David Abramovic

@davidbekic

I’ve Come From the Future to Save Spotify

Disclaimer: I’m required to inform you that I haven’t really come from the future.

Growing up in Sweden, I’ve had the opportunity to watch Spotify’s development sitting front-row. Like a new member of our monarchy, Spotify has been the royal child that we’ve proudly watched grow up to become a crown princess with 170 million users.

The road to be crowned Queen is far from a straight one though. When Spotify started the seemingly impossible mission to make music listeners pay for music through streaming, it was mostly alone in doing so, competing mainly against itself. Incredibly, the streaming company achieved this feat and indisputably proved a lot of people wrong. Today however, it’s not only competing against itself, as some serious competitors have emerged to cause an external threat to Spotify.

The bootstrapper company

Marketing guru Seth Godin describes the Bootstrapper as the company/person/brand that has the state of mind to be the most resourceful with as little money as possible. The bootstrapper will succeed because its efforts and its focus will defeat bigger and better-funded competitors.

In my estimation, the bootstrapper’s most important asset isn’t money nor short-term goal achievements, it’s the ability to be three steps in front of its competitors in terms of innovation. This is the asset that makes users come to you, instead of you having to chase them down. Consequently, lack of money becomes less of a problem since you’re getting free marketing.

There are some downsides to being the bootstrapper though, mainly that you can‘t ever rest on your laurels and therefore you can never stop taking risks. It’s certainly scary, but you have no other options. You simply have to view not taking the risks as the biggest risk of them all.

The bootstrapper company of the music business

Out of the absolute biggest music streaming services today, Spotify is the true bootstrapper. Its biggest competitors are Apple, Google and Amazon. Man, that’s rough. When Apple Music launched in 2015, they had over 800 million credit cards on file to try to convert into users. Hence, without differentiating themselves much in terms of functionality, Apple managed to garner half the amount of Spotify’s paying subscribers very rapidly.

That‘s a position the bootstrapper is never going to be in, thus the necessity of risk-taking. And since Spotify is the only bootstrapper of the biggest music streaming services, actually differentiating its service must be the primary goal. The moment Spotify starts getting too comfortable, it’s in trouble.

So how does Spotify actually differentiate itself? As it turns out, the answer lies beyond music.

The audio revolution

Over the last years, a massive new technological trend has emerged. The audio industry, which previously almost entirely consisted of radio, has started to flourish in the form of audiobooks, voice assistants, and most importantly; podcasts.

Photo by Pete Souza The White House via marcmeetsobama.com

The podcast industry has absolutely exploded, between 2017 and 2018, Apple Podcasts went from 17 billion to 50 billion total downloads and streams. The scope of this can be witnessed in individual podcasts as well. The podcast “Stuff You Should Know” has gained over 500 million total downloads by now, and on a good month(!) “The Joe Rogan Experience” can now record over 100 million downloads.

Audio as a technology for communication has the key advantage of requiring only your ear’s attention, and thus makes for a more suitable medium in many situations. Podcasts have filled people’s dull train rides, dish washing sessions and replaced the radio station in their cars with shows that listeners actually choose themselves.

Furthermore, audio has for whatever reason truly conquered the long format. Whether it’s a deep diving interview with a celebrity or a 3-hour-long discussion with a professor, a ridiculous amount of people are listening, and they’re doing it through podcasts.

A rare opportunity

In the last century more than ever, we’ve learnt to know a technological revolution when we see one, and this one fits all the criteria. However, the podcasting industry is especially unique, because for a technology that has become so immensely popular and properly settled in, it still resides on terrible platforms.

