10 years of Spotify: How a digital platform succeeds [5 reading tips]

spotify, playlist, screenshot — Photo by Jean on Unsplash (bearbeitet von dotSource)

Music has always been part of my everyday life. Through the good times, and the bad. During special moments I won’t forget. It has the power to shape every moment with the right notes and melodies. It has only recently become possible to have a limitless catalogue of music with you at all times – and when Spotify launched in October 2008 they made it possible. A lot has changed in ten years. Today, Spotify does even more than just music streaming. Let’s take a look at their track record and explain what other companies can learn from it to drive their digital business.

Freemium model

Today it is quite different and Spotify has a lot to do with it. According to a recent study (German only) by the IT association Bitkom, every other internet user streams music – in 2013, only nine per cent did so. At the same time, Spotify dominates the music streaming market with a share of 36 percent. Their IPO last year was successful.

What makes the platform so attractive? Users can now listen to millions of songs from digital devices such as smartphones or tablets and get personalised playlists tailored to their tastes. Favourites can easily be saved and shared with friends. For free. The biggest drawbacks of the freemium model, however, are commercial breaks and the ability to skip over songs. This makes users want to upgrade. This tactic has paid off for Spotify: The Swedish company now has 83 million paying subscribers and a total of 180 million subscribers – more than comparable services from Apple and Amazon. This success has pushed consumer spending for music back up.

Music lovers at the centre

But without excellent services, this platform would not attract users. The business strategy entails a digital platform relying on advanced algorithms and the power of the smartphone as a data collector to put the user and their needs at the centre of it all.

In recent months, Spotify has also added some new features to the app to further strengthen customer relationships:

Personalisation: Subscribers can get personalized music recommendations on their homepage, as well as curated playlists like “Your Daily Mix,” “Your Summer Flashback,” or the popular “Weekly Discovery” playlist, based on their listening habits.
Customer focused: Music fans now have a bit more control, as they can play 15 playlists in any order, skipping many songs.
Convenience: Data usage has been reduced by up to 75 per cent by developing a special economy mode that gives even more users the freedom to use Spotify on the go without worrying.
Customer loyalty: Users can use the like button and the dislike button in the free version to give direct feedback on which songs and artists they like. Then they get even better musicrecommendations and curated playlists.

Last but not least, Spotify has expanded its subscription model with new offers and functionalities. In the future, Spotify Premium customers will be able to listen to more songs offline and on more devices than ever before. In addition, Spotify offers a family subscription, with which up to six members can use the service in parallel.

Digital platforms as a business model

With these unbeatable digital services, Spotify has not only changed the listening habits of many people but also promoted the platform economy. Many companies – including B2B – are inspired by success stories from Spotify, Airbnb, and others and continue to develop their business models based on this. And yet, many German companies are still struggling with digital platform economics. Only 12 per cent of board members or executives currently operate a digital platform themselves, while 60 per cent at least offer products or services on an external platform.

» “Even if a similar business can be digitised successfully, German companies should take the courage to explore all possibilities to build such platforms themselves or at least use them. Tomorrow’s business is all digital,” says Bitkom President Achim Berg. «

But courage alone isn’t enough. The right technology selection, an innovative and open mindset, and agile methods form the perfect recipe for a successful digital transformation, as Spotify shows.