At Spotify’s 2023 “Stream On” event, CEO Daniel Ek announced that the platform had just passed half a billion monthly listeners across 184 countries and markets. Looking ahead, Ek aims to grow Spotify to 1 billion users by 2030; an ambitious — but not unwarranted — goal, considering the immense growth and success that Spotify has achieved over the past few years.
From viral organic marketing strategies to bold moves in the metaverse space, here’s an in-depth analysis of everything Spotify did to become the world’s most popular audio streaming service today.
What Is Spotify’s Marketing Strategy?
Spotify’s marketing strategy is centered around the three main principles of personalization, emotion, and data. Everything that Spotify does begins with considering the end user; whether it be through personalized playlists or user data-driven campaigns, they are a brand that truly knows how to focus on making sure their audience receives the most positive experience possible. With that, let’s break it down.
Spotiy has always been at the forefront of personalization — they even have a dedicated role of a VP of Personalization. Through machine learning, Spotify leverages users’ listening habits and historical behaviors to inform the types of albums and playlists that are shown on a users’ home screen. Reinforcement Learning, or RL, is then used to predict what a user might want to listen to in the future, so as to maximize the ultimate, long-term reward that users get from the platform. Recently, Spotify launched a new AI DJ feature that offers a curated selection of music with spoken commentary about the tracks and artists. This new AI feature marks a shift wherein Spotify turns into more of a lean-back, passive listening experience that’s based more on the platform’s recommendations rather than intentional user selection. Spotify is using a Reinforced Learning with Human Feedback model where users are basically teaching the AI to become better at their job every time they play or skip a song — hence creating the perfect foundation for continual personalization and improved recommendations.
Spotify is a tech platform that really understands the value of tapping into human emotion to build user engagement and loyalty. Emotion can be an incredibly powerful marketing tool — particularly when it comes to music. Spotify really leans into the relationship between music and emotion, and builds their strategy around what music means to people. For example, many people associate music with the idea of memory and nostalgia, so this year Spotify created a “Playlist in a Bottle”, which lets users create a musical time capsule that will be unlocked in January of 2024. Since users have to wait until 2024 to “unlock” their playlist, this nostalgia-steeped feature essentially locks a user into their Spotify subscription for another year, and provides an opportunity for organic UGC and social sharing when the time eventually comes around.
Music is also often seen as a space for connection and love, which is why they created the “Spotify Blend” feature — a daily-updated playlist that combines the music you and another person listens to based on your shared listening activity. For Valentine’s Day, Spotify took this a step further and allowed users to view their personalized taste match score and compare their music tastes to a partner or significant other. It’s a sweet sentiment that is extremely fitting given the inherently emotional nature of music, but it’s also a genius way for Spotify to spur greater engagement and viral sharing.
Spotify has access to huge amounts of listener data — so why wouldn’t they use it to their advantage? One of Spotify’s most well-known campaigns was all about data, yet it somehow still felt incredibly human and relatable. What Spotify did was they pulled user insights from large amounts of data, and framed those findings in a way that still feels deeply human. The result was a campaign that combined humor with leveraging user data, making users feel like they’re a part of a larger community of listeners.
Who Is The Target Audience of Spotify?
Spotify’s target audience skews towards the younger Gen Z and Millennial generations, with a slight female majority and a geographical focus on the United States, Europe, and Latin America. That being said, Spotify’s audience is still incredibly diverse, with users in over 184 different countries and markets. This diversity calls back to the importance of user personalization, so that Spotify can create a customized experience for each user that is specific to their listening habits and music preferences.
What Are The 4 P’s of Marketing For Spotify?
Now that you understand the main pillars of Spotify’s marketing strategy, here are the 4 P’s of Spotify’s marketing.
Product: A look into a Spotify’s vertical scroll discovery
One of the biggest features Spotify announced at their 2023 Stream On event was a new mobile interface built for deeper discovery. Much like TikTok or Instagram, there’s a vertical scroll that allows users to explore new album covers, short canvas clips or recommended podcasts. This fundamental change in the product interface reflects an overall shift towards a more discovery-focused model, where users not only listen to music they like but also find new songs and albums that are similar to their listening tastes.
One thing is clear: Spotify is no longer just a music streaming platform. With this new interface, Spotify is borrowing elements from TikTok, Instagram and Youtube, thus turning Spotify into a holistic experience encompassing not only audio, but also short-form video, album art, and more.
It’s important to note that this more discovery-based approach may be Spotify’s attempt at solving the issue that they’ve been having with podcasts recently. Spotify acquired podcast production house Gimlet Media in 2019 for a reported $230 million, and purchased The Ringer network in 2020; all in all, Spotify spent over $1 billion as an investment into the podcast category. Despite the ambitious investment, Spotify’s podcasts are not yet profitable, and the platform only brought in roughly $215 million in revenue through podcasts in 2021. The benefit of the vertical scroll discovery format is that it gives users a new avenue to discover new content, and empowers creators to share and promote their content within the platform. Will this discovery model solve Spotify’s podcast problem? Only time will tell — but it was definitely a strategic move on their part.
Price: The freemium model in action
Spotify’s pricing strategy uses a freemium model that offers a basic service for free and an unlimited, ad-free premium service for a subscription fee of $9.99 a month. The advantage of this freemium business model is that Spotify can attract and acquire a large number of users through the appeal of a free service, and then convert those users to paying subscribers once they have already established a positive relationship with the customer. Evidently, the freemium model has been working for Spotify, as they have a 46% conversion rate to paid services, compared to just 30% for Slack, 4% for Evernote, and 0.5% for Google Drive.
