I really like Spotify and I was wondering why I like it and what they are doing well and they could do better in order to become a better product and actually start making money.
3 Different Models for Entering
Spotify created a big buzz when released making people shout out in forums for invites to the new music service that lets you stream almost any music. This helped Spotify grow in a controlled manner AND get a lot of attention as people wants to feel special, that is either knowing peers that can share invites or be a peer that controls how invites are shared. But, it would be stupid to just offer enter via invites. As long as you have a good product, someone are willing to pay for.
The free account, which you get via invites is financed with commercials, jingles between songs (every 20 minutes or so) and banners in the client.
Spotify offers two different types of payed accounts, one where you pay per day, this is a way for the customer who is running the free version to test the full version for one day. This way the customer gets to touch the premium version for a small fee (9 SEK, approx $1.25). The second payed account is the monthly subscription, where you get all the extras available and no commercials for a monthly fee of 99 SEK ($14). For 99 SEK you get higher bitrate, possibility to use the mobile client, having music available while offline, more invites and some other fringies.
Big partners
Spotify has teamed up with the big players in music, but also with big partners for making their service known. In example Bredbandsbolaget/Telenor offers customers who use and pay for their services to get Spotify (the free version), this is a way for people who do not wanna pay, do not have the contacts to get invites, but still wanna play with the toy because they may have heard about the product.
Premium means premium
Premium members who pay the monthly fee gets better bitrate when listening to music, possibility to use Spotify on their iPhone or Android-enabled phone. They also get invites to share and special offers when tickets for interesting concerts are released etc. They get the possibility to actually make the music available offline (perfect for a flight or mobile users with a subscription plan where data is expensive)
Mobile
Bringing all the music you could think of when you travel by car, going to work, are having a workout or when you are on vacation is a killer application (the nineties called and wanted that saying back). What is even better is that in order to not kill any data-transfer-limit you might have on your mobile subscription, it is possible to sync music via WLAN to your mobile phone, making sure that you do not end up paying to much for the use of Spotify. Today there are clients for iPhone, Android-phones and some Symbian phones as well. There is talk on clients being developed for more mobile platforms.
Personalized and travel friendly
Why do everyone want one account? Couldn’t a family share an account? Of Course they could. But music as a product is very personal and the product Spotify easily lets you personalize your music experience people feel they want their own account and if they want to have some playlists in common they can always share their playlist and even make it collaborative.
Community without a Community
Spotify has one of the biggest communities right now. There are numerous sites out there who offers extra functionality for Spotify customers by letting users share and use playlists. And they do not even have an affiliate program!
Suggestions, Shared Playlists and Ever growing music catalogue = Sticky
The thing with Spotify is that it is growing more and more sticky, the more tools people get to share music in Spotify the more stickier it gets. Today we see people sharing playlists peer to peer, in groups or externally on dedicated websites. This combined with an ever growing catalogue that is pushed on the dashboard will of course make the content and product more and more sticky. I think the solution of actually enabling sharing via standard http-links is exceptionally smart, because if a user who gets the url do not have the product installed, he/she can be offered to buy it, this is something that more products could make use of.
API
Spotify has an API for Premium members (libspotify). This enables integration of Spotify into other solutions, such as websites or desktop applications. The API is a C lib and as such the audience may be smaller than if the API had offered other solutions for integration. But an API is still something that enables Spotify as a product to find distribution ways beyond their own desktop and mobile clients.
Brand Awareness
Creating a new brand is expensive, but now and then someone manages to create really strong brand awareness by offering a product that do not need traditional marketing. Traditional Marketing is often what makes brand awareness something really expensive. Spotify has managed to create a really strong brand within a really short period of time. I am absolutely sure that the somewhat odd name has enabled a better brand awareness than for example the product name had been something of a more generic music keywords.
