Spotify hits 100 million user mark

Things are looking up for Spotify. The Swedish music streaming service claimed overnight that its active user base has now passed the 100 million mark.

Most listen to it for free. But Spotify claimed in April it has the largest subscription base in the music industry, with 30 million paying for the privilege. (The figure was 28 million at the end of 2015). That helped Spotify grow its revenue by 80% to €1.95 billion (A$2.96 billion) last year.

Spotify is also now Europe’s biggest start-up, overtaking Skype, with investment bank GP Bullhound, valuing it at US$8.5 billion (A$11.39 billion) last June. The company is also believed to be edging closer to an IPO after hiring a head of investor relations.

There are cynics in the music industry that believe despite these impressive figures, Spotify has to actively increase its growth. It is getting strong competition from Apple Music, which picked up 15 million subscribers in less than a year – and has just redefined the app to make it more user-friendly. Spotify has been in the game since 2006.

They also draw a question mark on the longterm sustainability of its business model. As it continues to pay more than 80% of its revenue to record labels and artists, its losses were up by 10% to €173 million ($262.6 million).

But other analysts suggest that Spotify is moving in the right direction. Its number of users was 89 million at the end of 2015, which means it is safe to assume it is adding 1.8 million users per month. Its ad sales revenue has doubled year-over-year for the past two years.

What’s more, it’s showing a concerted dial-up into generating more sales. The Wall Street Journal also reported that Spotify is increasingly moving from a focus on its on-demand, ad-free music streaming to leaning harder into advertising, adding ads products and partners.

The WSJ reported, “It focuses on audio ads and native integrations, such as sponsored playlists (some of Spotify’s top pre-programmed playlists, such as Rap Caviar, get over a billion streams a week globally) and video ads that allow brands to sponsor 30 minutes of ad-free listening. The company also lets certain advertisers buy ads using data and programmatic platforms.”

Last month its Chief Revenue Officer Jeff Levick hired former CNN/Fox executive Liberty Carras Kelly as new Head of Americas Sales and one time Vevo VP of Commercial Marketing, Danielle Lee, as Spotify’s Vice President of Global Partner Solutions.

A strong signal to the industry about its seriousness about larger deals with advertisers, was Spotify’s Chief Executive Daniel Ek’s keynote speech at the Cannes advertising festival.

“We have a large paid business and a large free business,” Levick pointed out to the WSJ. “They offer two very viable meaningful revenue streams and we are doubling down on both.”