Mexico City — The boom in the popularity of Mexican music, with exponents such as Peso Pluma, is leading brands to explore new niches to connect with audiences through innovative advertising strategies, according to Spotify’s director of advertising sales in Latin America, Diana Ramirez.
“These are niches that some brands didn’t used to visit and now they’re saying: if that’s being relevant, it makes sense to try,” Ramirez told Bloomberg Línea.
Currently the top 50 most-listened-to songs on Spotify is headed, in first and second place, by Peso Pluma collaborations and their corridos tumbados, a genre that mixes corrido - a traditional Mexican genre characterized by its narrative - and urban music.
The 24-year-old singer from Mexico’s Jalisco state is a worthy representative of his generation in Mexico. According to a study conducted by Spotify, most of the country’s Generation Z (62%) seek to explore different aspects of their personality through music, while appealing to nostalgia, “when things were simpler”.
‘A pulse of society’
These musical trends, as well as the sertanejo genre in Brazil, a style also known as Brazilian country, offer a pulse of society, said Ramírez.
In business terms, this popularity translates into growth in the number of monthly active users for the platform, which provide information at a different level of detail than traditional platforms, such as radio.
At the end of the first quarter, Spotify had 210 million premium subscribers and 515 million monthly active users of its ad-driven version. Twenty-one percent of its audience is in Latin America.
“Monetizing the inventory of audiences listening to the free version of Spotify falls on understanding the audience. Of the emotional moment and the activity of the day,” Ramirez said.
That means going beyond traditional age and socioeconomic segmentations with data. With this detailed information, according to the directive, advertisers should not wait for a specific time of day to access their target audiences.
Spotify’s main source of revenue is the Premium version with a subscription fee. This line of business accounted for 89% of revenues in the first quarter. Advertising sales, which enable the “free” version, accounted for 11% of revenue.
Despite their relatively lighter weight, advertising revenues are growing at higher levels than subscriptions. Subscription revenues grew 14%, while advertising revenues grew 17% in Q1, compared to the first quarter of 2022.
The increase in advertising revenue “was primarily due to growth in music impressions sold, which increased revenue in our direct and programmatic channels,” the company said in its quarterly report.
In addition to musical genres, another niche for advertisers in the region is podcasts. According to the Spotify study, 56% of listeners between the ages of 18 and 24 seek answers through podcasts, before even talking to family members.
“They generate a level of trust and closeness, as if they were a friend and that over indexes up to 5x the purchase intention against other media,” added Diana Ramirez.
Podcasts also have another virtue for Spotify’s business. According to Bloomberg analysts, Spotify’s growing exposure to podcasts and advertising could offset the user slowdown and improve the long-term margin profile, which has among its costs music royalty payments.
“Long-term profitability depends on its ability to leverage podcasts, given that music content owners have the upper hand. Spotify’s strategy of owning podcast content may be a key growth driver,” wrote Geetha Ranganathan, Bloomberg’s senior analyst focused on media, in an April commentary.
According to Ranganathan, however, the competition Spotify faces is stiff, with Amazon and Apple rapidly expanding their services.
Spotify announced earlier this month that it will lay off 2% of its employees, or 200 people, mainly in its podcast division to help optimize its operation.
Latin America accounts for 21% of Spotify’s global audience. The market has become key for the Swedish platform, which is increasingly turning to the region first, even before Europe, to test its innovations, said Ramírez.
This implies, for example, the upcoming arrival in the region of innovations such as Audiobox, a music-reactive LED box with Spotify integration, Ramirez said.
“Latin America is a diamond,” Ramirez said. “It’s easy to say, but at double digits in Mexico and Brazil we listen to music and podcasts at full blast.”