Spotify is one of the best music applications on Mac but the only drawback of the free version are the ads. As the application becomes more popular, the ads have increased a lot but help is at hand from Smutefy which aims to reduce them intruding on your listening as much as possible.
Smutefy is a free small menu bar application that automatically detects and mutes Spotify ads. It doesn't actually block the ads - it simply reduces the volume when an ad comes on so that you don't hear it.
Firstly, you'll need to make sure that you have both Growl and Soundflower installed for Smutefy to work. Smutefy doesn't block Spotify Growl ad popups but it uses both Growl and Soundflower to monitor the application so that it can auto adjust the volume when an ad comes on.
All you have to do to activate Smutefy is double click on it in your Applications folder. Smutefy then places a small icon in your menu bar. When an ad is detected by the application, the icon will change color and mute the system sound until the ad finishes.
Smutefy works very effectively the only problem being that the first second of an advert isn't muted but it kicks-in pretty quickly after that and all you hear is silence instead of adverts until the next track starts.
Smutefy is an ideal application for all those Spotify users that prefer silence over adverts.

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Or you could stop using Spotify! (I'm not a fan of streaming music in general)
Or of course, sign-up for the Premium version which is definitely worth it if you have a mobile. What's your gripe with streaming music then?
I have got this but it doesn't work. It goes blue when an ad is playing but it doesn't turn it down or mute it! Please help.
@Jon: to repeat the question, why aren't you a fan of streaming music?
@Peter-Paul and Nick: I dislike streaming services because they are less energy efficient than local storage, basically. We are supposed to think environmentally these days, aren't we? With a streaming service, every time you listen to a song it's downloaded, but discarded. Listen again, and it is sent to you again. That feels wrong to me. On top of that, with the music I buy digitally I can listen to it however I want, with whatever app I want, even if I'm offline for some reason.
Actually, Spotify downloads songs on your harddrive as a cache. That´s why songs starts quicker at the second time and there are no unnecessary traffic.. i use manual keys, when i detect ad i press mute + play, and when the ads are over i press unmute =)
This is a brilliantly crafted side-application. Great work. Long-live Apple Macintosh.
I'd much rather just skip the last few seconds of a track, than listen to silence for 60 seconds. Skipping to the next track = no adverts.
Not seen a way to do this automatically yet though. Would be the best solution if it could be done I think.