When Spotify made its North American debut last summer, things looked bright. And while the platform’s 10 million active free users seem to be pleased with the tool, paid subscriber growth is much lower than predicted.
But the team at Spotify is not necessarily worried about the lack of paid users. According to CEO Daniel Ek, “free is just as important as paid service.” The company is combatting the monetization issue head on, coming up with creative ways to bring in ad dollars in order to support internal costs (streaming rights can be pretty pricey, people – think $300 million in fees).
Today at the Ad Age Digital Conference, Ek threw out some pretty astounding figures about the platform:
- There have been 1.5 billion Spotify-to-Facebook shares so far
- Spoitfy has an estimated reach of 50 billion
- Users have already spent 1500 years within Spotify apps
He also announced the platform’s latest indirect channel of revenue: branded apps.
Spotify originally introduced apps in late 2011, but back then they were only available to music industry publications like RollingStone, Pitchfork and Billboard. These tools focused on organizing Spotify’s massive music catalogue in fairly straightforward playlists with accompanying reviews.
What Ek announced today are apps from brands outside of the music industry.
The first batch includes AT&T’s “Surround Sounds,” which plots songs on a map to show the exact location in which a song was written, recorded, played or performed. Users can glance at a map, pinpoint a location and hear songs that have some relevance in that exact spot.
Another member of the first round of brand apps is Reebok’s “Sifter,” which recommends songs and artists based on what your Facebook friends are listening to. Also look out for apps from McDonalds and Intel.
And according to Ek, Spotify won’t charge anyone, brand or not, to build these apps. But what about that new monetization model, you ask? The idea is that brands will create the tools free of cost and then buy Spotify ad space to get the word out. “Brands will build these apps and they’ll spend their marketing dollars to promote them on Spotify,” Spotify Chief Marketing Solutions Officer Jeff Levick told Ad Age Digital before the conference.
So if you’re one of Spotify’s 10 million active free listeners, the next time you listen to your playlists, you might hear or see an ad spot telling you about how McDonald’s can help you find new music thanks to their handy new app.
Depending on the creativity put into these tools, brand apps could prove to be a useful driver of revenue for both Spotify and the brands that build them. As consumer behaviors continue to evolve around music, keep an eye on Spotify. They’re showing up in Bluetooth speakers and devices, cars, and even TVs and wireless surround sound systems.