12/6/13: Spotify readies free mobile

Brad Hill
December 6, 2013 - 12:35pm

Spotify will announce free mobile access to its listening platform, according to the Wall Street Journal, citing anonymous sources. If true (we think it is), the announcement will probably be part of a Spotify media event in New York on Wednesday of next week. Spotify distributed mystery press invitations to the event earlier this week, Apple-style, with no agenda or purpose disclosed.

The news might be puzzling to some observers. Isn’t Spotify already a mobile service, in addition to its desktop-bound computer application? 

Yes, Spotify apps can be downloaded by anyone, whether or not they subscribe to Spotify’s service. But free use of the mobile app is restricted to the “radio” feature. Spotify is also a jukebox service providing random access to tracks, albums, and user-created playlists. The whole shebang is available free of charge on computer desktops, supported by ads. Subscribing to Spotify ($10/month in the U.S.) cleans out the ads and opens up the entire platform (including song downloading) to smartphone and tablet use. 

Assuming the leak is true, there are a few significant dimensions to Spotify’s decision.

Erasing the difference between mobile and desktop

This is the aspect with the most far-reaching consequences for all stakeholders -- music services, music owners, and consumers. For years, mobile has been regarded as a separate usage realm, existing alongside normal computing, and exceptional. Increasingly, That view of usage has shifted out of alignment with lifestyle realities.

RAIN spoke with music-tech entrepreneur Michael Robertson earlier this year about the separation of mobile use in music business models. Robertson, whose latest project is the Radio Search Engine (RAIN review here), took the consumer’s viewpoint:

“One of the big hurdles has been the industry's view that mobile is different than desktop. Spotify, Rdio, Xbox Music -- these have most every song in the modern library. On the PC it's free with ads, but when it comes to mobile, you've got to get out your credit card. That has stunted access. People wonder whether they really have access. When there is an arbitrary decision about delivery on a PC but not on a tablet, people think, ‘Maybe I don't really own this.’” 

Consumers are leading the “mobile-first” revolution sweeping through Internet content of all sorts. Spotify’s decision to open up mobile (to some extent, not yet known) would ratify a growing mainstream reality that the smartphone is the consumer’s leading digital device. The boundary between desktop and mobile is increasingly artificial and hostile to users.

Turning on new revenue

To whatever extent this course change reflects new mobile ad inventory, Generating more mobile usage traffic will generate more ad revenue. That doesn’t necessarily mean a profitable mobile operation, of course.

The other side of Spotify’s business is the paid subscription tier. Withholding most of the platform’s features in the past was intended to drive free desktop users into the paid subscription service. But that style of coercive induction has become bizarre and off-putting to consumers in a music-access world with more choices than ever before. Speaking of choices--

Competitive positioning

Spotify has leadership position against Rhapsody and Rdio, its most direct U.S. antagonists, when it comes to audience size and brand sway. But as online streaming flows into general awareness, the user population is less able to distinguish fine points of service features -- and uninterested in doing so. To some extent, “Internet music” today simply means finding the most convenient Play button and clicking/tapping it. In that context, Pandora is every bit as directly competitive, even though it offers a substantially different feature set.

Looking ahead, the waters will get choppier, and the competitive atmosphere more strangling. It is nearly certain that YouTube, Deezer, and Beats Music will launch highly publicized, attention-grabbing U.S. listening platforms in early 2014. (Beats Music is a certainty for January.)

In anticipation of a more crowded field, now is the time (arguably past time) for Spotify to fortify its brand by opening the doors wider, both to get existing users more involved in the ecosystem, and to give new users a rounded view of its features.

Brad Hill
December 6, 2013 - 12:35pm

Streaming music is gaining popularity fast, but lags behind the web in understanding its users.

Internet content sites can tag, track, and categorize people as they move about the web, creating deep and accurate user profiles that follow most of us as we move among digital properties. Combined with programmatic ad buying, it means that when a user visits a certain website for the first time, that site can display an ad that is more-or-less precisely relevant to that user. Advertisers pay more for effective targeting.

