Spotify ads: a blunder or a genius?

Abstract

Spotify, since its inception in 2006, has grown into a household name. It boasts over 345 Million MAUs in 2021 and is present in over 170 countries. Spotify has arguably changed the way people consume music and can be considered a breakthrough product in all regards. Spotify follows a simple freemium model; there is a free ad-supported version and a premium version with better features and no ads. There are around 155 Million Premium subscribers in 2020 out of the 345 Mn users. Spotify pays a fixed amount per stream to the music owners (This amount is then distributed between the artist and the music label in a pre-decided split). Thus, regardless of what revenues a stream makes, Spotify needs to pay a fixed amount for every song stream (A song played for more than 30 s).