Advertising delivers just 10% of Spotify income

By Nicola Riches | 27 November 2014

Spotify has dished up a mixed set of financial results for 2013. Figures show a slowed increase in revenues, and, perhaps more fascinating, the disclosure that only 10% of its global income flowed from advertising.

According to figures issued in Luxembourg yesterday, the company revealed that in the year closing December 2013, it generated subscription revenues of €679m (AU$994m), up from €375m (AU$549m) in the previous year. Global advertising revenues came in at just €68m ($AU99.6m), up from €56m (AU$82m) in 2012.

What the company will more than likely note is that the financials wrap up a year’s business in vastly different markets: established territories such as Australia and the UK, versus developing markets such as Mexico, Brazil and Italy. As such, any revenues are skewed by extremes of strong and weak local performances.

Meanwhile, the report excludes the impact of the free, ad-supported mobile tier that launched at the end of last year. With the majority of new users signing up via mobile, this more than likely forms a large part of the company's ad business.

Spotify, however, has been making aggressive moves, particularly in Australia, in a bid to significantly drive up advertising revenues.

Day-to-day the backbone of the platform serves up a range of advertising options for brands including audio, display units, banners, skins, interstitials and video. It also tailors advertising units for mobile and desktop, with close to 80% of each of the platforms' audiences coming in via mobile.

While the platform is limited by a remit to deliver four 30-second ads per hour, it has recently introduced video ads.

Jeff Levick, Spotify’s global chief business officer, recently told AdNews the music platform wants to educate brands that advertise with them about how to think in native terms about video ads, or video content ,in order to minimise disruption.
Spotify offers brands the option of “sponsoring” ad-free playlists, while the local operation also recently revealed that it is working with third-party production agencies to help produce bespoke ads for brands.

Revenue rose from €430m (AU$629m) in 2012 to €747m (AU$1bn) last year, while its operating loss widened from €80m (AU$117m) to €93m (AU$136m).

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