Has it happened to you that you are playing a sad song and the next moment, the music streaming platform offers a bunch of other sad songs that you can listen to? Now imagine, if the music streaming platform could use the same data that it uses to suggest you similar songs and give you personalised ads? Would you sit through the ad?
The user penetration rate in music streaming platforms is projected to be 12.7% in 2024 and is expected to increase to 14.1% by 2027 according to Statista. India is one of the fastest growing markets in online music streaming. It recorded over 1 trillion total on-demand music streams (both video and audio) in 2023 and we now have the world’s second-highest annual streaming volume by market. India’s music streaming market is expected to generate a revenue of $531.90 million in 2024, growing at a CAGR of 7 to 8% till 2027.
With advertising on music platforms picking up gradually, the ad market is projected to achieve a revenue of $373.00 million in 2024. “Rich music streaming data is gradually becoming more valuable to advertisers, as it allows them to better target their audiences and measure the return on ad spend (ROAS). When ads are relevant, audiences are generally more willing to view or listen to them because there is a connection to their interests,” Chandrashekhar Mantha, partner, media and entertainment sector leader, Deloitte India, told BrandWagon Online, adding that platforms capture and utilise a wealth of insightful data, including demographics, device information, genre preferences, time spent, hour of the day, artist preferences, new listeners, and the intent to explore new content.
Tuning Into You: The mechanics behind personalised ads
A recent report by YouGov revealed that 78% Indian consumers prefer personalised ads. In simple terms, personalised ads use data to tailor advertisements to individual users based on their preferences, behaviours, and demographics. It utilises the data from your browsing history, social media activity, purchase history etc. to analyse and identify patterns. This analysis is further used to predict your interest, using which marketers create targeted ads that will be more appealing to you. For example, if you frequently search for makeup products, then you might see more ads and offers of makeup products and brands. “When users see ads that align with their interests and listening habits, they’re more likely to engage with them. For instance, targeting fitness enthusiasts with ads for our latest athleisure collection during workout playlists and podcasts could be very effective.” Pallav Bihani, founder, Boldfit, said.
Yet, personalised ads haven’t not been able to tap into the market of music streaming platforms. Experts believe that personalised ads in music streaming platforms will not only result in higher relevance, increased user experience and engagement rates, it will also lead to an increasing revenue chance for both the platform and the advertisers. Meanwhile, by making personalisation possible, campaigners will be able to launch their campaigns with effectiveness and see better ROI. For users, this will translate into getting interest-based ads and finding new products or services which might be helpful.
However, personalised ads in music streaming platforms is not just a bed of roses. From privacy concerns to legal considerations, there is a seemingly big barrier that separates the two. Personalization within the music streaming industry receives very mixed consumer acceptance in its online advertising. Many consumers appreciate the relevance of personalised ads while others view it as a fair price to pay for receiving free or low cost services. On the flip side, this trend is also brewing increasing concerns over data privacy and security. Some users feel that personal data is being garnered to an uncomfortable extent. Moreover, excessive leaning on data may cause misinterpretation of user preferences or cause invasive ad experiences that turn away users at times. “Younger demographics tend to be more tolerant of personalisation, while older demographics might be a bit more resistant. In general, one can say acceptance often depends on the perceived value exchange and how a platform does its thing about privacy and user control,” Abhishek Tiwari, global business head, NetSetGo Media, said.
Can You Hear the Lawsuit Coming?
Key regulatory challenges for the use of information that is personally identifiable on music streaming platforms for personalised advertisement. First on this list of concerns is adherence to data protection regulations, such as GDPR in Europe and CCPA in California, in which data collection needs to be transparent and there is a requirement for obtaining informed consent from users.
The latest addition to these data protection regulations is the Digital Personal Data Protection (DPDP) Act. The DPDP Act mandates clear user consent, transparency in data usage, and stringent data protection measures to safeguard personal information. Platforms must ensure robust data security to prevent breaches and unauthorised access. Other concerns arise when collecting and using minors’ data; special care is needed. “The platforms should ensure that this does not return them to discriminatory ad practices based on protected characteristics. Moreover, the increasing scrutiny in AI and automated decision-making in advertising may be insisting on explainability and fairness of algorithms.” Tiwari added. Hereafter, the question will lie in striking a balance between those regulatory requirements with a personalisation that is effective.
Personalised ads: Intrusion or integration?
While some consumers may appreciate relevance, many find any form of intrusion into their music experience something of a pain.The key lies in the execution, if personalised ads are short, very relevant, and add value with some sort of exclusivity offer, then perhaps some users may be more accepting. “They have adapted by reducing the length to 4-6 seconds, so that the online user doesn’t mind seeing it. But how do you communicate anything meaningful in 4-6 seconds? So the creatives need to be differently designed. They should be themed to the platform on which they are being featured,” Prashant Panday, general partner, Silverneedle Ventures, commented.
Overexposure via personalised ads could very easily be a propagated cycle of listener fatigue that drives users to ad-free alternatives. This highly relies on clear opt-out options and limitations in ad frequency. In the final analysis, the success of personalised ads will boil down to delicately balancing monetisation and user experience which includes low disruption and higher relevance. “By aligning ads with user interests and preferences, we can reduce the perceived intrusiveness and enhance the overall listening experience. In our experience, users are more receptive to ads that resonate with their personal interests and needs,” Bihani added.
From offering personalised ads in return for a lower subscription rate to adhering to the strict regulatory measures, it is indeed a long way ahead for music streaming platforms to reach personalised ads. Will they or won’t they is the question we can just play with for now…