Why Podcasts Change the Game for Spotify
Well recognized for its streaming music platform, Spotify (NYSE: SPOT) has proven a great success story so far this year, as its stock price has nearly doubled on the back of strong subscription data. Yet Spotify offers more than just music; its focus on expanding content categories mirrors how we are changing the way we consume information. And that change makes all the difference for Spotify's future.
The coronavirus pandemic has meant more time at home for all of us -- and highlighted a long-term shift in how we watch and listen to the things that entertain us. Rather than waiting for traditional TV broadcasts and radio shows to air at set times, people are moving toward enjoying those programs on-demand. Over the past year alone, for example, Spotify experienced a 31% increase in overall users. From 2017 to 2020, the company's total monthly active users grew from 131 million to 286 million, and its total revenue doubled.
Spotify also has a strong strategy for converting ad-supported free users to premium subscribers, which is significant since the gross margin for premium users is higher than for free users. While the company employs several conversion tactics, the most notable is its subtle and insistent interruption of the immersive, free user experience, which encourages users to upgrade to premium in order to make their experience perfect. As a result, the company successfully manages to convert an eye-popping 60% of its free users to higher-margin premium accounts. Accordingly, over the past three years, the number of paying subscribers has increased threefold, contributing heavily to its increasing revenues.
Source Fool.com
