Quick Thought: Promoted Posts in Spotify

It’s common knowledge that Spotify isn’t exactly profitable. As avid user, I’ve really liked their latest product introductions: Discover (suggested content from Spotify), Activity (what your friends are listening to), & Direct Artist Following.  With those features and Spotify’s financial struggles in mind, one revenue generating product seems obvious: sponsored content and placements. As we’ve seen with Facebook, it’s much easier to sell advertising inside an algorithmically generated content feed. And with Discover, Spotify has built just that.

Spotify builds a complex profile of your music tastes.  They get the data for that profile from a combination of places: what you listen to, what you add to playlists, what you “like” on Spotify Radio, what your friends and people you follow listen to, etc. So, let’s say I “follow” Justin Timberlake. And listen to his music. And add him to playlists. And on and on. Why doesn’t Spotify sell a placement in my Discover or Activity feed to a similar artist? Preferably, it would be an artist that Spotify’s data shows I will probably like. Or, like Facebook, Spotify should start charging Justin Timberlake to alert me inside Spotify and by email when he releases a new album. That kind of targeted email marketing is incredibly valuable to artists of any stature.

The cherry on top: if done in a clean enough way, promoted/suggested wouldn’t even intrude on user experience. In fact, it could be a genuine value add.

Seems like a layup to me….

P.S. This ad product also allow Spotify to further monetize premium subscribers. It wouldn’t be limited to “free” users.

*** Apologies for grammar, it was a quick thought. I’ll clean it up later***

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The Follow Button: Spotify’s Social Experience

I’ve written several times about how important curation is for good media consumption. When media companies pair content libraries with well built curation tools, it creates a magical experience for the consumer. Recently, Spotify (an enormous content library) made a major improvement to its music discovery tool.

Spotify eliminated the all inclusive discovery stream, replacing it with a Twitteresque “follow” model. Previously, the all inclusive stream displayed all the music being listened to by a user’s Facebook friends. This previous discovery model had several shortcomings. First and foremost, it ignored the simple fact that peoples music tastes are not homogenous. People have certain friends or tastemakers they look to for new music. Music taste is extremely personal, so assuming users are interested in ALL their friends tastes is a rash generalization.

Instead of a stream with all the music a user’s FB friends listen to, the right 1/5th of the Spotify window now contains a curated stream. Spotify users now elect which friends and artists to follow. Based on those choices, users see a stream with songs those specific friends listen to (and tracks/playlists artists recommend). This “follow” model is a proper reflection of social music exchange in real life: we’re only interested in certain peoples tastes. I believe this is the first in several product decisions Spotify will make to create a better social music expereience. This first change is focused on social discovery, and it has major product and revenue ramifications for Spotify:

  1. Privacy:

    As opposed to before, only users who specifically elect to follow me will see what I listen to. This makes me feel much more comfortable. I didn’t like that previously, seemingly the entire overlap of my Spotify-Facebook venn diagram could see my listens….. Not EVERYTHING I listen to I want broadcast out to the world. This “follow” model is much better for private listening.

  2. Better Music Recommendations: Curated Stream

    I now get to curate whose feed I see. Instead of wading through unwanted clutter, I can focus on the friends/musicians whose taste I respect. Plus, in the open graph model, I can follow anyone I wish.

  3. Advertising Value For Brands: Native Ads

    With a curated recommendation stream, Spotify can charge artists or brands to advertise their latest releases, playlists, etc. inside that stream. This creates an additional revenue source for Spotify that can even be included in premium subscriptions. The best part of native recommendation ads is that becuase they would be curated, they will genuinely add value for the end user.

I’m very excited about the most recent update to Spotify social, and am looking forward to what’s next.

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Interesting?

