Swedish-headquartered audio streaming service, Spotify has revealed that it is making a profit, surprising Wall Street by beating expectations.
In a letter to investors, the company showed monthly active user growth of 30% year-on-year, spurred by growth in developing regions such as Latin America and Southeast Asia. As a result, the company was able to show that, relative to publicly available data, the company was outpacing its nearest competitor, Apple, adding roughly twice as many subscribers per month. Subscribers were up 31% year-on-year, having added five million subscribers in the quarter.
Q3 saw the company report an operating profit of €54 million on total revenues of €1.73 billion.
Total revenues were up 28% in Q3 compared to last year, with the vast majority of that premium (subscriber) revenue, which was up 29% to reach €1.5 billion, while ad-supported revenue was €170 million, which was up 20% year-on-year but weaker than expected.
“For the Ad-Supported business, revenue growth of 20% Y/Y underperformed our expectations in Q3. Roughly 80% of the miss was related to self-inflicted implementation and integration issues we experienced with the rollout of a new order management software to replace Google’s Doubleclick Sales Manager which was sunset in July”, the letter states.
One bright spot was in podcasting ad revenue, which saw “strong” yearly growth, but still remains a small part of the total ad revenue haul at less than 10% of ad revenues.
“We continue to see exponential growth in podcast hours streamed (39% Q/Q for 3Q19), albeit off of a small base. Podcast adoption has reached almost 14% of total MAUs. The U.S. accounts for the largest share of podcast streams but share of listening is higher and growing faster in several European countries. Podcast engagement is clearly a growing global phenomenon.
“For music listeners who do engage in podcasts, we are seeing increased engagement and increased conversion from Ad-Supported to Premium. Some of the increases are extraordinary, almost too good to be true.”
The news follows significant investments from the company in original podcasting capabilities with the acquisition of both Gimlet Media and Anchor FM, part of a $500m push into the format from the company.
At the same time as posting results, the company also announced that its Chief Financial Officer, Barry McCarthy, who was hired from Netflix to take the company to its IPO would be retiring from the company in the new year.
Sourced from Spotify, WARC