Spotify saw a 31% YoY increase in MAUs to 271 million, a 200% YoY growth in podcast hours streamed, and a 29% YoY growth in Premium subscribers to 124 million in Q4 2019.
Revenue grew 25% YoY to €1.85 billion, with Premium revenues “slightly better” and subscription revenue slightly weaker than forecast. Premium revenue was up 24% YoY to €1.63 billion, and ad revenue was up 23% YoY to $217 million.
Trends in MAU growth, and implications: In terms of MAUs, growth “picked up again” across Europe, North America, and Latin America, while the Rest of the World remains Spotify’s fastest growing region. Spotify is sticking to making only conservative estimates for 2020 as its data, especially around podcasts is reasonably new. This is despite the fact that MAU growth, which has been consistently growing at Spotify in 2019, typically converts to Premium subscribers. User retention is up in all of Spotify’s top 20 markets.
Conversion of MAUs growth to paid subscriptions fluctuates, bEk said. “But in general what we’ve seen in history is that when we see top of funnel growth in MAU growth, we see conversion come to Premium over time,” he said, adding that “then we see the benefits on the revenue side from more subscribers and more advertising inventory”.
ARPU for Premium business was down 5% YoY to €4.65 due to extending the free trial to all plans. The most important thing right now is to grow users and subscribers, and “we will continue to stress over ARPU and profit in the short term”, CFO Paul Vogel said. ARPU will be affected by product mix and geographic mix and expansion; extension of free trials to all plans negatively impacted ARPU.
Spotify Lite: The response to Spotify Lite has appeals to a different user demographic that what’s normally seen, Ek said. He was asked about response to Spotify Lite outside the US, but he instead stated the obvious: “data and connectivity is a big impediment for a lot of consumers” as Spotify expands to more regions. “And it’s something that we take for granted in the western world where we have abundant access to cheap data, but we’re still dealing with many territories where data usage is a real thing,” he said.
“So having Spotify Lite which really protects the consumer makes them aware of how much data they’re using and enable them to listen more via WiFi has been a strong driver for retention and growth.” – Daniel Ek
Marketing and campaign: Results this quarter was boosted by promotions from the Wrapped campaign, which neatly summarised users’ listening profile for the decade or just for 2020. 60 million users engaged with Wrapped content, the campaign got 40 million shares, with over 6.5 billion streams from year/decade top songs playlists.
It’s raining podcasts
Spotify now has 700,000 podcasts. It has also begun recommendations for daily podcasts in 10 markets, including UK, US, Canada, Brazil, among others. It released 26 shows in markets outside the US, including three in India: 2 Yarns, Love Aaj Kal, and Bhaskar Bose. The 200% growth in podcast hours streamed clearly showed “podcasts are driving overall engagement and user retention” and podcast consumption was seeing an “exponential growth” on the streaming platform. Podcast users are more engaged overall and because of that engagement, they’re also listening to more music, Ek said.
- Spotify has also acquired podcast-centric media company The Ringer, owned and operated by Bill Simmons. The acquisition comes with the “exponential growth” in podcasts given that 16% of Spotify’s total MAUs now engage with podcast content. The Ringer covers sports and culture. Spotify intends to hire Bill Simmons and his roughly 90 employees who work on The Ringer’s website.
- The Ringer is the fourth podcast company acquisition made in the past year: Almost exactly a year ago, it bought Gimlet Media, a podcast network which produces popular shows such as Reply All, and Anchor FM. Later in the year, it bought Parcast, a network which focused on podcasts about true crime and horror.
- The company is also building a podcast advertising business which will target listeners based on their demographics and online behaviour. It’s developing tools to monetise podcasts, which is different and more difficult than monetising music. It announced ad-targeted tool ‘Streaming Audio Inserts’ last month, which inserts ads into shows in real-time, based on its profile of users, including their age, current location, and other granular data. Ek added that there’s a long way to go as “we haven’t added Internet-level monetization yet to audio”.
Commenting further on investments and acquisitions, Ek said “any decision to accelerate our investment in podcast and technology spend should be viewed as an indication of our belief that our strategy is having tangible results” He continued: “We have gained even more confidence in the data, particularly around the benefits from podcasts, and as a result, 2020 will be an investment year”.