Revolution can reveal that the two digital music ventures are in talks about a proposition that will allow brands to book campaigns comprising audio ads on Spotify and display ads on Last.fm. The companies are also discussing other ways they can work together, such as merging their music recommendation engines.
Spotify and Last.fm hope that creating a single buying point will make it easier for advertisers to run campaigns across the sites, while proving to major record labels that ad-funded digital music can be profitable.
"If we work closer together and engage more brands then it will benefit both of us," said Jon Mitchell, UK sales director at Spotify. "We want to get advertisers using our space and we're sitting down to work out how that can happen. For us growing the ad market in the sector makes sense and if there are opportunities to work together we'll try and do it."
Miles Lewis, senior vice-president of international sales at Last.fm, said that there is an opportunity for the two companies to work together to engage the agency world and become digital music evangelists.
Spotify has grown massively in the UK since coming out of beta in February and already has around 500,000 million UK users. Last.fm, which commands a global monthly audience of more than 100 million, is still enjoying a steep upward curve, having cashed in on its explosive growth by selling to CBS last year.
Both companies offer music free to listeners and rely on a largely unproven ad-funded model. But global brands including Adidas and Apple have made Last.fm a central part of their online marketing plan, while Spotify has secured partnerships with Nike and Carling.
Spotify's offering centres around music being social, enabling listeners to share songs and work together to create playlists. The service offers premium subscription with no advertising or free access with advertising.
Last.fm, the more established of the two services, offers listeners the chance to create their own radio station and listen to music on demand. It was set up in the UK in 2002 before being sold to US media giant CBS in 2007 for £140m.
"There are going to be lots of services and it's up to consumers what they want to use," added Spotify's Mitchell.
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