Spotify to Buy Podcast-Ad Platform Megaphone for $235 Million

Spotify will pay $235 million for podcast ad platform Megaphone, the latest in a group of podcast-related deals in recent months.
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Audio streaming service Spotify  (SPOT) - Get Report definitively agreed to buy podcast advertising platform Megaphone for $235 million, the latest in a series of podcast-related deals in recent months.

Shares of the New York company at last check were down 6% to $257.77.

The closing of the transaction is subject to regulatory clearances.

Megaphone would be part of Spotify's effort to help advertisers and podcast publishers quickly make money off podcasts, "powered by a scaled audience and state-of-the-art technology," Spotify's chief content and advertising business officer, Dawn Ostroff, said in a statement.

Megaphone, Reston, Va., was founded by the online magazine Slate. Both are units of closely held Graham Holdings,  (GHC) - Get Report the Arlington, Va., provider of education and media services.

Shares of Graham Holdings at last check rose 4.1% to $453.19.

The podcast technology at Megaphone provides hosting and ad-insertion capabilities for publishers and targeted ad sales for brand partners.

The acquisition follows Spotify’s launch of Streaming Ad Insertion, a technology platform that delivers traditional podcast ads.

And in June Spotify unveiled a multiyear partnership with AT&T's  (T) - Get Report Warner Bros. and DC Entertainment. Under the terms Spotify will get first-look rights to original scripted narrative DC podcasts based on such characters as Superman, Batman, Wonder Woman and the Joker.

For the third quarter, Spotify posted a net loss of €101 million, or €0.58 a share, vs. net income of €241 million, or €0.36 a share, a year earlier. 

Ad-supported revenue grew 9% year over year, coming in at €185 million, ahead of the company's forecasts, "exhibiting a return to growth following the impact of the global pandemic," Spotify said.

In February, Spotify bought sports and lifestyle company The Ringer for $250 million.

Podcasts generated $708.1 million in advertising sales in the U.S. last year, according to the Interactive Advertising Bureau. That number has grown every year and should surpass $1 billion within the next year or two.

As for other podcast deals:

Late last month radio-station operator IHeartMedia said  (IHRT) - Get Report it would acquire Voxnest, operator of a marketplace and provider of data and publishing tools for podcasts. 

In mid-September the Seattle tech and online-retail giant Amazon  (AMZN) - Get Report said it launched a podcast service, moving in to Spotify's territory.

And in July, Sirius XM  (SIRI) - Get Report said it would pay $325 million for an E.W. Scripps  (SSP) - Get Report podcast production company, Stitcher, that includes, among other luminaries, Oprah Winfrey's network.