Currently, the biggest podcasting platform is Apple’s “Podcaster”. Like other podcasting platforms, it does the basic job well, letting its users download and stream podcasts. Other than that, there’s not too much to cheer about. Both listeners and creators are underserved in many areas, namely:

1. Social

  • The experience of sharing podcasts is not great. Sure, podcasts tend to be much longer than say, a song or a Youtube clip, and therefore more complicated to consume, but podcast sharing could still be much better. For example, there’s no way to to send more than one podcast in one link.
  • Consider how easy it is to embed a Youtube clip to a Facebook/Twitter/blog-post and directly play it on that platform. The only platform that does the same thing for podcasts is Soundcloud. The way we share podcasts today too often goes something along the lines of: “Hey buddy, go to Podcaster and search for ‘…’, then scroll down to episode 670, download it, and skip to 1:34 to hear a great story”.
  • There are virtually no social elements to the podcasting platforms.

2. Discovering

  • We’re kind of in a gridlock when it comes to discovering new podcasts. Largely because of the limited sharing functions, but also because podcasting platforms aren’t great at recommending content to us.
  • The search functions are a mess. Compare the experience of searching for specific content for some research you’re doing on Youtube versus on Apple’s Podcaster. On Youtube you’re much more likely to get quality content, whereas on Podcaster you’re completely lost.

3. Data

  • Today, podcasters get almost no data from their platforms, which is problematic in several ways. Analytics is incredibly important for podcasters when it comes to developing and improving their content. Podcasters have to make guesses about what their audience connect to and use other measures for gathering information all because of the data being locked in the podcasting platform.
  • Lack of measurement standards and analytics has played a huge role in the untapped potential of monetization in the industry. Ads are severely underpriced due to podcasters not being able to give specific data points to sponsors.

4. Creator-listener relationship

  • There’s really no way for the podcasters to connect with listeners on the podcasting platforms. The relationship currently has to reside in its entirety on other platforms.

Audio Streaming Service

Unlike other music streaming services, Spotify actually has podcasts and is focusing more and more on them, but they’re still heavily deprioritized. Perhaps not too strange, it is still a music streaming service. However, if Spotify wants to capture this massive, still-growing user base, it needs to figure out how to become an audio streaming service instead.

And because of the the current audio platforms being so flawed, the opportunity to become one is bigger than it will probably ever be. But to achieve this, Spotify needs to fix both the current flaws, and further create the new innovations that’s going to make up the audio platform of the future.

Just as Spotify did with music in the mid 2000s, it needs to think in first principles and ask itself some really simple fundamental questions:

  • What should an audio platform be?
  • What do users and creators really need?
  • What don’t they need?

To Spotify’s advantage, it already has some really impressive tools they use with regards to music that they can start with. If it can translate its current strengths in to audio, while also working to entirely rethink the concept of what an audio platform should consist of, it could well become the strongest audio platform.

Eight Things Spotify Should Think About When Building the Future Audio Platform

Image by Spencer Camp

1. Playlist infrastructure

Playlists has been an essential part of Spotify from the very start, and they’ve spent a decade refining them. There are now playlists for every mood, season and obscure music subgenre you can think of. Spotify’s algorithms coupled with human supervision also brings you personalized playlists based on what you’ve been listening to in the form of playlists such as “Discover Weekly” and “Release Radar”.

Ordinary Spotify users also create playlists of their own, some of which have hundreds of thousands of followers. This also enhances the social element to Spotify. Moreover, playlists are now truly one of the best ways to get discovered as an artist, with a myriad of examples as evidence.

It seems to me that a substantial part of this infrastructure should be applicable to podcasts as well. Podcast listeners in general don’t get sufficient help from their platforms to find new content. One of Spotify’s key missions has been to help users find new music that they might enjoy based on what they’ve already listened to. Astonishingly, I’ve yet to come across a platform that does this well for podcasts. There’s really no reason why it shouldn’t exist.

Listeners should be able to sort podcasts they enjoy in to playlists just like they do with music. What other better way could there be to send multiple podcasts to a friend, or to even keep track of them on your own. Playlists for podcasts is one of those ideas that makes so much sense that you can’t believe it doesn’t already exists, and nobody knows playlisting better than Spotify at the moment.

