Yesterday, we explored the numbers behind Spotify’s tremendous growth in subscription and advertising revenue counterbalanced by its shrinking gross margins. Today, we will discuss where all of that money is going.
Spotify recently released data showing that it had surpassed $2 billion in revenue with an 8.7% net loss. However, these were far from the most interesting data points that became public. The near doubling of advertising revenue, the fall in effective monthly revenue per user and the contracting margins are noteworthy.
Internet radio audience has grown quickly. The industry commands somewhere between 600 – 900 million monthly listeners globally depending on which analysis you choose to cite. In the U.S., 57% of the population listens monthly and 50% weekly. The growth will allow Internet radio and streaming music services to capture an increasing share of the $42 billion in mobile advertising forecasted for 2016.
Two weeks ago a press release announcing the results of a STRATA Survey buried the lead. While its headline indicated a 45% jump in Ad Agency interest in digital video, the interest in “streaming/online radio saw a 53% increase.” There is no doubt that interest in video advertising is growing, but we can also see that Internet Radio is emerging from the novelty stage. It is becoming an important tool for reaching consumers.