An interesting article in Fast Company, “More than Joe Rogan: Inside Spotify’s audio revolution”, looks at Spotify’s success with podcasts, a phenomenon that has been growing in popularity since 2005, but has not yet become the next big thing many predicted.
In 2005, three young Silicon Valley industry veterans, Ev Williams, Jack Dorsey and Biz Stone, created Odeo to try to capitalize on what was then expected to be the explosive growth of podcasts. The arrival of Apple with iTunes and the appearance, almost by chance, of a product created to coordinate the people who worked at Odeo distracted them from that idea and led the company to pivot to become Twitter and completely abandon the world of audio, which Ev Williams has now returned to after buying Knowable and incorporating it to Medium.
Meanwhile, in Europe, a company managed to navigate the complex world of music rights by incorporating several record labels into its shareholding, while convincing music fans to stop downloading unlicensed music and instead use a freemium model with ads between songs, or paid a fee for an ad-free music experience. The Spotify that Daniel Ek and Martin Lorentzon founded in 2006 is now a tech giant, one of the few that Europe can truly be proud of, and has long been trying to expand its dominance in music to other areas of audio based on strong growth, content deals and acquisitions. Right now there are 3.2 million podcasts on the platform, generating annual ad revenue growth of 75%. Total ad-derived revenue on Spotify is now up to $1 billion, and this is considering that, at its core, advertising is meant to be a deterrent, an “advertising-as-torture” model that aims to encourage heavy users to switch to the premium model and start paying their usage fees.
In the competitive US market, Spotify has already managed to become the number one podcasting platform, with 24% of users going there to listen to their favorite shows, compared to 21% for Apple and 18% for YouTube. An important advantage, considering the competition, and which underlines the importance of having a good platform model already sufficiently tested and which continues to work to make its creators, as has recently happened in music, reasonably comfortable, even if the revenue model does not benefit everyone in the same way.
Either way, Spotify continues to grows: the acquisition of Anchor and Gimlet in 2019, along with Betty Labs and Findaway more recently, or the creation of Green Room for live audio broadcasts, are making Spotify the default model we turn to not just for music, but audio of any kind. If we combine this with its push toward video and a rethink of its advertising model, this is clearly one of the few European companies that stand out in the field of technology, and with a very positive future ahead of it.