Dedicated music apps like Pandora or Spotify exist as islands, separated from broader engagement with the oceanic Internet. They are years behind the web in understanding their users. Two advances have sparked what promises to be an intensely developed intelligence layer that can understand, profile, and target the users of streaming music services.

First, Pandora announced audience segmentation based on user-registration information. (RAIN coverage here.) The first segments released by Pandora to advertisers are Hispanic users and Spanish-speaking users. More segments are doubtless forthcoming as Pandora develops and refines its testing and predicting methods.

Second, and more recent, The Echo Nest released its Music Audience Understanding platform, which leverages that company’s immense data intelligence about music choices to better profile online music users. (TargetSpot, a leading digital audio advertising network, was the launch partner and first client.) The premise of The Echo Nest’s development is that a proper analysis of music preferences can predict non-music attributes of a person and cohorts of people.

Does it work?

“The Echo Nest’s technology delivers predictions that are at least as accurate as registration data, or more so,” said Mitch Kline, CEO of TargetSpot. “Some advertisers think registration data is gospel, but we believe The Echo Nest’s technology is more accurate.”

It is certainly more ambitious than Pandora’s first venture into segmenting. The Echo Nest has released 20 audience segments that cover demographic categories (age, gender) and lifestyle inclinations (automotive, parenting, etc.). That starts to get very interesting to advertisers.

“It is increasingly important,” Kline affirmed. “Our clients are trying to get more and more targeted. Dumb inventory doesn’t do anything for them anymore. People are now looking for advanced targeting. Automobile manufacturers want to target auto intenders. Or, an insurance company wants to target people who are in the car market because they will need auto insurance. In digital audio, this is fairly new." 

Can music taste really predict whether someone likes cars, or is a parent? We put that question to Jim Lucchese, CEO of The Echo Nest, and he described elaborate methods of testing against the “ground truth” of music-service users, gleaned from multiple sources. Correlating music choices against populations that live in a certain “ground truth” segment (like auto enthusiasts or parents), results in a prediction reliability score.

“That’s part of what took us so long getting to this point. The segments that we’ve released are ones where we’re confident that the results are predictable enough, and reliable enough, to take to market. There were a number of things that weren’t successful. Music can’t predict everything about a person.” 

Big Data and privacy

Though it might seem that the inference level is high when connecting music choices to lifestyle interests, that’s what “Moneyball” and Big Data are all about, and why there is such promise that analytics can illuminate previously unknown connections between all sorts of things.

Lucchese told us that the Music Audience Understanding platform was in pre-release development for two years, and that the launch timing, close on the heels of Pandora’s audience-targeting system, was coincidental, and probably favorable to both companies.

“[The timing] was awesome! The internal conversation we had was, ‘OK, cool, there’s going to be market discussion about this.’ Prior to that, you didn’t read much about it. [Our] timing was set well in advance -- we needed to have an initial customer lined up; we needed to have a product ready. We saw the Pandora announcement as we were preparing our own announcement. I saw that as a huge plus, educating the market around music as a powerful predictor of people and applying a level of data vocabulary around streaming music.”

Interestingly, Lucchese also noted, “I don’t view Pandora as a competitor; I view it as a prospective customer. Pandora is one of the most forward-thinking companies in the space.” (Pandora does not use The Echo Nest’s music intelligence platform, which is utilized by over 400 other music services.)

All of this makes privacy advocates uncomfortable. Lucchese hit that issue head-on: “We really wanted to make sure anything we were doing was not only compliant from a privacy standpoint, but better the current state of the market. [Our system] is not only non-personally identifiable, we’re not even tracking users. Because we can look at anonymous clusters of listeners, and make predictions based on those clusters, we’re not tracking people around the Internet or dropping cookies.”

Mitch Kline expresses the natural enthusiasm of a launch partner, while looking beyond the first-mover advantage: “We believe in The Echo Nest and this technology. We’re the first ones to dive into this space, and we think others will dive into it also. Then we’ll have to think of other ways of targeting!”