What could Spotify do to earn more money
I am not sure that Spotify is such a success yet when it comes to make money, but they have the possibility to earn a lot of money as they have a good product, a large user base and the best content you can have. I have listed a couple of things Spotify could do in order to start earn more money and eventually showing positive numbers.
Affiliate Program & Revenue Sharing
Give affiliates 15% of all future revenue generated or a good CPA-deal ($50) for every single user they push into actually start paying for Spotify. This way combined with an open API, Spotify would see a lot of creative ways to use their content and drive traffic back to their product. The good thing with affiliation deals is of course that you only pay for actual paying customers and you leave the marketing efforts to the affiliation. This is a must have from my point of view. Gambling Sites, Amazon and likes would not be the money makers they are without the strong focus on Affiliation.
Sell extras (Lyrics, Genius)
People love music and are willing to pay in order to get something you cant have for free. What can Spotify offer more than mobile clients, offline mode, higher bitrate and more invites for paying customers? I think that selling packages that upsells 5-10% is a way to go. Like the telecoms do with their extra services (answering machine, number presentation etc). I would gladly pay an extra dollar a month to get hold of the lyrics to the music I am listening to. Why not offer the Genius (iTunes) functionality as an account upgrade for $1/month. In Apples case Genius is about upselling similar music and in Spotify’s case maybe an extra dollar a month for such a functionality would suit the product better.
Extended API
Open up the API to all developers and offer not only a C-lib, make sure Web Developers, iPhone and Android developers can integrate their applications with the communication solution that suits their needs best, that will make the third party applications driving traffic back to Spotify explode. Combined with affiliate programs it would for sure help development of smart products we are yet to explore. Create a big development community around the product, I think that we could be amazed what people actually are able to do when they have open API:s and the possibility to earn a dollar or two.
Bundle Premium in other subscription plan
Create subscription plans together with telecoms, broadband, TV-companies where the premium account is bundled into the main product, this could enable users who otherwise do not pay for music, to actually pay for it as those products have an history of actually getting paying customers. The other good thing is that is a win-win situation for Spotify and the company they work together with. Spotify gets a large user base to offer their product to and the companies joining forces with Spotify can differentiate their product offering by adding the hyped product Spotify to it. Lets face it, Spotify must get the ordinary people to pay, otherwise it will be difficult to actually show good numbers, this could be a good way.
Play in Facebook
Today it is difficult to share a song on Facebook. Often a link to Spotify or a video from YouTube is used. Enabling integrated playback in Facebook news stream would make Spotify become the number one service for actually listening to music. The absolutely best thing would be that Facebook recognized spotify urls (http or spotify:) and automatically embedded a Spotify Player in the stream as it does with posted Youtube clips.
Search – Still the Next Killer Application
Tags
System Tagging
User Tagging
Let the user tag everything, it is good for the user, other users and for your business. It must however, more or less, be effortless to add tags and you have to, preferably intuitively, show the user why tagging is a good thing for him/her. If the user sees no reason for tagging, why would she? A typical way of using tags is to making them clickable in order to find related content. So in order to give the user the incentive to add tags, show how the content is tagged and add an option for the user to add more tags describing the content. Give the user help while they adding tags, maybe remembering old tags the user has added.
Ratings
Long-tail
Semantic and Personalized
What does the user actually mean when he searches for something? When he writes “Thailand Weather” is the user doing it because he/she is:
In order to offer the best possible search solution to your customers you should be able to better understand what the user actually means when he/she tries to find answers to their problems in your content. This is a major task, and often the meaning of something is closely connected to the person it self. In the above case, things such as search history, personal profile and geographic location could act as entities making the search a little more semantic and personalized for the user. There is probably a thin line to walk here as something that is really personalized may trigger personal integrity questions for the user. I would suggest that you carefully measure and ask your customers on the personalized features you add to your search in order to not break the thin line were it gets scary for the user, when they realize how much you actually know about them. Even if Internet is not anonymous, maybe it is important to serve that feeling to the user to some extent. Another suggestion is to make these features possible to turn off in some way, or at least describe why and how you know all these things about the customer and how it benefits the customer.
