Last week, Spotify (SPOT +4.03%) and Facebook (FB 0.82%) teamed up to announce a new feature in their partnership called the Miniplayer. With Facebook recently announcing that it will be investing heavily in new audio features, it's no surprise that the company is teaming up with Spotify, which boasts the largest audio platform globally.
Though Facebook is a much larger company by market cap, it seems that this integration should be a big benefit to both companies. Let's see why.
What does the partnership entail?
Before we look at the benefits, it's important to understand what this new feature actually includes. In Spotify's press release announcing the Miniplayer, the company stated that Spotify premium subscribers will now be able to share and play audio tracks from within the Facebook app. This means that users will no longer have to switch between apps just to listen to a song or podcast, but instead can do it directly from their social media feed.
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The Miniplayer also includes full playback capabilities, just like the normal Spotify app, and free users will be able to listen as well -- granted, it's only in shuffle mode and with advertisements included. Though Spotify and Facebook plan to roll out these capabilities to more geographies in the future, it's currently only available to users in select markets.
Why is this such a big deal?
While this might not seem like headline news at first glance, this is the first time Facebook is allowing advertisements to be run on its platform by another company. Whether users are listening to music for free or listening to podcasts with embedded advertisements, it's Spotify that's controlling the ad inventory, not Facebook.
Since this partnership means sharing audio tracks between family and friends will be easier than ever before, Spotify advertisers will be getting even more exposure. While there weren't any details about potential revenue-sharing agreements, it's safe to assume that Spotify is still administering the advertisements. Whether it's Megaphone or Anchor connecting sponsors to podcasts, or Spotify itself controlling the ad-supported freemium accounts, these in-audio ads aren't under Facebook's purview.
Which company does this help more?
Though it's always fun to try to pick which company is getting more out of a partnership, this integration should create value for both platforms. For Spotify, not only could this attract potential new subscribers as it grants greater exposure to Facebook's 2.85 billion monthly active users, but it also serves as another step in Spotify's larger ubiquity strategy. Making its platform accessible from anywhere should give existing users more of a reason to resubscribe, ultimately boosting retention.
As for Facebook, even though users might be listening to audio from Spotify, this incentivizes them to stay on Facebook's platform, and more time on the platform means more advertising dollars for Facebook. Not to mention, the users are happier since this partnership enables easier sharing and reduces the friction of having to move between apps.
For shareholders of either company, this feature looks like a plus. Not only is it helpful for users, but the partnership should also aid in both companies' competition with Apple (AAPL +0.11%).
