress.

Of course. So human judgment is sort of one of our values, right? Yeah, no, for sure. And I think that's a great lead into the next question, which is as AI sort of becomes more capable as a creative partner and assistant and, you know, augmentation accelerator, you know, helping brands produce at scale and personalize at scale.

where where do you see the the human element and like how does the the spotify platform help those two things coexist right because we we believe or i believe i believe for a long time that there will be places where we see more bot-to-bot marketing and advertising or agent-to-agent right um where the ad in those cases is maybe not even meant to be seen by a human yeah um but audio So I think, you know, for now, we're assuming it's mostly going to be human directed. Yes. So how do you see that sort of balance going forward?

Or how do you think about the human element in what you're building today and where that goes in the future? That's a great question. I mean, we are really working to balance both, right? We're investing in the sort of agentic side of things.

So for example, we released a plugin in Claude and in Codex that can allow you to access the Spotify ads API just through a prompt, which is really simple and easy to use. It's actually quite fun, right? You can say, draft me a summer campaign and it'll, okay, well, define summer. What do you mean?

What's your audience? And there's actually a really interesting set of interactions that happen to really create a very impactful and, you know, performant. We've seen pretty strong performance from these LLM based campaigns, which is great. So that's important, right?

We have to invest in this world where our customers on the ads business are probably at times agents acting on behalf of the humans who are behind the scenes. Yeah. But right now within Spotify's core platform, we do expect humans to continue to be the consumers of the content on the platform, especially as that content expands, which means that sort of humans in the loop remains an important sort of core tenant, right? So we are building for both.

We're embracing the technology, as we said, as an accelerant, as a way to smooth friction and sort of solve problems. But we're not assuming that humans are gone from the equation. I think that's a dire state that no one really is rooting for, right? So it's about finding that balance.

I also think for an advertiser, AI is a way to sort of, I don't know, automate away some of the tedious tasks, right? You want to focus on doing the hard thinking, the strategy, having the creative conversations, right? Having these types of conversations, you don't want to be doing ad operations all day, every day, right? So there's just, I think, some ways that it can be used to actually free up time so folks can focus on their brand voice, who they want to be, understanding measurement, understanding audiences.

Like, spend time in the strategy and the data and let sort of agentic-led buying, again, smooth those rough edges where they are. Yeah. Do we think eventually there are Spotify podcasts or channels for agents? I don't know.

That's interesting. As they become sort of their own commercial entities, right? Maybe if they're acting more on behalf of their managers, people, do they have their own tastes? Are there things that spring up that are really directed to agents?

I don't know. I mean, honestly, to be honest, I would be so interested in asking our music or our podcast teams how they think about that, right? We're focused on our ads business for now, but it's a fair question. if I could predict the future I'd tell you that's what this show is all about oh goodness you're putting my predictive powers to test but I don't really know but I might assume that there is probably some world in which that type of technology evolves to what's happening already today who knows what do you think?

put the question back to you it's possible right I suppose if you think about something like a what is it? multi-book or something where there are already services that are sort of being designed for agents very early days so whether there's something that purports to help them be better digital assistants somehow maybe that's a thing I also love Clark from Anthropic talking about how in the early days the agent would just go look at pretty pictures as it was in the middle of a task so I think anything is possible yeah that's true I forgot about that anecdote I like that one too yeah that is a good one well thank you so much for this conversation.

This was great. It's always nice to be air conditioned. I know. What a relief.

We'll stay in here. Just drag it out. What else? More questions, right?

Yeah. Well, thank you so much, Katie, for joining me. And this was great. And we'll make sure we highlight the new version of the Advertising Intelligence Framework when it comes out and hope to speak to you again soon.

Maybe another next year. We'll see you next year. Yeah. Thank you, Kate.