Real-time
Recommendations
People like to buy stuff other people have bought. People like to buy stuff other people like them have bought. People like to buy stuff that people they look up to have bought. People like to buy things that are similar to things they already like. People like to discover things that are similar to things they already bought and liked. People like to get pointed in a direction when the supply of choices are huge. There are some companies that focus a lot on recommendations when it comes to help the user find more products in their database and to up-sell. Two companies that do this really good is Netflix and Amazon. I believe that this is the next commodity-functionality we will see across almost all online products that offer a big range of products to their end user. The value to the customer and thereby the daily incomes are far to big to not act upon. Today we see recommendations for books, music and movies, but no doubt that the algorithms for selecting products that fits the end user will grow in a lot of different product areas. Today it is very easy to start using recommendation on your online product, there exists different open source libraries that lets you integrate a powerful recommendation engine into your existing product database. An example is the powerful library Voogo running on PHP that is very easy to setup. Today we see websites that are built upon the concept of recommendation; Last.fm and another good example is the swedish site http://iglaset.se, where people can rate and get recommendations for beers, wine and liquors. Spotify has a lot of clickability to thank for the recommended similar artists. ITunes uses Genius to help people find new music based on their music library, and of course to up-sell. Recommendations are really a win-win solution for businesses and customers. If you look at social networks such as Facebook and LinkedIn they use recommendations as well. They ask if you maybe know this person. And they recommend on further actions you can take to further enhance the user experience of the service. There is no end to how you could utilize such a powerful tool as recommendations for your online service.
User-to-user
If all systems fail delivering the answer to a question, why not use other persons to help finding the right answers. This way you can take more detailed and complex questions to your system and have real persons answer them. Today there are some services that offer this kind of help (answers.yahoo.com, answers.com) and of course a lot of big brands offer forums and communities. Another part of user-to-user interaction could be crowdsourcing. Crowdsourcing is the combination of the words crowd, a lot of people, and outsourcing, letting someone else do the job. Lets say you would like to find a book on Amazon that has unicorn on its cover but not in the title or description. Why you would want such a thing is strange, but never the less, how would you go about finding it? It is a time consuming job trying to find it but if 10,000 people did the same search somewhat structured you could probably have your unicorn cover in less than an hour. In order to make this work, you got to give the user incentives to help, either money, status or fun. Google make use of crowdsourcing for labelling images in their image search. They have set up a game (http://images.google.com/imagelabeler/), two persons get shown the same image and they start to tag it. When they tag the image with the same tag, they are shown a new image to tag. This way, people get to play and Google gets better meta-data for their images.
Customer Support
Authority
Customer Support offers authority, they are the company, and the answers you get from them are official answers from the company.
Trust
Sometimes it is difficult to trust the information you get by searching and finding solutions yourself and contacting the official Customer Support offers you as a customer a channel where trust is the key thing they deliver. If Customer Support says that the plane takes off at 1900 on monday, then I trust them more than the table that the company has on their website. Why? Because a human said so.
Integrity
For some people it is easier to go through personal information where integrity is key, together with dedicated personell. Some people still go to banks for some errands even though it is possible to solve these things interactively online. Why? Maybe because they believe that some things are to sensitive to handle for computers and software (even if the customer support probably uses the same tools as are available online), and the feeling of having another official person handling it makes the customer feel more secure.
Verification & Sanity Check
Sometimes the answers you get from the software solutions available doesnt make sense, maybe you get different information from different sources and you as a customer really feel that you would like to know what is the correct data. Then Customer support can act as a channel for verification of data/sanity check. They may not have the answer immediately, but they can take on the role of finding the solution for you.
Conclusion
The more content you have to offer your customer, the better functionality you need to give them for finding the information/products/content that fits their need. In this article I have discussed and shared some ideas on how you can apply search in order to give your users a better user experience.