Spotify, the streaming music company that went public earlier this year, published the quarterly results today, and while it continues…
Spotify, the streaming music company that went public earlier this year, published the quarterly results today, and while it continues to grow at a modest pace, it seems only to meet analysts’ expectations regarding the finances and therefore continue to fight on the public markets.
The company announced that it generated 1,352 billion euros in revenue for the quarter ending in September. It was just before analysts average estimates of $ 1.51 billion, or 1.33 billion euros.
Spotify’s revenue increased by 31
percent a year ago; Operating profit now stands at EUR 6 million, an improvement of 92 percent a year ago. and its margin now stands at 25 percent, “surpassing” its expectations. Spotify’s monthly active users now at 191 million – an increase of 28 percent compared to last year – it will be interesting to see if investors will remain patient in the coming months, as Spotify tries to tip the waves to its advantage.
The company’s stock has been hammered recently, with prolonged skepticism on the market as Spotify will be able to maintain its growth and tip into black in the long run.
It does not seem like today’s news has done much to change it. At the beginning of this week, the stock price fell to at 139 USD / share. At present, it’s $ 134 / share, down 10 percent, and it’s been as low as $ 134.54 / share in trading today – a sign that even with the profits reported today investors are not especially impressed. (Market headline for yesterday’s end was $ 26.9 billion.)
One reason for skepticism, despite expectations, may be that Spotify has already warned that there will actually be some things to it the margin in the quarters a head. This week, the company announced a partnership with Google where it will offer Google Home Mini talking for people taking their family plan as a holiday season.
“We expect this partnership to have a negative impact of about 50 points on our Gross margin profile for Q4,” noted the company.
The United States continues to be the largest part of Spotify’s user base, although the company said Latin America and the rest of the world are growing fastest (as is often the case with newer consumer market markets).
In its user base, paying subscribers now reached 87 million, which is better than Apple Musics 50 million (as reported last summer). That figure is 40 percent and Spotify said it was run by the company’s family and student plans. The company is now working with other streamlining providers like Hulu and Showtime to provide entertainment bundles, with a Student Level introduced in the quarter to $ 4.99, which has helped the company lock in more users less likely to churn.
However, the company continues to rely heavily on the “free” part of its freemium model for growth: it now has 109 million ad-supported MAUs, an increase of 20 percent. The company has expanded the types of advertising that it serves to these users, so even if it does not make them earn subscriptions, it will get their pound meat in other ways. Its programmatic ad platform, Ad Studio, is currently available only in the United States, Great Britain, Canada and Australia, so there is still plenty of room for growth both in these markets and in others.
It will also mean that it needs to get its house in order. Specifically, Spotify has met – like many others who make easy and quick registrations for access to services – a longer term to avoid bots and other fake users on the platform to reach a more accurate audience. Spotify does not say how many users it is identified through this process but says it still has that work.
The free users and the ad model that support them are in any case a relatively untapped part of Spotify’s business: The company said premium revenues amounted to EUR 1,210 million in the third quarter, an increase of 31 percent a year ago. This means that ads only cost about 140 million euros at the moment.