Spotify data points to fast-growing market

Anyone in doubt about Spotify’s power to colonise listening habits should take stock of this statistic: in December, the music streaming service had 210,000 free users in Ireland, but in the wake of the Christmas outlay on smartphones and tablets, that number had swollen to 250,000.

Ronan O'Loughlin, co-founder and commercial director of Digitize, the company that sells advertisements on Spotify's free version in Ireland, says he expects the number of users to continue to grow, as more kids move into the 15-24 year-old bracket and graduate to the service.

About 40 per cent of the free user base are 15-24 year-old, while another 40 per cent are in the 25-44 year-old demographic, says O'Loughlin, who uses Spotify himself to play lullabies to put his kids to sleep.

“It’s now on a scale where it’s comparable to some of the radio stations in terms of monthly reach.”

Digitize, the largest independent digital media sales house in Ireland, was appointed as Spotify’s Irish sales partner in 2013. It also works closely with Channel 4’s video-on-demand service 4oD (soon to rebrand as All4).

On Spotify, it hopes to pass the €1 million mark in advertising revenues this year. “For a two-year-old business, that would be fantastic”.

About 20 brands advertise on Spotify in Ireland at the moment, through a combination of audio and display or by sponsoring playlists based on particular themes, musical genres or moods.

"More and more, we are seeing small bits of budget being tested on Spotify," says O'Loughlin, who cites campaigns by Absolut vodka, the airline Emirates and the Diageo music event, Guinness Amplify.

Digitize will launch a Spotify video advertisement product this year, in which users who watch the video will be given ad-free listening for a period, while those who skip it will continue to have their song choices interrupted by an audio ad every so often.

Listeners who use free Spotify (in other words, those who do not pay a monthly subscription) are served with about four advertisements per hour of listening, with one, or sometimes two, popping up every 15 minutes.

“Inventory is limited. We cap it so we don’t annoy the user,” says O’Loughlin.

The 250,000 free users are estimated to represent about 80 per cent of the total number of Spotify users in Ireland.

The other 20 per cent – around 60,000 people – pay for Spotify Premium not just to avoid ads altogether, but to receive greater functionality on the service, including better audio quality.

An “over-serving” of ads could, in theory, prompt the free service users to upgrade – on the other hand, it could simply inspire them to shut down the app.