2. Data

Spotify provides great data for its artists. If it could do the same for its podcasters, there’s no doubt many creators would prefer its platform over others. Spotify For Artists has been very important for many artists’ success due to the possibility to see exactly what kind of music their audience connect to.

Podcasters have to do a lot more work to get a clue of where their audience actually come from, and what they engage with. When content creators negotiate with sponsors, their biggest asset is to be able to inform them of exactly who their audience consist of. Instead, they have to guess because they have limited access to the data.

It’s very difficult to overstate the importance of data for creators, and the one providing Google Analytics-quality of analysis will not go unnoticed.

(To the podcasters satisfaction, Spotify has actually started working on this with Spotify For Podcaster, which if it lives up to its expectation will likely prove to be very impactful.)

3. Audio-music integration

This is a tough cookie to crack, and perhaps the most important one. Music and audio need to coexist together, without suffocating each other. Too much music, and there’s no tapping in to the massive audio market. Too much audio, and Spotify risks losing its current users, its edge and its core identity.

Today, the balance very much leans in music’s favor. Many don’t even know that Spotify has podcasts, and it’s no wonder, Spotify really can’t risk compromising its music service in any way in order to make podcasts prevalent.

One very interesting solution is the stand-alone podcast app, first brought to my imagination by the amazing designer Spencer Camp. That would allow for Spotify to not trade-off its simple and un-cluttered UI, while fully developing the different capabilities of the different territories.

In a live Q&A session from 2014, Facebook CEO Mark Zuckerberg explained that the benefits of having a stand-alone messaging app far outweighed the friction of asking its users to install a new app. The user experience was simply much better in a two-app solution.

It’s definitely an enormous step to create a totally new application for people to install, but it may prove essential for capturing the full value of the audio experience.

4. Social

Spotify isn’t the most social platform out there, especially not on the mobile application where there are virtually no social features. This isn’t necessarily a bad thing, since it’s unclear how social a streaming service actually wants to be. Netflix CPO Neil Hunt has claimed its users don’t want any advanced social features, while others crave functions like Stories for Spotify.

Still, there are some social functions. When Spotify entered its 6+ year-long relationship with Facebook, users gained the option to sign up to Spotify using their Facebook account, and on the desktop version, music listening suddenly became a social experience. Having the option to share what you’re listening to, and see what your friends are listening to makes it a much more engaging platform to use for a lot of people.

No podcasting platform has anything even similar to this. Facebook doesn’t have to be the solution here, but there’s really no reason why podcasting platforms has to be entirely excluded from being social. For many, their podcasting platform is like the secret app that no one else has insight to, ever. People who like it that way should be able keep it like this, but today it’s the only option for people.

Podcaster-listener relationship

When it comes to maintaining communication between creators and users, different types of platforms have different ways of doing it. For example, Apple’s Podcaster basically offers no means of communication, while Youtube does it quite extensively through comments. For podcasting, comments probably isn’t the best solution since an absolute majority of podcast listeners listen on mobile, but new solutions should always be thought about.

In the meantime, Spotify already has some really neat and sleek ways for creators to communicate with their audience, which could directly be utilized with regards to podcasting. Consider:

a) Artist’s Pick Podcaster’s Pick; let podcasters write something to their fans.

b) Artist’s Playlist → Podcaster’s playlist; let podcasters show fans their own inspirations and what they’re currently listening to.

c) Concerts → Events; let creators add dates for events that they’re doing.

d) Merch → Merch; let creators sell merchandise like artists do.

5. Signing up or not

One of the biggest reasons Spotify is currently much better positioned to become the new podcasting platform than the other music services is its free tier version. Podcasts are currently free to listen to on most podcasting platforms, and most people like it that way.

Whether Spotify offers its podcasts in a stand alone app, or in its current app, they need to, at least initially, be free for everyone. Otherwise, moving users from other podcasting platforms is going to prove to be much more difficult.

The question of whether users should be required to sign up or not is tricky. If you require users to sign up, you can provide much better data to your creators and yourself. But since other podcasting platforms do not require users to sign up, you’re creating friction instead of making things easier.

