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Spotify vs Apple: How Spotify is betting $230M on podcasts to win over Apple users (Ep. 1)

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Earlier this year, Spotify spent more than $230M to make two major acquisitions in the podcast market, cementing their vision of becoming an audio-first company [0. https://newsroom.spotify.com/2019-02-06/audio-first/].

Podcasts have been on the rise lately. Thousands of podcasts are created every week. Creators, storytellers, marketers, designers, and experts from all around the world share their invaluable knowledge through this format.

The only problem… very few are profitable.

So why is Spotify investing so much money on podcasts, if most of them are doomed?

Make sure to watch the 1st episode of this case study in fullscreen🔝

In 2017, podcasts in China added up to 3 billion dollars in revenue. Meanwhile, in the United States, they only racked up $300M. Needless to say it’s an underutilized market in North America.

How come there’s such a big gap?

The short answer [0. https://a16z.com/2018/12/07/when-advertising-isnt-enough-multimodal-business-models-product-strategy/]; China has figured out entirely different business models for podcasts that rely on the diversity of revenue streams that benefit both the creators and the platform equally.

They also rely heavily on innovative app mechanics by hooking users through social elements and gamification. E.g., Tipping the podcast creator makes you ‘level-up’ and have access to more content or limited-time offers.

With this in mind, the podcast market here still faces significant challenges [0. https://exponent.fm/exponent-162-why-exponent-isnt-on-spotify/]:

  • 🔍Experience of podcast discovery
  • 🎯Centralization of data for advertisers
  • 💰Monetization for creators

But Spotify is officially betting it can solve those…

So what does that mean for Apple? More importantly, for you and I?

Growth: The billion dollar questions

They are plenty of unknowns that will shape the future of the podcast market, but the three following questions will be at the core of Spotify’s growth:

  1. Will people want to listen to podcasts at the same place as their music? In other words, will the user experience be good enough to make people want to have both in the same app?
  2. Will they have enough exclusive content to pull people away from Apple music?
  3. How will Apple respond to this push?

Now, the first two questions, we can try to answer by evaluating the product, and that’s exactly what we intend to do! The last question, only time will tell. The one thing we know is that it will be interesting to watch this story unfold in the next couple of years.

The biggest takeaways for better product releases

For this first episode, my only goal was to test the podcast experience and slowly migrate my favorite podcasts to Spotify. However, I had a few missteps along the way that provided us excellent reminders when building new features. Here they are:

Key takeaways
  • Understand the problem you’re trying to solve from a user’s perspective.
  • Ease-in your users by providing a familiar interface.
  • Keep a beginner’s mindset when designing the interface. It’s not because your users are using your product that they will automatically understand the new feature. Au contraire, they will reject it if it changes their natural flow.
  • Collaborate with market influencers to reach a specific audience.
  • Make your customers part of the process.

If you haven’t, watch the 1st episode of the case study here.

If you don’t have time to watch the case study, make sure you leave with the 8 Key Insights to deliver better product releases.

Also, stay tuned, for Episode 2!

The post Spotify vs Apple: How Spotify is betting $230M on podcasts to win over Apple users (Ep. 1) appeared first on Growth.Design.