A company that doesn't receive the attention it deserves is Spotify.

They launched in 2008 and built the product in 4 months. Spotify now boasts 248 million monthly active users (MAUs) and 113 million subscribers, with its paid user base growing 31% year-over-year.

They have incredible conversion (~50% of free users convert to their premium solution) and retention (80% of all users use the product at least twice a week) rates.

A study by Hiten Shah indicates high engagement as well - with 55% of respondents saying that they would be very disappointed if the product did not exist.

Qualitative feedback suggested that people are using it daily, call it 'my music', use it to get through the workday and don't have an alternative. The company has evolved to the point where their singular focus on music has led to total domination in that market with alternatives such as iTunes, Pandora or YouTube not posing a significant threat.

Their success led to me a podcast with their CEO, Daniel Ek, who shared a lot of interesting insights and lessons from the evolution of Spotify.

Job To Be Done

Similar to my post on Instagram, Daniel views his relationship with his users by understanding the job to be done. Spotify's goal is to own the relationship between audio and the end-user. Users could ask to be entertained, they could be asked to be taken from point A to point B, they can ask to be educated. This is a big reason why Spotify has moved into the podcast space.

The Future of Spotify

Despite all his success, Daniel believes that he's in the very early days of his journey. With the goal of winning the market of audio, Spotify is aiming to have a billion users who consume content on a weekly or daily basis. There are three main drivers to this journey:

Platforms: There are three modalities where people consume content.

• On The Go: This is where most people consume their content today especially when you think about the relationship between audio and cell phones.
• In Your Home: This market is growing rapidly with Alexa and the number of voice apps and hardware products available today.
• Cars: This hasn't happened yet but once autonomous cars gain adoption - cars will shift from an ownership to a service model. This impacts how the role of audio will play in the autonomous car experience.

Globalization: Users are experimenting and discovering content that sits outside of the normal range of music. This creates an exponential effect on the number of users that Spotify can attract (especially as content creators make Spotify the default platform).

Creators: The company is really focused on making it easy for creators to launch their music on Spotify. Internally, they have a goal of helping 1 million artists to earn enough income from Spotify so that they can sustain themselves independently.

Building a Culture of Experimentation

"First and foremost, I think it's about building a culture of long failures because you can't have a culture of experimentation if you don't allow for failures to happen."

Spotify does hack weeks - a practice that I've started to see in most growing tech companies. Unlike other companies though, Spotify doesn't force people to go in one direction or another - they just provide enough context to people so that they can make informed decisions.

An interesting idea that came from a recent hack week is the practice of doing internal company podcasts. As opposed to having strategy discussions in the form of presentations, Spotify publishes their internal discussions as a podcast on their platform - allowing employees to catch up on discussions at their convenience.

If Spotify gets to the stage it expects, these podcasts would be invaluable to listen to as people try to understand how Spotify continued to grow its dominance over the audio market.

Spotify Originals

A misconception behind the reason why Spotify Originals exists is that Spotify is trying to do what Netflix (and many other media companies are doing) - which is to make their platform defensible. Spotify doesn't believe that original content or being our own label is a viable strategy.

The primary reason for why they launched Originals is because it doesn't make sense for artists to launch their own label. Most artists make the vast majority of their income (~80%) from touring. By making it easy for creators to launch their music on Spotify, they allow artists to focus on their core responsibility which is to spread your music as wide as possible so that you can create new fans that want to come and see your shows.

Competing With Free

Pirating was very common especially where Spotify first started (Sweeden). "The reality is that the consumer job to be done the friction point from A to B was pretty horrible experience, you had to go on one of these services, we had to find a person had a fast enough connection to download from and that can be a problem. You could get what virus with it, we didn't know if you were actually getting the right thing you were going for. And it could take 30 to 40 minutes before you got it."

To alleviate this pain point, Spotify had to create an experience that was free like piracy (even though the content was licensed). The magic moment that Spotify was aiming for was having access to the world's music on the user's hard drive.

A hack that Daniel identified was playing on the feeling of 'instant music.' "I read this book on psychology that told me that it takes about 200 milliseconds before people to perceive latency at all. And it turned out that it took about 500 milliseconds for us to start a stream. And so we had to work with that dynamic. And so I realized on the design end of things that if I got the progress indicator to move even before we played something back, you would perceive it like it was instant even though it wasn't."

Understanding User Data

Daniel spends most of his time looking at segmented cohort data (vs. the average or even aggregated data). A lot of times, the aggregate data (especially as a company grows) doesn't tell much of a story. By going a couple of clicks deep, the data can provide powerful insight into users' behaviors.

Career Development

Spotify manages internal development based on a concept called mission - which last two years. In a high growth company, even if your title and team remain the same, your role and responsibilities will have changed drastically. Daniel's job went through 6 stages so far - evolving from being a product designer/manager to HR person to finance person (raising money) and now CEO. His job today is to make sure that the company is on the verge of being uncomfortable - which is a tough balance to strike.

Daniel lives by a racing quote where "you're not driving fast enough unless you're scared."

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