Spotify sales chief Rak Patel insists he can rise to the 20% challenge
The Media Leader interviewThe Spotify enterprise sales chief for Europe, Middle East and Africa has three reasons why he can help the streaming giant significantly grow its ad revenue in 2022 after years of sluggish growth.
Behind his affectionate smile, Rak Patel is a man under pressure to deliver.
The Spotify EMEA sales chief, thrust into the top EMEA sales job almost a year ago after the departure of Marco Bertozzi, is under orders to significantly ramp up the company’s advertising revenue.
Not that you’d know it as Patel sits down with Mediatel News for a pre-Christmas chat in Spotify’s London office in the Adelphi Building, just off the Strand.
“I feel I'm the luckiest person in advertising and in media, with the role that I get to do, “ Patel beams. "If I think about the journey, and about the teams we're building, about how I learn every day, that’s what keeps me going – the brand [and] the opportunity that we have.”
Patel might describe Spotify’s objective for 2022 as an “opportunity” but in reality it’s a significant challenge – the company is on notice to significantly increase ad revenue this year.
The music and podcasting streaming company has historically struggled to grow the free, ad-supported side of its business, with ad revenue making up less than 10% of revenue before last year.
Daniel Ek, Spotify’s founder and CEO, threw down the gauntlet last October by suggesting this proportion should reach 20%.
“Long-term, I believe at the very least, [advertising] should be 20% of our revenues,” Ek told investors after reporting Q3 financials. “But it might possibly be a lot more than that 30%, 40% even over the next five to 10 years.”
So how does Patel, now positioned as one of the company’s key commercial operators, hope to achieve that?
"We can get to 20% over the space of the next year or so," Patel insists. "For us as an organisation that is profound."
He points to a strategy comprising three main prongs. The first is simply benefiting from having “more boots on the ground” – Spotify is on a hiring spree and plans to double the size of its EMEA sales team in 2022, Patel says, in order to capture a “greater breadth” of advertiser.
Notably, this is even more than the 70% overall increase in international sales staff promised by Lee Brown, Spotify’s overall head of advertising business, in an interview with Reuters last October. Clearly the Europe, Middle East and Africa region is expected to do more than its fair share.
Shortly after that, Spotify hired the experienced LinkedIn commercial chief Sally Keane to be head of UK and pan-EMEA ad sales, taking on duties previously held by Patel, who now holds the title of head of enterprise sales.
'Love of audio' is turning digital audio into a must-have on the media plan
This bigger team will need to deliver both growth in big brand ad revenue and so-called “long-tail” commercial income from small and medium-sized businesses.
Patel describes this as “the penny drop moment” for Spotify – the realisation that upping brand count is going to be “really key”.
“The catering for all brands of all sizes, that’s going to be really important for us. If we accelerate to all levels, we need to be supporting enterprise suite brands and advertisers. That’s our sweet spot…. As we move from a publisher to a platform, SMBs become even more important to us.”
Patel reckons the time is right for brands to invest more in digital audio going into 2022, as a “love of audio” is now translating into being seen as a must-have on a media plan rather than a nice-to-have.
Indeed podcasts are seen as a game changer. Spotify’s podcast ad business has surged over the last few quarters – it reported a 200% increase in podcast revenue for Q2 2021, and triple digits again in the following three-month period.
“Our approach has been very much centred around all things audio, being the world's leading audio platform, taking brands along on that,” Patel explains. “Whereas, a few years ago, previously we'd just be content if [brands] had a 'music strategy'. Now it's very much centred around 'audio' and what that can do, and how that can really sort of open up audiences."
The third big bet for Spotify is around innovation, and Spotify just loves announcing new and shiny things. Just last week it announced the launch of "Call-to-action cards", a new format for podcast advertising that appear as soon as an ad starts playing in a podcast and also remain visible show and episode pages.
There were also a flurry of eye-catching developments before Christmas, such as an exclusive content partnership with Netflix (a company regularly mooted as a potential acquirer for Spotify), and the trial launch of a TikTok-style vertical music feed called “Discover”.
2021 also saw Spotify unveil new features for Streaming Ad Insertion, unlocked podcast ad buying in Spotify Ad Studio, and the introduction of the Spotify Audience Network. Since the launch of the Audience Network, Spotify says it has seen a double-digit increase in fill rates and a double-digit lift in CPMs for opted-in Megaphone publishers. Spotify acquired Megaphone in 2020 so it could offer podcast publishers new monetisation tools to help them earn more from their content.
However, Patel believes the whole commercial podcast industry needs to innovate in order to pull in more advertisers – not just Spotify.
“If I think about where the podcast advertising industry is today, and where I think it could go it creates a hell of a lot of excitement. What we can bring to that industry or that discipline, is what a marketer really craves for in any form of digital advertising.
“So on one side, you're aware of the ad tech we're creating, whether it's around measurement, streaming, ad insertion, etc. On the other is around the scale as well and real audience buying across the US, so our purchase of Megaphone is really fundamental to that, as is Audience Network.”
Patel insists exclusive content will continue to form Spotify’s strategy going forward, despite the company having to shell out huge amounts to secure the popular Joe Rogan Experience (bought for a reported and never denied sum of $100m in 2020). Last year former US president Barack Obama launched a podcast on Spotify with music legend Bruce Springsteen, although Prince Harry and Meghan Markle’s podcast has reportedly stalled.
‘You talk a lot… try media sales!’
This year will mark five years at Spotify for Rak Patel, whose media sales career now spans more than 20 years with stints at Emap (now Bauer Media), the Financial Times, Microsoft and Auto Trader.
Anyone who knows Patel well (or follows him on social media) will know he is a staunch Manchester United fan. But his football fandom is also responsible for his entry into the media industry in the first place.
As a recent Leeds University graduate with little idea what career to pursue, he bumped into a university friend while visiting a pub in Piccadilly Circus to watch his team play in the 1999 Champions League final.
“And I've just come down to London, I’d been travelling for 18 months, and I bumped into him; we were at the bar. And I’ve never seen this chap since! He said ‘what are you going to do, Rak? I said, ‘I don’t know’ and he said ‘Why don’t you try media sales? You’d be good at that, you talk a lot.
“And the next day I went to Lipton Fleming, do you remember Lipton Fleming, the recruiter? I got the Media Guardian newspaper and I saw this ad for this recruitment agency saying ‘media sales and recruitment…. And the next day, I got an interview at Bauer, or Emap in those days. And I fell into it and loved it from day one.”
Patel takes diversity and inclusion in the industry seriously, having been a founding member of MEFA (Media for All), the support network for underrepresented communities. But what does he think this notoriously white, male and middle-class industry do to improve access and representation?
“Look, when I started. There was one Asian person I can remember and that was Neshat Ahmed and she was the MD at Emap. There wasn't anyone else from my background anywhere. So think of where we are today. We’ve still got a lot to do, but to think of where we are today; I’m really pleased with that.”
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