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Spotify IPO: Here’s why Daniel Ek needs you to spend more time listening

Spotify IPO: Here’s why Daniel Ek needs you to spend more time listening
[Photo: courtesy of Spotify]

Spotify users streamed 40.3 billion hours of content last year, up from 26.7 billion the year prior. But the bulk of that growth stems from Spotify’s overall user growth, the company says. Going forward, as Spotify nears saturation in major markets—the Stockholm-based company owns 95% of the streaming market in Sweden, for example—its challenge will be to increase the number of hours that each user spends with the service.

“We are in the discovery business,” Spotify cofounder and CEO Daniel Ek writes in his company’s IPO filing, released yesterday.

Today, on average, Spotify users stream 25 content hours per month. To increase that metric, the company will have to further refine its home page,  the “gateway” to its 35 million tracks. “Users are more likely to engage with a platform that reflects their real-time moods and activities and captures a unique understanding of moments in their lives,” the company writes in its filing. During commuting hours, that means boosting playlists like “Songs to Sing in the Car.” Later in the evening, the company’s algorithms might suggest “Relax & Unwind.”

Personalization is at the heart of these efforts. “We realized early on that being a music application was not enough,” the company writes.

Like rival Apple Music, Spotify is experimenting with the right mix of algorithms and editorial content as it seeks to improve personalization. Spotify’s data scientists evaluate user preferences according to 40 different parameters, taking into account factors like demographics and past listening behavior. But the company also employs a team of editorial curators tasked with creating playlists, like Today’s Top Hits and Acoustic Covers. Their human-curated playlists comprise 15% of content hours.

For Spotify, the content-hours wild card is video. Already, the company has started adding music videos, artist interviews, and behind-the-scenes footage. But video remains a tiny portion of its overall streaming. YouTube, on an annual basis, is capturing well over 360 billion content hours of attention.

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