3 things we learned from Daniel Ek on Spotify’s Q2 investor call


Spotify delivered some excellent news to buyers final week within the type of YoY Premium Subscriber development: the platform’s subs had been up by 7 million on the shut of Q2 2021 (to finish of June) on the 158m that it counted on the finish of the prior quarter.

SPOT’s world Month-to-month Energetic Customers, (MAU) efficiency, nonetheless, fell in need of the steering it printed on the finish of Q1.

Spotify’s world MAU rely reached 365m in Q2 2021, up by simply 3% – or 9 million – in comparison with the earlier quarter (Q1 2021) when the platform counted 356m MAUs.

Spotify partly blamed this sluggish MAU development on COVID-19, telling buyers that the impression of coronavirus “continued to weigh on our efficiency in a number of markets” and that, in some situations, the platform has just lately “paused advertising campaigns as a result of severity of the pandemic”.

Secondly, Spotify cites a now-resolved “person sign-up situation” related to an unnamed world third occasion platform as a cause for slower MAU development in Q2.

“Whereas I’m disillusioned that our MAU development was softer within the final half of Q1 and the primary half of Q2, the excellent news is that we’ve seen that trendline reverse and all of the main indicators I’m seeing present that we’re again on observe”.

Daniel Ek, Spotify

Throughout his opening remarks on the corporate’s earnings name, SPOT CEO Daniel Ek defined that “Whereas I’m disillusioned that our MAU development was softer within the final half of Q1 and the primary half of Q2, the excellent news is that we’ve seen that trendline reverse and all of the main indicators I’m seeing present that we’re again on observe.”

He additionally revealed that, “Markets like India, Brazil and components of Southeast Asia lagged behind our expectations and we’ve additionally seen a barely slower adoption fee in a few of our newly launched markets”.

Ek famous: “All these areas have been laborious hit by COVID”.

CEO Daniel Ek and CFO Paul Vogel had been quizzed on the corporate’s earnings name final week. Right here’s what we came upon:


1) SPOT’s missed MAU steering is only a “bump on the street” and never associated to cost will increase, or competitors…

Ek and Vogel had been requested by an analyst early on within the Q2 earnings name to elucidate the third-party platform situation cited as having had an impression on MAUs

Along with that, they had been requested how assured they’re that the missed steering is just not associated to competitors or slower uptake attributable to value rises, which have been carried out in multiple markets, together with the US, Europe and the UK.

In answering the primary query, Vogel revealed that the third occasion platform situation “was a problem with electronic mail verifications between [SPOT] and the third occasion”. He didn’t reveal who the third occasion was.

“We made a change that was not fairly fixed sufficient and we imagine it had an impression on development,” he defined. “The estimate proper now could be that it was about 1 to 2 million of MAU development that was impacted by the friction created by this electronic mail verification change. It’s since been corrected and shouldn’t be an impression in Q3.”

Relating to competitors, saturation and value rises, Ek famous that “the underperformance we noticed [was] in rising markets and never western markets”.

“To the query of saturation,” he stated, “these are additionally in markets the place we’re in a lot earlier phases of development, relatively than the type of larger markets just like the US and most of Europe as properly”.

“If I’m disillusioned about something it’s in all probability simply we must always have seen it coming extra within the forecasting.”

Daniel Ek

Added Ek: “We really feel actually good about the place we’re from a aggressive standpoint. We see a robust demand for Spotify internationally, however clearly, as we stated going into the 12 months, 2021 can have the next diploma of variability and particularly for a world firm like Spotify, the place we’ve got so many areas which can be all in several phases of maturity.

“That’s what you’re seeing right here and simply to contextualise it even additional, it’s actually been taking part in out over 1 / 4 so I take a look at it extra as a bump on the street than the rest and since we had such a robust 2020 12 months. If I’m disillusioned about something it’s in all probability simply we must always have seen it coming extra within the forecasting however it’s clearly very tough to forecast this stuff, however I I really feel actually actually good about our long run development prospect and that hasn’t modified.”

