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Observations about the Spotify product and user acquisition strategy (or, you catch more flies with honey than vinegar)

Posted on | February 14, 2012 | 1 Comment

How My free Spotify trial convinced me to sign up for MOG instead.

A few months ago I was excited to try the free Spotify trial. I love music, and my first impressions of the application were positive. Lots of music! Decent user interface! Free! I even bought a new headphone amp to celebrate my increased music consumption.

But soon, I was starting to get annoyed at the advertisements. I don’t have a problem with ads; it’s an ad supported service after all. But these ads were junk: irrelevant, repetitive, ineffective schlock. Sometimes an ad would play two or three times back-to-back, just for kicks. I’m simply not going to decide to buy that boy band album because I’ve heard the promo ad 10 times in an hour. Nor am I likely to purchase pants named after a monkey just because a tart with a British accent told me 500 times that they will make my butt look good.

I and others openly wondered if the ads were actually designed to motivate free users to just pay the $5/month for the paid service. A sort of inverse recommendation engine designed to annoy with statistical precision. But also just wondered if maybe Spotify was still ramping up ad sales in the US, unable to play relevant ads because they simply didn’t have them yet.

Then I saw this announcement: Spotify is capping the free service to 10 hours of play per month. This suggests that the ad supported service is unprofitable: it is merely a user acquisition strategy for the paid service. The company as a whole has been growing revenues quickly, but is also unprofitable as a whole losing $42M in 2010. So they have to cut expenses (licensing fees) and increase revenues (mainly paid subscriptions).

 

An annoying free service is a terrible way to acquire paying users.

Thanks to the ad supported service,  I have had a practically unlimited time to experience the limitations of the Spotify service. The shrinking music catalog which has poor coverage of classical, world, and jazz music. The low streaming quality of the free service and limited number of tracks available at higher bitrates. The poor mobile offering. The whole pop-music-centered-ness of the service that continues to push me to listen to top 10 hits when they should know by now I’m just not into that kind of music.

 

But mainly, I associate Spotify with trying to annoy me with ads to coerce me to sign up for their paid service. And there’s just no way I’m going to give money to a service that thinks that is ok. 

 

A great free service with a limited preview period would have been more effective.

If  the goal was simply to acquire users who are likely to convert to the paid service, Spotify should have focused on creating the best possible user experience for those trial users. Give them high quality streams. Don’t bug them with ads that don’t pay the bills anyway. Give them the mobile app. Make them love your service. Addict them to your service, so when you take it away they have to sign up!

 

How did I end up with MOG? They offered a really nice trial service for a limited time. I compared Spotify with MOG, and MOG had better streams and a much larger catalog of the music I listened to. The IU needs polish, but the music sounds great and they have almost everything I’ve searched for.

 

Take aways for product designers.

  • Annoying freemium products create opportunities for your competition (unless you’re a monopoly).
  • It’s sometimes better to offer a great free trial than a disabled free version of your product.

 

A final word.

It’s entirely possible that none of the above issues will matter for Spotify. They have huge traction, and are growing rapidly. Their biggest problem is that they’re dependent on licensing music from labels who will squeeze all the revenue out of them they can. But if Spotify does well over time, that doesn’t mean their freemium model is a good example for your own product design efforts. They could have grown faster with a great free product, or been more profitable with a user acquisition strategy that was more sustainable than the ad concept.

Comments

One Response to “Observations about the Spotify product and user acquisition strategy (or, you catch more flies with honey than vinegar)”

  1. Theorn
    May 21st, 2015 @ 9:04 pm

    I might consider paying for spotify premium if the advertising strategy were different or if the entire model were not designed to push a dying pop music industry. The fact that both of these arre true of spotify, I will never even consider supporting spotify by paying for their “service”. when will it end?

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