Spotify finally makes bigger push into mobile


Spotify’s app

Now that Spotify has built up a desktop presence, it is shifting the focus to mobile with the release of a free mobile music streaming application, but it is late to arrive tothe channelcompared to its competitors such as Pandora and Rdio.

Up until now, mobile Spotify users were required to pay a monthly fee, but according to The Wall Street Journal, Spotify is planning to lift the fee. Desktop users already have free access to Spotify, but this news signals that the company is rethinking its mobile strategy to appeal to more consumers and compete with Pandora and others in the space.

When Spotify runs the mobile math on their 20 million active non-pay users, they know that monetizing their mobile phone market is essential to competing with service such as Rdio and Pandora, said Gary Schwartz, president/CEO of Impact Mobile, Toronto.

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“Artists earn .007 cents per Spotify track or stream online,” he said. “The company needed to land a deal with the labels for the mobile screen. Whatever the number, I am sure there is a healthy margin for Spotify on an impression or audio-based CPM buy.”

Dividing the screen experience online/mobile did not make business or consumer sense. Spotify now can offer a multiscreen ad network, which will appeal to the media buys and net the company a multiple of value.

Gary Schwartz is not affiliated with Spotify. He commented based on his expertise on the subject.

Spotify declined to comment.

Free music
Consumers in the United States can currently use Spotify radio for free in the mobile app. The app also lets consumers pay to get Spotify premium, which lets users sync playlists to their phone and listen offline.

Spotify premium costs $10 a month and lets users access unlimited, on-demand music from the companys 20 million-song catalog on any device.

Users can also sign up for a 30-month free trial of Spotify premium by entering in their credit card information.

With the new Spotify app, users will be able to not only listen to radio for free but also play a limited number of songs on demand. The service will be ad-based in a similar format to Pandora.

Spotify already offers the ad-based service on its desktop site, but now users will be able to access it via mobile as well.

According to The Wall Street Journal, Spotify has six million paying subscribers and 20 million active users worldwide.

A screenshot of Spotify’s app

Spotify generates much of its revenue from its paid subscribers. Around 20 percent of free users convert to the paid version.

The desktop ads also contribute to the companys earnings. Now that it will be offering ads on mobile as well, Spotify will be able to bump up its earnings even more.

For marketers, this means more opportunity to reach engaged consumers.

Audio mobile ads especially have great power in terms of connecting with consumers. A consumer is forced to listen to branded messages every once in a while during the music streaming, and if a brand gets this right it can convey a creative and fun thought with an engaging call to action.

Pandora has already had much success with its ad-based offering. During the second quarter of 2012, Pandoras mobile revenue, including subscription revenue, totaled $59.2 million (see story).

Numerous brands have advertised on Pandora, and Spotify may be able to tap into that spend with its mobile app.

For instance, White Castle has relied on Pandora a number of times to promote some of its menu items (See story).

Beauty marketer Este Lauder also relied on both audio and visual touch points to promote its womens fragrance Modern Muse on Pandoras app (see story).

Creating a mobile app where users can stream music on their mobile devices is a strategic move for Spotify, said Shuli Lowy, marketing director at Ping Mobile, Beverly Hills, CA. There is an inordinate amount of music streaming taking place on mobile devices and it is a must be place for all radio streaming services.

Frankly, this market release should have been done a long time ago, she said. In March of last year, Pandora reported that over 70 percentof their active users were listening to their music through a mobile device. Pandora reported $229 million in their 2012 mobile ad revenue, placing the app as one of the top overall mobile ad leaders for the year.

A Spotify mobile app will open up additional mobile ad opportunities particularly in audio-based mobile ads. This add on will play into the supply and demand of mobile ad placements that impacts the availability and pricing of ad units. The extent of that impact, along with the number of active mobile users Spotify can convert/acquire at this stage, remains to be seen.

Final Take
Rebecca Borison is editorial assistant on Mobile Marketer, New York

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