Music streaming service Spotify is about to test the waters for its video ad products in Asia-Pacific, after launching two formats in the United States and Western Europe last year.

From next month, Spotify executives in APAC will start to offer video takeover ads for tablets and PCs, and sponsored sessions offering mobile phone users 30 minutes of ad-free music in return for watching a video.

These will be sold as standalone offerings in Australia and New Zealand, but bundled with other ad formats in Spotify’s Asian markets, where digital has a smaller share of ad spend.

Listeners will be prompted to watch these ads with an audio cue, while brands will only pay for completed plays where Spotify’s interface remains visible on-screen.

“We put a lot of thought into what video advertising would look like, if we did venture into it,” says Sunita Kaur, Spotify’s Asia MD. “We wanted it to be different.”

Video advertising is an intriguing addition to what is primarily an audio medium. Advertisers will be looking for some relevant case studies to come on board, with encouraging results from their first campaigns to keep them spending.

advertiser interest

Spotify has been gaining good traction among media buyers and advertisers in larger online ad markets in Europe and the US.

Some are asking Spotify to offer video in Asia, Kaur says. The region represents a tougher sell however, where many brands and media owners are just starting to engage with what digital media has to offer.

Most radio stations in Spotify’s core Southeast Asian markets treat digital as a mainly promotional medium for now, with few offering combined audio and online ad packages that would help lift interest in multimedia campaigns.

Demand from advertisers is also relatively low, putting the onus on Spotify to convince brands with small digital budgets to try out something new.

Nonetheless, video represents a lucrative segment of the digital landscape, where demand for premium inventory exceeds supply, pushing up prices.

“Video is where the digital money is, this is where they should be fighting on the business side,” remarks Jason Tan, GM of media agency ZenithOptimedia Singapore.

“Whether they have a natural advantage here, or whether they should even be in this space, is what they need to think about,” Tan adds.

Kaur denies that the move is motivated by the ad rates that online video can command, describing Spotify as an entertainment service designed primarily for its users.

Song lyrics introduced last year for example, allowing people to sing along, also draw attention to the screen.

Video ads are a complement to Spotify’s existing audio offering, Kaur adds, rather than the precursor to more direct competition with large-scale music video aggregators such as Vevo and YouTube, at least for now.

“Right now we’re focusing on what we’re good at, which is music streaming,” says Kaur, who will be speaking at next week’s Festival of Media Asia in Singapore.

Asian expansion

Spotify made its APAC debut in May 2012 with launches in Australia and New Zealand, moving into Asia the following year with local services for Hong Kong, Malaysia and Singapore in April 2013.

A Taiwanese offering followed in September the same year, while a service for the Philippines launched in April 2014.

Initially, Spotify will only sell its sponsored sessions format in Australia, New Zealand and Singapore, although video takeovers will be available across its markets in APAC.

More Asian nations will be added by next year, Kaur tells Media Business Asia, with Spotify inking licensing deals to bolster its lineup of local artists ahead of launch in a particular market.

Pushing the new video ad formats will be a major priority in Asia this year, she adds, alongside more telco partnerships. Kaur also wants to extend payment options beyond credit cards this year, to encourage more people to become paid subs.

Although it is seen as skewed towards younger audiences, most of Spotify's users in Asia are aged 18-34 – a core demographic for advertisers.

Familiarity among advertisers is also high, Tan notes, helping generate interest in what the music specialist has to offer.

Since starting operations in Sweden in 2008, Spotify has built up a global base of more than 60 million people who have used the service within the last 30 days, including an overlap with 15 million paid users.

User numbers by country are being kept under wraps for now, making it difficult to gauge Spotify's market share in Asia. The service doesn’t necessarily need a mass audience however, to attract advertising.

“Spotify for agencies has always been less of a reach channel, and more of a creative niche platform to reach young adults,” Tan says.