Spotify ARPU

2022 (as of September)€4.52
FourWeekMBA BI Intelligence – Source data: Financial Statements

When you look at Spotify’s ARPU and compare it to other attention-based business models like Facebook’s ARPU, you realize how much lower that is.

The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2021, Meta’s ARPU worldwide was $11.57. While in US & Canada, it was $60.57; in Europe, it was $19.68; in Asia, $4.89. And in the rest of the world, it was $3.43.

However, there are a few considerations to make here.

Spotify’s business model, contrary to Facebook, is primarily skewed toward premium members who pay a subscription to the platform.

Those members are kept on the platform with engaging content, which is released continuously, and it’s optimized for a long engagement.

Thus, a business model like Spotify fundamentally differs from other attention-based business models, as it’s a mixture of subscription and ad-supported.

Whereas a company like Facebook needs to optimize its ARPU to make it as high as possible in the short term since this is subsidized by advertisers (companies pay to advertise on top of Facebook, which is what makes up its average revenue per user).

On Spotify, the company optimizes for the lifetime of the subscriber.

In short, it will take less today but for a more extended period.

Spotify’s ARPU, over time, might increase substantially if the company strengthens its ad-supported segment.

In fact, for that segment, Spotify can work on increasing the short-term value of ARPU thanks to the advertising network, similar to what Facebook does.

There, then, it’s all about being able to scale up the Spotify advertising machine!

Related Visual Stories

Spotify Business Model

Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated €9.66 billion in 2021. Of these revenues, 87.5% or €8.46 billion came from premium memberships, while over 12.5% or €1.2 billion came from ad-supported members. By 2022, Spotify had 195 million premium members and 273 million ad-supported users.

Spotify Ad-Supported Business

Spotify Audience Network is the underlying advertising infrastructure that supports its ad-supported user base. The Spotify Audience Network was born as the result of the acquisitions of Anchor and Megaphone. By 2022, Spotify had 273 million ad-supported users.
Spotify licensing deals affect its business model. The company runs on both a free service, which is ad-supported and a subscription premium service. They have different economics. The ad-supported business had a 10% gross margin in 2021, compared to 29% of the subscription-based business. That’s because the more the content gets streamed on the platform, the more that increases royalty costs for Spotify. That is also why the company invested in developing its content. Thus, in part transitioning from platform to brand.

Spotify Competitors

Spotify is the world’s largest music streaming platform with over 381 million users across 184 markets around the world. The company was founded by Martin Lorentzon and Daniel Ek in 2008 in response to the shutdown of peer-to-peer music service Napster. Spotify became a success because it was the first company to determine how to distribute music legally and compensate the music industry at the same time. The platform now offers various curated music discovery services, music stations, audio customization, and private listening. In recent times, it has also ventured into the streaming of audiobooks, podcasts, comedy, poetry, and short stories.

Spotify Model

The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Who Owns Spotify?

The multi-billion music streaming company Spotify is primarily owned by its founders, Daniel Ek and Martin Lorentzon. As of 2021, Daniel Ek has 16.7% ownership of ordinary shares and 31.9% of the voting power. Where Martin Lorentzon has 10.9% of ordinary shares and 42.9% of the voting power. Another key shareholder is Baillie Gifford & Co, a Scottish-based money management firm, followed by Morgan Stanley, T. Rowe Price, and Tencent.

Read Next: Spotify Business Model, Spotify Advertising Business, Spotify Model.

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