Why Is Spotify so Successful (Or Lessons From a $46 Billion Business)

Long time readers of this blog know that I love Spotify. It is one of the few apps that I use every day, and I have paid for a premium subscription for years now. This is why I was excited to answer two questions that kept bouncing around in my mind: why is Spotify so successful, and why should you care?

A Brief History of Spotify

Founded in 2006, Spotify wasn’t the first music streaming service ever created. Some readers might remember the days of Napster and Kazaa. Apple also launched its iTunes store around the same time, where you could buy songs for $0.99. Music has always been a significant aspect of the internet, but it has also faced a litany of legal challenges.

Let’s fast forward to 2018, which is when Spotify when public after 12 years in operation. By this point, music streaming had completely taken over the music industry, and all the major players wanted a piece. Apple had Apple Music, Google had Google Play, which became Youtube Music, and Amazon had Amazon Music. This led to a revolution in access to music like we have never seen before.

Spotify has been one of the most successful players, and they are now trying to innovate into the next trend. They don’t think they are in the music business, but instead, they are moving to be in the audio business. This is why they have acquired media companies like Joe Rogan and Bill Simmons. They both maintain popular podcasts, an area in which Spotify is investing significant dollars.

Spotify Success Factors

Spotify isn’t successful merely because you can play music reliability. That’s table stakes in this business. There are several factors that we could consider, but I want to focus on five critical ones.

Great User Experience

Using Spotify apps is dead simple. The app design centers around “playlists,” an idea that is easily understood. Inside a playlist, you can play a song, go to its album or start listening to songs similar to this one (we’ll get to the personalization in the next factor).

Spotify Right Click Opens Up Options
Spotify Right Click Opens Up Options

You’ll then spend most of your time browsing through different playlists. Other Spotify users create some, but Spotify automatically makes the bulk of what you will see.

Moving between devices is also seamless. I can start playing on my computer and then proceed to my phone without missing a beat. All of this means I can be listening to my favorite songs within seconds of opening the app from my phone.

In my client work, we have looked at data to understand “friction” points where users tend to get stuck. These can happen in any part of the product, including the onboarding and checkout funnels. I worked with a company that used this idea of friction points to redesign its sign-up process completely.

Brilliant Use of AI/ML

I think Spotify has one of the best uses of AI or machine learning out there. They can use models to make songs and playlist recommendations that tend to be quite useful. It isn’t solely based on the artist but on the type of music and how often you might listen to a specific genre, the BMP, and other factors.

Spotify Generates Playlists Based on Behavior
Spotify Generates Playlists Based on Behavior

Spotify makes music discovery extremely easy while also making it easy to listen to the songs you already love. Their concept of “Radio” will play songs similar to a starting point, which could be an individual song or even a playlist.

Spotify Radio Makes Music Discovery a Breeze
Spotify Radio Makes Music Discovery a Breeze

Aggressively Expansion Into Other Content Forms

Spotify isn’t just in the music business, but it is moving into the audio business. This allows them to add other types of content to the app, such as podcasts. This opens the door for Spotify to eventually add short stories, audiobooks, and any different kind of audio content they could imagine.

Spotify Podcasts
Spotify Podcasts

Simple Pricing

Spotify has a simple pricing model that you can explain to anyone. They have two plans: a free and a premium plan. The premium plan then has a further option for a family plan. I particularly like their free plan because it provides access to their app to anyone who wants to use it. If you don’t mind the ads and limitations, you can listen to as much music as you want. 

If you’re willing to upgrade, the premium plan gives you full control over your music, offline downloading and lets you potentially share it with your family. I’m sure Spotify could figure out multiple plans based on specific features, but they have kept their pricing simple for a reason: it works.

Integrates with All Devices

Spotify will play on all your devices, and I mean all of them. Desktops and phones are apparent, but you can find support for Spotify in Chromecast, Google Home, Alexa, Playstation, Apple Watch, etc. There are so many options that Spotify has an entire website dedicated to the devices they support.

Spotify is Available Everywhere (Literally)
Spotify is Available Everywhere (Literally)

Lessons for Your Business

Let’s come back to you. What are the lessons that you can pick up from a company like Spotify? There are three things that I want you to think about.

How Good is Your Core Customer Experience?

Spotify is doing a lot these days, but the core experience of playing and finding music is still outstanding. They haven’t lost sight of the core value, and neither should you. Are you happy with the core experience that your customers currently receive?

Is Your Pricing Scaring Customers Away?

If you disregard Spotify’s pricing as just “another consumer product,” then you might miss a few lessons. B2B and Enterprise products may need more than only two pricing plans and perhaps even rely heavily on custom plans. The goal is to make any pricing plan simple. I hate opaque pricing options that aren’t completely clear to me unless I’m an expert, or I can predict the future with a high degree of certainty.

Are You Doubling Down on Success?

Spotify realized that they are pretty good at delivering music, and they are now moving into other audio content forms. This is an excellent example of doubling down on success instead of trying to build on failures. In your business, are you exploiting what is working and trying to do more of it?

Spotify isn’t an accident. The music streaming business is riddled with the corpses of other services that couldn’t make it. Spotify has built an objectively great product and supported that with effective deal-making with music labels and artists. Take a minute to also read my short analysis of TikTok, another popular consumer product.

One more thing before you go! Do you know how to get more insights out of your data? 

All companies are sitting on a goldmine of data that they haven't fully explored. It's not about technology or capturing more data. The key is to learn how to make the most of your current data and convert it into actionable insights. This is the main idea behind my first book, The Data Miage: Why Companies Fail to Actually Use Their Data

I'm excited to announce the release of the book through all major retailers. If you're interested, you can download the first chapter for free using the form below. You'll learn what the best data-driven companies do differently and how to make sure you're playing the right data game.