Product vs. Platform… App.net

I leave tomorrow for 3 Days in Las Vegas (woohooo I hate las vegas!!!….Seriously. Scroll past the article, I’ll explain) but I wanted to churn out this post before I left. By the time I return, App.net‘s funding campaign will have concluded. At that point, we will know whether or not Dalton Caldwell’s brilliant proposal will have succeeded or failed. I have personally supported the project and believe in its values. I also believe in Dalton (without personally knowing him) as he spent many years trying to bring innovation into the music business (which I care deeply about) in the form of Imeem. Twitter’s Platform decisions have been written about all over the web, by people more intelligent than me. Still, I wanted to chime in with my own opinions before the funding deadline is reached.

The Twitter Phenomena… A Live Social Stream Is So Important

Here’s the backstory: Many prominent social platforms (twitter, facebook, etc) deliver tremendous value to their user’s through 3rd party access to their APIs. Essentially, external developers can build on top of these platforms in the form of games (think farmville), applications (spotify), and other constructs. What this does for the user is create a much richer online experience. An open API also brings value to the actual platform developers, as so much more content is delivered to their users without additional expense. Innovation can happen at a much greater rate when the platform is open. Everybody wins.

Once attaining a critical mass, these Social Platforms naturally begin to think about money and profitability. So, they turn towards the only established model of income for such ventures: an ad-based revenue model. Now, in an ad-based revenue model, success is predicated on the # of page-views. This directly conflicts with having an open API and platform, as many of the 3rd party applications built upon these social platforms direct views away the platform to the outside sources. So, instead of having 3rd party developers built on the social network’s platform, keeping development in-house keeps page views on the platform. Then, the shutdowns begin. Facebook’s API became more restricted. As did Twitter’s. These restrictions threaten the entire 3rd party development ecosystems that the platforms support.

Dalton Caldwell has proposed a whole different system for funding social platforms. Instead of using an ad-based revenue model. He proposed straight charging users for entry, as well as charging developers to build application on the platform. This kind of premium live social stream has its pluses and minuses. The downside (and what many credit with what will be a failed fundraising period) is that users have to pay to gain access/membership. The upside (and the part I STRONGLY agree with) is that charging users and developers will allow the platform to retain its integrity! It will not shut out 3rd party developers who threaten page views and it will not become an ad-riden experience as Facebook has.

Yes, it will cost us users money. But what fantastic experience doesn’t?!?!?! I enjoy paying for Spotify Premium. I like having an ad-free experience.

The consumer internet is still relatively young, and it is definitely still evolving. I believe the initial push-back from consumers against online services that required membership fees was because they weren’t receiving enough value in exchange. Also, many of the physical services were overpriced before the Internet (CD’s and Music). So when the option for free digital versions arose, consumers leapt at the opportunity.

Free, ad driven models have become the norm. But, people will pay for greatness. People will pay for great services. Hell, look at HBO. Sure, Youtube offers free video content. And, HBO is disrupting the hell out of mediocre television. But, people are more than willing to pay for HBO’s additional content. The free option of Youtube entertainment hasn’t touched HBO. Thus is the power of premium experiences.

App.net is striving to create a premium experience of a social streaming platform. One with integrity. One that will not go back on its promises once it attains critical mass. The business plan allows for this. So take a leap of faith. Donate.

Screenshot of my App.net

They’re so close. Be a part of the future, for even though free is the present model, it delivers shitty products. Instead, lets move toward the future. Where premium costs deliver premium content.
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Vegas Post Script Haiku:

I Hate Las Vegas
Gambling, Stress. Drinking, Stress.
Free Trip, So I Go. 🙂

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If you like what you read, you should follow me 🙂

Current Trends

1. Access Points vs Content Libraries:

There are two emerging macro categories of products. One is doing much better (financially) than the other. The one I have labeled access points, are what we use to access content. Examples are Iphones, laptops, Kindles, Ipods, etc. Another form of access point (with a slightly different result field) would be Google. Through Google search, most users access the web.

Access points often take the form of hardware, and in that sense, they can be extremely successful financially.

The other category is Content Libraries.