In a while within the name, Vogel defined that Spotify’s Common month-to-month Income per Subscriber (aka ARPU) is anticipated to extend in “the again half of the 12 months”, with value rises cited as taking part in a job on this predicted uplift.

SPOT’s ARPU landed at €4.29 in Q2, down 3% year-on-year, however flat at fixed foreign money.


2) Daniel Ek claims that the times of Spotify’s advert enterprise “accounting for lower than 10% of our whole income are behind us…”

Daniel Ek might have been “disillusioned” about Spotify’s MAU development in Q2, however he was bullish in regards to the firm’s Promoting enterprise, and for good cause.

SPOT’s Advert-Supported Income outperformed its forecast, reaching $275 million in Q2. That was up 110% YoY and up 28% in comparison with the prior quarter (Q1 2021), when the corporate generated $216 million in ad-supported income.

Ek made a few attention-grabbing feedback in regards to the firm’s advert enterprise on the corporate’s investor name.

In his opening remarks, he stated of SPOT’s advert enterprise, “Admittedly, that is an space the place I beforehand didn’t spend a lot time, however it’s turning into not possible to disregard.”

He added nonetheless, that “it’s now secure to say, it’s turning into a second huge income driver for Spotify”.

So what’s driving Spotify’s wholesome advert enterprise?

The corporate’s Advert-Supported MAUs solely grew by 2 million in Q2 – from 208 million within the prior quarter (Q1 2021) to 210 million – so on the centre of this development, in keeping with SPOT, is its podcasting technique.

“Admittedly, that is an space the place I beforehand didn’t spend a lot time, however it’s turning into not possible to disregard.”

Daniel Ek

Based on Ek, “podcast income was up over 627% year-over-year, or practically 200% on an natural foundation, and the continued outperformance is at present restricted solely by the provision of our stock, which is one thing we’re actively fixing for”.

Spotify doesn’t present a breakdown of how a lot income its podcast enterprise is definitely producing, however in keeping with the corporate’s shareholder letter, “The energy in Advert-Supported Income was led by our Direct and Podcast gross sales channels … together with contributions from the Megaphone acquisition”. Podcast ad-tech platform Megaphone was bought by Spotify for $235m in November 2020.

Ek is now so assured in regards to the potential of the corporate’s advert enterprise, he instructed buyers and analysts that “the times of our advert enterprise accounting for lower than 10% of our whole income are behind us”.

He added: “Going ahead, I count on adverts to develop to be a considerable a part of our income combine.”


3) Daniel Ek says that “The chance in entrance of [spotify] is to get to greater than 50 million creators”…

At Spotify’s ‘Stream On’ occasion in February, Daniel Ek stated that by 2025, Spotify may have “as many as 50 million creators on our platform, whose artwork is loved by a billion customers all over the world”.

He reiterated this goal final week, explaining that the platform Spotify is attempting to construct “is all about transferring from 8 million to 50 million creators and from 400 million to a couple of billion customers on our platform”.

He was requested about this “billion person alternative” on the corporate’s earnings name and particularly what “key investments” SPOT would want to make to make that dream a actuality.

Ek didn’t specify a worth of funding required or any particular areas of funding to realize that concentrate on, explaining that Spotify had “grown previously few years from about a million creators to now greater than eight million creators”.

“The chance in entrance of us is basically to get to greater than 50m creators.”

Daniel Ek

“However the alternative in entrance of us is basically to get to greater than 50 million creators,” he added. “And as a part of that, it’s actually all about getting these audiences of these 50 million potential creators to begin listening to that content material, turning into tremendous followers, and creating increasingly instruments for the creators and followers to begin participating with one another, turning that engagement into monetization alternatives and so forth.”

Added Ek: “In order that’s actually the type of essential technique, and quite a lot of that comes all the way down to a mixture of platform enhancements, discoverability of simply with the ability to showcase and seeing new content material.

“After which, clearly, the content material staff and onboarding new creators and discovering compelling methods to get creators to really feel like Spotify is the primary platform.

“When that occurs, it’s a flywheel that turns into extra creators turns into extra customers and extra customers turns into extra creators and so forth and so forth.”Music Enterprise Worldwide



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