Don't underestimate audio as an ad channel in Asia

With the rapid growth of Internet penetration, the exploding growth of smartphone usage and declining cost of mobile data, music streaming in Asia has outpaced the rest of the world.

Music streamers in Asia are expected to reach 813 million by 2020, according to research firm Statista. Advertisers know they can be effective if they place their messages into these free digital music-streaming platforms, because audio delivers close to 100% “listenability”.

For sure, Asian consumers have switched from music downloading to streaming far quicker than their Western counterparts. Indeed, McKinsey’s recent music industry report on Asia said that 56% of digital music revenue comes from streaming.

In APAC, an average free listener will be exposed to six ads within an average listening session of 180 minutes. Advertisers always prefer a premium content environment, and music streaming delivers on that need.  Music is a personal and emotional experience, and ads in that stream have a far higher recall rate.

Digital audio streaming is going to continue to grow, and advertising will fund the “freemium” model. This presents powerful opportunities for marketers to reach users in a unique way that is addressable and measurable.

Digital audio advertising is so new in Asia that it is virtually untapped when it comes to programmatic placement. This is going to change quickly, because of the precision targeting on offer. For example, brands can utilize first party login data from Spotify to run truly personalized ads according to the demographics, context of the song (playlist targeting), mood of the day (genre targeting) and behavioural patterns (workout/chill/pop genre generally). Other targeting options include the time of day, day of week, and the application of third party data. 

I think that right now is the best time to run audio ads, because competition is low and the CPM’s are attractive. Furthermore, audio advertising is highly targetable, and offers a totally different and personalized experience

The first cab off the rank is of course Spotify, and with a user base of 70 million free users, it’s going to be a powerful player. However, next year will herald the arrival of more programmatic audio advertising platforms.  We are already seeing Pandora announce it is moving into programmatic advertising in other markets.

My view is that the more local in nature these platforms are, the more likely they will win. Streaming services are learning to adapt and provide music that matches the consumer’s interest. In Indonesia, Spotify has created a local playlist of artists, and they have music editors across Asia, curating music that is popular in each country.   

Similarly Tencent’s JOOX and Taiwan-based KKBOX has captured market share by having localized editorial teams, a local playlist, and local language UI. That approach has been so successful for JOOX that it’s the leading streaming provider in Thailand, Malaysia, Hong Kong and Indonesia.

Streaming providers have also come up with creative solutions for payment, because in some countries the penetration of credit cards is low. Spotify partnered with Telco Indosat to bundle Spotify with a consumer’s telecom bill.  Other local players that have wrapped music with mobile phone bills include Spinnr in the Philippines, NhacCuaTui in Vietnam, and Langit Musik in Indonesia.

I believe digital audio in Southeast Asia will continue to grow by getting a critical mass of local record labels on to these platforms, via new telecoms carrier partnerships for streaming services and lower mobile data cost. Advertising, applied programmatically, will help to fuel this growth.

For sure, Asia will have a different audio advertising market to the rest of the world. In the future, we will see more programmatic tools that spur investment in this channel, such as sequential advertising, cross-device targeting, and deeper, immersive experiences.

But all these elements point to one thing: in Southeast Asia there is a lot of room for music streaming services to grow.

DK Tan is senior director of trading, APAC, with The Trade Desk