The challenge with a freemium model comes later at the retention stage, as Spotify would have to continually retain their paying customers to maintain their stream of subscription revenue. Spotify has maintained an 85% retention rate, even despite their immense new user growth, demonstrating their strength in not only acquiring new users but also keeping them. At the heart of Spotify’s retention strategy is their ability to capitalize on the social and network effect on listening behaviors. Once a user subscribes to Spotify, they become part of a larger network of Spotify users, and they feel connected to that community through following a friend’s playlist, making blended playlists, or comparing their Spotify wrapped top artists. Once Spotify is able to give a user a sense of belonging, they are more likely to continue paying for the platform in order to continue to engage with others through the platform’s social sharing features.
Promotion: The art of engineered virality
Since its launch in 2016, Spotify’s viral “Spotify Wrapped” marketing campaign has dominated online conversations and social media platforms come every December. The campaign was so popular that it became some sort of an annual tradition or a rite-of-passage for die-hard Spotify users. In addition to being widely shared on social media, Spotify Wrapped is also the subject of countless memes, satirizations and copycat recreations. It went from marketing campaign to viral social phenomenon, and quickly rose to its status as the prime example of engineered virality and the power of social media trends.
On the surface level, Spotify Wrapped was created with the goal of giving users an opportunity to better understand their music tastes, and celebrate a year of listening by looking back at their favorite songs, artists and genres; but that’s only the beginning of it. Spotify Wrapped was created with the behaviors of social sharing in mind. Spotify recognized that music is by nature something that people like to share and show off, so they took that natural instinct and turned it into a tool for engineered virality and rapid word of mouth. Every part of the Spotify Wrapped function was designed and optimized for social sharing: 9:16 image dimensions were ready for Instagram Story posts, colors were designed to be eye-catching and attention-grabbing, and “share” buttons were scattered throughout the entire experience. Every time a user shared their Spotify Wrapped on their story, they were directly contributing to the viral loop of social sharing by reminding their own follower network to do the same.
Genius? Yes. Organic, cost-effective, and sustainable? Yes, yes, and also yes.
Place: Expanding into the metaverse
In May of 2022, Spotify expanded their product into the metaverse with the launch of “Spotify Island”, a “paradise of sound” where fans and artists from all over the world can connect and explore a digital world of sounds, quests, and exclusive merch. Spotify is the first music-streaming brand to have a presence on Roblox, marking a significant change in the way we think about how we think about “place” when it comes to music streaming platforms.
In terms of place, Spotify exists across any device that can access the app — be it a smartphone, laptop, smart speaker or voice-activated home assistant. With their expansion into the metaverse, Spotify pushes the boundaries of physical and digital spaces by creating a virtual universe to foster greater community and brand awareness. With Spotify island, the music streaming platform is no longer limited to its app itself; rather, it becomes a recognizable brand that transcends its functional manifestation. Spotify Island is designed to be incredibly true to its brand, with lots of green, music easter eggs, and shapes and icons that users will recognize from the app’s interface.
On Spotify Island, users can mingle with artists, complete interactive quests, and unlock exclusive content. By creating a space where artists and listeners can interact with each other and with the brand in a whole new way, Spotify is able to immerse users in the world of their holistic brand identity, no matter how and where they choose to listen to their music.
How Does Spotify Market Through Social Media?
In addition to Spotify’s now-viral Spotify Wrapped campaign, the tech company is skilled in marketing their platform through social media in a variety of different ways. At the core of their social media strategy is the principle that music can and should be a cross-platform experience, one that is not limited to the confines of the Spotify app itself; we already see this happening in their expansion into the metaverse, but this is apparent in their approach to social media as well. Every single experience and touchpoint on the Spotify app is designed to be easily shared across a variety of social media platforms, a move which is just as strategic as it is convenient. According to Spotify’s internal research data, 42% of Gen Z Spotify users in the U.S. said they’ve heard a song on social media and then searched for it on Spotify. While previous generations of music listeners may have been flipping through CDs at the malls or searching for vinyls at their local record store, today’s modern music listeners are seeking out new tracks and artists through social media. Evidence of this avid behavior of music discovery through social media proves particular importance for Spotify to hone in on their cross-platform experience and enable seamless discovery of their music.
Spotify is not only marketing through social media, they are also evolving their product to replace behaviors that used to primarily exist on social media. In other words, much like social platforms like TikTok or Instagram, Spotify is broadening its offerings to become a space for eCommerce, music news, and information search in addition to music streaming. In their recent partnership with Shopify, artists can now sell their merch and/or concert tickets directly through the Spotify app. This “retail-ification” of the music streaming app is a win-win for both artists and Spotify, as it gives artists a platform to promote their work in the app itself, and it likely increases the amount of time that Spotify users spend on the app. Hence, in a strange chicken-or-the-egg type of situation, Spotify is simultaneously promoting itself through social media, and evolving to become a social media platform in itself to become less reliant on social media platforms in the future.
What’s Next for Spotify?
There’s no denying that Spotify has been widely successful in their marketing strategy these past years — and they have the numbers to prove it. As of Q4 of 2022, Spotify has 489 million monthly active users. Still, listening habits and user behavior is a rapidly and continuously changing landscape, and in order for Spotify to retain its existing user base and maintain its success, the platform must also evolve to fulfill the diverse needs of today’s modern consumer.
Will Spotify’s new vertical scroll discovery approach solve their podcast problem? Will Spotify Wrapped continue to go viral year after year? Will their social media strategy change in response to all the changes being implemented across Meta and Twitter? Spotify has many challenges ahead of themselves, but if their history of strategic thinking shows anything, it’s that this is a company that truly knows how to push the boundaries of growth and innovation.