Spotify has shown a 380 per cent increase in mobile advertising revenue throughout 2014, showing the massive growth of the service and also advertisers desire to be on the music platform.
With 60 million users on the music streaming service; 15 million paying £10 per month to access the service ad-free, it is clear Spotify is becoming one of the most significant revenue streams for artists, even if some find the freemium model to offer less than other options.
Some high profile moves this year have raised eyebrows on Spotify’s claim to the music streaming throne, with Taylor Swift, Coldplay and other artists revoking the right to streaming their latest albums, alongside Jay-Z launching Tidal, a music streaming service without the freemium model.
It will not get any easier for Spotify, considering Apple’s plans to relaunch Beats Music without a freemium model. Both Tidal and Beats Music will have exclusive deals with artists, alongside early concert tickets, live shows and other incentives to pay for an account.
Spotify does not seem too worried about these competitors, although it has fought back against claims it doesn’t pay artists. In a Music Business Worldwide report, Spotify paid out $100,000 (£65,000) per week to Mark Ronson and Bruno Mars, for the hit song ‘Uptown Funk’, for two months straight.
The real issue for Spotify is turning free users into paid. One paid user is worth 100 non paid, since advertisers are not paying the big bucks like they will for YouTube ad videos or Facebook’s own marketing, which offers a much larger audience and better demographics.
That said, if Spotify can continue grabbing more advertisers on its desktop and mobile client (up 57 per cent from last year in terms of revenue) it should be able to start making serious cash from ads alone. Spotify might also start focusing on other features outside of the music, like promotions, physical product sales and concerts, to retain more revenue.
The Swedish based company recently hired Goldman Sachs to help raise $500 million (£325 million), showing that it was not ready to enter into an IPO. That might mean we have to wait until 2016 before Spotify becomes public, and we can start digging into money paid out to artists.