Can Spotify's (SPOT) Ad Business Hit the Right Notes in 2025?
As Spotify (SPOT) doubles down on its advertising ambitions, the streaming giant has entered 2025 with a renewed focus on monetizing its vast user base beyond subscriptions. The big question remains: can Spotify's ad business finally hit the right notes in 2025? Here's what Main Street Data tells us about Spotify.
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Spotify's Revenue & Subscriber Growth in Q4
According to Main Street Data, Spotify generated $556 million in ad-supported revenue in Q4 2024, reflecting a 7.2% year-over-year increase. Meanwhile, revenue from its premium segment surged 17% to $3.7 billion compared to the same period last year.
On the user front, ad-supported users grew 12% year-over-year to 425 million, while premium subscribers rose 11% to reach 263 million.
What Lies Ahead for Spotify's Ad Business?
Although ad revenue has traditionally taken a back seat to Spotify's premium subscriptions, recent initiatives like expanding podcast collaborations and enhancing programmatic capabilities signal the company's growing focus on this segment's potential. Earlier this month, Spotify unveiled several updates to its advertising strategy, including the launch of Gen AI ads.
One standout announcement was the introduction of the Spotify Ad Exchange (SAX), a new programmatic platform that enables advertisers to target logged-in users through real-time bidding. Additionally, the company announced new partnerships for SAX, including Google's (GOOGL) Display & Video 360, Magnite, and The Trade Desk (TTD).
Meanwhile, SAX will support ads in audio, video, and display formats across music, with podcast inventory to follow. It will be launched in key markets, including the U.S., Canada, Europe, Australia, India, and Brazil.
Is Spotify a Good Stock to Buy?
While Spotify's ad push signals long-term ambition, analysts are also weighing in on how these moves might impact the company's stock trajectory.
According to TipRanks, Wall Street has a Moderate Buy consensus rating on SPOT stock, based on 18 Buys, 10 Holds, and Zero Sell recommendations. The average Spotify stock price target of $668.13 implies a 21% upside potential.
Year-to-date, SPOT stock has gained 23.6%.
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