Tech Bound #37: Spotify’s Growth + the role of Email Marketing

6 min read

Not much to ramble about from my side this week ;-). Let’s get right into it!

Case study

Growth case-study: Spotify

Think about how many great companies started around the prime crisis: Uber (2009), Airbnb (2008), Twitter (2006), Dropbox (2007), Whatsapp (2009), Quora (2009). One of them is the Swedish unicorn Spotify.

Founded in 2006 and launched in 2008, it had a tremendous journey to grow to 170m users and 75M premium subscribers in 2018. In this article, I look under the hood of Spotify’s growth strategy.

As always, let’s start with the market: Spotify is Netflix’ pendant to TV, with the exception that Netflix doesn’t have a freemium model. Spotify could be the next big one in line with Google, Apple, Facebook, and Amazon. For now, it’s apparently eye-to-eye with Apple Music in terms of user numbers.

Google, Amazon, and Apple are attacking and must be taken seriously, as they can manage losses much better. They don’t need to turn in a profit because they can just provide music streaming as a “bonus” to their existing products. Apart from that, the biggest challenge is to become (highly) profitable, manage royalties and keep growing. So much in terms of cooling the hype.

Next, product: Spotify is “a two-sided music marketplace for Users and artists, which is powered by data, analytics, and software” (S-1). Spotify is notoriously famous for building MVPs. Check out these two stories on Speckyboy and Crisp’s Blog.

Let’s not even talk about how disruptive the product is, or how easy it makes streaming and syncing between desktop and mobile devices. Let’s also not talk about Spotify’s “cool factor”.

Instead, let’s talk about Spotify’s exciting social features users are not only able to share albums and songs with other social networks, but also to create playlists that others can follow. It has a social network touch to it, another distinguishment from Netflix.

Daniel Ek, CEO: “We believe that music is the most social thing there is and that’s why we’ve built the best social features into Spotify for easy sharing and the ultimate in music discovery.

Finally, Growth. Just two years after launching, Spotify had 10 million tracks. Three years after launching, they got almost 7 million regular subscribers, of which one million were premium subscribers. In 2012, they had 20 million subscribers, of which 5 million were premium. And that in a time in which pirated music was everywhere. What prevailed was the convenience and low price Spotified offered.

Spotify’s user growth; source: QZ

On its growth journey, Spotify leveraged a couple of classic growth tactics. We have “Piggybacking” on Facebook (2011), which was a major accelerator. Instead of illegally cross-posting or leveraging Facebook’s API, Spotify closed a partnership that made it the preferred music service for the social network.

Partnerships are a recurring theme in Spotify’s growth, for example with the New York Times, as I highlighted in Building a triple-looped growth model for newspapers. Or the integrations with Instagram (stories) and UBER, which are great ways to increase network effects.

The way Spotify leverages freemium as a business model is also a “Growth classic”: initial sign-up friction is reduced to almost 0. In return, Spotify gets a huge load of user data that it can use for experimentation and building out network effects. That’s the point behind freemium: it’s not just to give people a taste of your product but it gives you more data to improve the product.

Sure, there are fun marketing stunts like the “year in review” pages and billboard campaigns you have to run as a cool music startup. But there’s so much more Spotify does well in terms of Growth: Pushing original content hard and early. RapCaviar is so popular it can decide whole careers. Personalized recommendations make Spotify a major discovery platform for new content.

But as a two-sided marketplace, Spotify also needs to grow the artist side and it does so deliberately. The benefit for creators include analytics like “demographics of their listening audience, Users’ anonymized geographical locations, similar artists that their fans listen to, the number of real-time Users, song performance data, playlist data, and playlist notifications.” (from S-1).

Despite its massive challenges, Spotify also has many opportunities for future growth, such as content formats (podcasts, audiobooks, and music videos) and countries.

Key lessons

  1. Increase network effects through integration
  2. Consider freemium to accelerate the pace of experimentation
  3. Seek out strong partners to accelerator growth



The role of Email in a Growth strategy

Question: “What role should email play in support of an overall marketing strategy?
As I mentioned in Building a tripe-looped growth model for newspapers, Email is a channel for several steps in the user journey:
  1. Acquisition
  2. Onboarding
  3. Retention
  4. Referral
That fact is often forgotten. Instead, many companies use Email to push offers and promotions. After my mind, that’s a huge missed opportunity!
Email can be used to get new users, introduce them to the product, or keep them. Of course, the campaign design is very different for each step. Emails that drive acquisition often revolve around curated content, like Fortune’s newsletters.
For onboarding, the best format is drip campaigns: a series of Emails around a specific topic that are sent within a couple of days distance. The topic could be “first steps in [product x]”, in this case, or introduce a specific workflow.
Retention can be improved by sending Emails that are triggered when users are inactive for a certain amount of time to re-engage them.
When asking or incentivizing users to invite their friends to subscribe to the newsletter or sign up for your product, Email can even be a good referral channel!
The challenge is to a) to create a concise strategy for Email, b) string together monitoring for each use-case and c) set all of this up. For grown-up companies, it’s a full-time job for at least one person if not a whole team. But the benefits can be huge and are commonly underrated.

Your weekly dose of awesome content

Think Growth: “Strategy First. Then Relentless Tactical Execution
Nice story from the OG Steve Blank about listening to customers and dominating a channel they’re using.
AHREFs: “How Low-Volume Keyword Strategy Can Get You High-Value Clients [Case Study]
Some pretty cool keyword research ideas in this one:
– Target “”{competitor brand} + alternative”” keywords
– Write about competitor tools and then promote your solution as better
– Use custom CTAs at the end of your competitor content
State of Digital: “JavaScript and SEO: The Difference Between Crawling and Indexing
Google indexes Javascript, it doesn’t crawl it.
Stone Temple: “Featured Snippet Churn Documented: What it Means for Your SEO Strategy
Lots of flux in featured snippets and knowledge graph results. Not only does the featured snippet change but also the sources. Most importantly: featured snippets and knowledge graphs are different for mobile and desktop. Another (good) reason to monitor rankings and SERPs for both!
Alex Debecker: “Product-Market Fit survey fail: how experts put us back on track
Very honest and insightful article about the journey to product-market fit and how to user surveys to find out whether you’re there or not.
NY times: “We Have Reached Peak Screen. Now Revolution Is in the Air.
Great write up from Farhaad Manjoo, who’s contributions I already liked on the NYT newsletter “Bits”.
Andrew Chen: “Conservation of Intent: The hidden reason why A/B tests aren’t as effective as they look
I made similar experiences with split tests: the uplift you see is not the one you get when deployment the learnings from the experiment.
What Are the Building Blocks of Extremely Good Online Content?