Youtube, Facebook, Netflix, NYTimes.com, Wikipedia, Spotify, etc. In these different products lie a majority of the content people consume. People reach these libraries through their different access points.

There is also a sub-trend emerging within Content Libraries. User generated content libraries vs. premium content libraries. Premium content providers (often the premium content is intellectual property) can justify charging for access to their libraries. Though many of these products are struggling in the Internet age, some users WILL pay for this access online.

User-generated content libraries are harder to make financially relevant.  Youtube is almost entirely an ad-driven platform. Wikipedia is free and survives on donations. As Facebook has shown us recently (through their failed IPO), there may not even be great inherent value in having a lot of users if the only income is advertising.

Conclusion: There is money in access points. There is also money (though not quite as much) in premium content libraries, though significantly less so. The real successes however, occur when a company controls both the access point as well as a premium content library associated with it. Itunes/Ipods and Kindle/Amazon-Publishing illustrate this very well.

2. The Shift back toward Silos:

Focused excellence. Focused excellence. Focused excellence. Multitasking is becoming passe.  This can be seen by the continued failure of the mobile Facebook application (too much content, too little space, terrible interface), while mobile Twitter continues to flourish (it’s a very focused product).

Users want to pull out their Iphone, and through that, have access to a panel of focused, well built, simple apps through which any need can be met.

Conclusion: Make sure whatever you are building is simplistic, clean, works extremely well, and solves a clear problem.

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Staggered Release Dates

Picture this. You are a fan of the Temper Trap. A big fan. Big enough that you were planning to PURCHASE their new album.  You live in the US. Their new album (self titled) was released in Australia on May 19th. But, the US release date isn’t until June 5th. What are you going to do? Wait for the US release, or simply torrent it, as the album is readily available online due to people in Australia uploading it.

I understand that there are contractual label obligations behind such a decision. But, all staggered international release dates do is hurt the artist financially. If a fan is loyal and rabid enough that they were planning to purchase the album, it means the fan is probably dying to hear the finished product. A few days is one thing, but releasing an album in a major territory weeks after the initial release is foolish, for many of those loyal fans will be impatient and will download the album illegally.

 

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Just Another Industry: The End of the Scarcity Model in Music

The following table examines the components of the music business that made it “perfect” for Internet-based disruption, and the state of those components afterward.

Business Component Pre-Disruption (Perfect Industry) Post-Disruption (No Longer Special)
Promotion Magazines pushing Record Companies’ product: Free Most music magazines have become culture based. Do not have nearly the same pull over readers. People do not need recommendations. They can sample and judge for themselves.
Promotion Radio pushing Record Companies’ product: Free Still relevant, but does not have nearly the same pull over listeners as before. Decentralized by emergence of Internet Radio.
Promotion Television: MTV: Free Advertising Now industry must pay for television advertising, like all other industries.
Promotion/ Distribution Physical Distribution. Chains of independent retailers whose focus was selling Record Companies’ product. Now only physical distribution is big box stores (Target, Walmart, etc.) or Mom & Pop indies. Physical is waning anyway. Digital distribution is not monopolized.
Distribution Controlled by Record Companies: Oligopoly. Distribution now flat. Internet is an equal space, any random musician can have worldwide digital distribution without Record Companies.
Listening Technology Records followed by CDs. High Priced. Cheap to produce. Not copyable. Wears out (must be replaced). Digital copies cost nothing or are cheap. They are easily copied. They do not wear out. Unlimited consumption streaming services like Spotify are emerging.
Costs of Production Used to take enormous sums of money to make a commercially viable album. Now solid albums can be created cheaply with virtual instruments and home studios.
Popularity Principle: Reinforcing Just had to get Album into Top 40 charts to create more sales: Consumer rationale “Must be good because it is selling!” World of niches. People can sample for free, will only buy what they personally like.
Cool Factor Music defines people over long periods of time. Still relevant.