Upon viewing Spotify’s latest ad campaign, it led me to think a bit more broadly about their overall business strategy and why I love the service so much.
Their latest campaign is all about the idea that behind every track on Spotify, there’s a story that is created by its users; what makes the music streaming business so unique and differentiated is much of the same: it’s all about personalized experiences to drive discovery and sharing.
Spotify’s competitive advantages and business strategy are forward-thinking and multifaceted.
- It puts control into its users hands. Users can select specific songs, create their own playlists, and enjoy a unique combination of on-demand streaming and discovery. instead of the clunky guessing game with competing services like Pandora, where users have to listen to whatever’s given to them and continually like and dislike songs.
- It’s all under one roof. To ensure discovery is seamless and existing entirely on their platform, Spotify combines three important factors: social (recommendations from peers, influencers and artists); robust algorithms, based on listening history and tastes; and, human curation by experts and millions of community members.
- It has built a new way for people interact with music. As a traditional process, music discovery is difficult and time-consuming. Spotify has built systems which aid and augment this process, and through the convenience and accessibility of having almost all of the music in the world at any place, any time for just $10 a month, it effectively decreases the time it takes for users to become loyal to the service.
Additionally, since its inception, Spotify was built around sharing. Spotify CEO Daniel Ek is a firm believer that music is the most social thing there is, and some of the service’s most valuable features, messages, following, and browse, were initially designed to facilitate such sharing that is so central to music as a social activity. Messages allows for private conversations between users and to share specific tracks and playlists. The following feature allows users to create their own network to source music from, and on no other platform can they have such a diverse, but comprehensive collection of friends, artists, influencers, celebrities, or organizations, which all come together to create a highly personalized, interwoven landscape which details in-depth, rich music preferences. Browse allows users to find playlists made my friends, influencers and other users based on a variety of factors including genre and mood. Browse has full playlists for a variety of occasions and purposes, from dinner parties, to work outs, to rainy Sundays. What all of these features more largely represent is the users’ distinctive ability to collaborate, learn more and share more, whether you’re a music professional or a rookie, all on the same platform.
Pandora provides recommendations for users, too; why is Spotify’s model so much more successful? Simply put, it’s the value they’ve extracted from the data from their more than 50 million users. After purchasing The Echo Nest, the music industry’s top music personalization and discovery API in 2014, Spotify has focused on using the data it possesses to tell stories about, and to, users. Instead of distilling down user habits and behaviors to give expected and less-than-impressive recommendations, Spotify looks at all of the data they have to uncover the intricacies of individuals’ music preferences and to provide recommendations that are of value and quality, based on the millions of other users they have. By triangulating the data of their entire community of listeners, they are uniquely able to see trends and narratives otherwise unforeseeable. From their valuable data and consequential trends, narratives and insights, they can give recommendations that users are excited about and actually like, which fuels the individual’s concept of discovery, which then facilitates sharing among friends, the key to Spotify’s success and differentiation.
Because Spotify recognizes that there are stories embedded in the music preferences and selections of each and every user, they’re better equipped to design features and ultimately value for users. It’s of course also the basis upon which their advertising rests. To all of you still streaming “Never Ending Story” every day from the corny 80’s movie, Spotify sees you, and encourages your off-beat nostalgic tendencies. To those of you contemplating moving up to Canada if Trump is elected come November, Spotify sees you too and wants to give you a hilarious track to make your move more enjoyable. The overall difference in business strategies between Spotify and Pandora is evident in their advertising too. Whereas Spotify focuses on the subgroups, sub-narratives, and the individual, Pandora’s latest ad campaign highlights the importance of music more broadly. Pandora is celebrating music more generally as a ‘thing’ that matters to people, but their attempts at understanding what music really means to each of their individual users are still surface level at best (by including ‘diverse’ people and occupations, but not effectively relaying any real understanding further).
Businesses which are successful in the sharing economy are those that encourage interaction, collaboration and mutual-value adding, and as a business which holds these principles central, it’s not surprising that Spotify’s ground-breaking music business model has landed them with such tremendous success.