Spotify's $235 Million Acquisition of Megaphone

By Vinay Naik (Warwick), Amarins Laanstra-Corn, Roshni Padhi, Winston Shum (Stanford)

 

Overview of the deal


Acquirer: Spotify

Target: Megaphone

Total Transaction Size: $235 million

Date Announced: Nov. 9th, 2020


Spotify’s acquisition of Megaphone marks the start of a new shift in the digital streaming industry, placing greater importance on dynamic podcast advertising within the wider audio ecosystem. Podcast advertising is projected to surpass $1 billion in 2021, according to the IAB. As one of the world’s leading podcast advertising and publishing platforms, Megaphone’s unique offering will enable Spotify to target ads to its 320 million monthly listeners. This acquisition follows the launch of Spotify’s proprietary Streaming Ad Insertion (SAI) technology, the company’s first step to delivering engaging and precise ads to podcast listeners globally, in real-time. Megaphone gives Spotify the possibility to extend this technology to third-party podcast publishers for the first time, positioning them as a leader within the industry.


“We believe that Megaphone and Spotify’s shared value in innovation will drive the podcast ecosystem forward around the world.” -- Brendan Monaghan, CEO of Megaphone

Company Details: Acquirer – Spotify


Spotify is currently one of the largest audio-streaming platforms on the market. It is a freemium service as the basic models are offered at no cost but additional premium services are available for purchase. They currently provide access to over 60 million songs and have recently branched into other forms of audio media. As of 2017, Spotify was not yet a profitable company. Revenues in Q1 2020 were approximately $1.7 billion.


Founded in 2006, headquartered in Stockholm, Sweden

CEO: Daniel Ek

Number of employees: 2,960

Market Cap: $49.49B (as of dd/mm/yyyy)

EV: $50.8B

LTM Revenue: $7.57B

LTM EBITDA: -$546M

LTM EV/Revenue: 6.71

LTM EV/EBITDA: -92.19


Company Details: Target - Megaphone


Megaphone is one of the leading providers of podcasting technologies for both publishers and advertisers. Their technology enables advertisers to connect to over 60,000 unique audience segments. It also assists content creators in developing profitable business models.


Founded in 2015, headquartered in Washington D.C., United States