Perhaps the best way around this would be to utilize the Youtube-model of not being required to sign up, but getting full capabilities if you do.

6. Radio

There seems to be some disagreement to which degree radio actually is fading away. Some say it is far inferior in comparison to new audio shows and will be dead in 10 years. Others say it has probably lost its former importance but will still continue to be a vital part of many people’s lives, at least as long as cars exist.

Could Spotify become the first music streaming service that allows live streaming of a large selection of already established radio stations around the world? Or does it try to create its own radio station like “Beats 1”?

In any case, it’s safe to say that if radio wants to stay relevant, it needs some serious innovation. Now that listeners have the option to choose any song or audio show they want, whenever they want, radio both needs to find new content that fits its medium while also updating the medium in itself.

Since radio is one of those rarities that still hasn’t moved online, there’s a lot of opportunity for the one trying to make that transition happen. Spotify is better fitted than anyone to do that.

7. Audiobooks

Audiobooks is by far the fastest growing area in the book publishing industry, offering the same advantages that podcasts do over video; no hands, no eyes. The Amazon-acquired market leaders Audible already starting working in this area some 20 years ago, but since growth is showing no signs of slowing down, the opportunity to enter the market is still very much present.

Audiobooks could be substantially further down the road for Spotify due to the different business model of the book publishing industry, and the actual format of audiobooks. But if we imagine a scenario where users can choose a different subscription-option to gain access to audiobooks on Spotify, it could provide its playlisting and data features in this area too.

If we’re talking about building the future audio platform, we have to at least discuss audiobooks. It’s one of the first and most important areas of the audio business.

8. Other solutions

As the early Spotify investor Fredrik Cassel described in a Medium story; in hindsight, attracting top tech talent has proved much more important than achieving individual tech solutions for Spotify. Since these solutions become outmoded quicker than you think, you have to be able to constantly stay ahead of the curve with new ones.

In our modern economy, “human capital” is becoming an increasingly decisive asset. To be able to come up with the new innovations in audio, Spotify needs to make a real effort to attract the best people in the industry so that the important innovations needed become consistently recurring indirect consequences.

If Spotify waits too long with making a genuine push into audio, that talent is going to end up somewhere else, along with the innovations.

How does Spotify make money out of all of this?

Rethinking an entire industry is not for free. It requires hefty investments in R&D, and we know that Spotify doesn’t have cash piling up waiting to be spent. But I’m convinced this investment is the most important move Spotify can make both from a user behavior perspective, and an economic one.

For many advertisers, podcast ads are generating better results than anywhere else, since they are delivered by the podcast hosts in more varied and entertaining ways. Still, the monetization potential isn’t even close to be realized. According to Nielsen, the average ad revenue per active podcast user is more than 20x less than the average internet ad revenue.

If Spotify can help drive up monetization with data, the ROI could be well be worth the pain. Spotify’s free tier users generate less than 10% of its revenue, and since the user base is so large, ways of monetizing them is constantly a big focus. A push in to audio could potentially bring that percentage way up.

Podcasts have much larger profit margins than music, due to them not being owned in the same manner by record companies and publishers. Spotify has payed over 70% of its revenue to the music industry over the years. That percentage is certain to decrease with regards to audio royalties.

Bootstrapper mindset

There’s no doubt that Spotify sees the audio market as an amazing rising opportunity and is allocating resources to that. I’m just here to remind it of just how mindbogglingly good of an opportunity it actually is. Podcast listeners in the hundreds of millions are currently using inferior audio platforms, waiting to be rescued.

Spotify needs to keep being the big innovators in its field, it’s its biggest and most important weapon. It needs to imagine that it’s 2006 again, and that it’s on a mission to build the best user experience it possibly can from scratch. That it’s a startup that’s going to win the battle through innovation, not through habits. Only this time:

  • 2006 is 2018
  • Itunes is Podcaster
  • Music is Audio

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