On the occasion of its Investor Day 2022, Spotify, through its co-founder Daniel Ek, announced a new objective for the firm: one billion users by 2030, and a figure business of 100 billion dollars within ten years. Very ambitious words, when you know the current profits of the firm. Thus, In 2021, the Swedish company, listed in New York, achieved a turnover of 9.6 billion euros (10.9 billion dollars).
The company also intends to achieve an operating margin (turnover less all costs before interest and taxes) of 20%, which would imply that the group has become clearly profitable. It is clear that this is not the case today. In recent quarters, the online audio service has oscillated between a modestly positive and slightly negative operating margin, and a gross margin of around 25% (far behind the target of 40% within 10 years).
Diversification on the move
This observation, Daniel Ek does not deny: “I know that it is complicated to put all that in a financial model, because, frankly, this type of company has never existed before”. Nevertheless, he intends to achieve it through the diversification of the company. From a music platform, Spotify has seen itself become an “audio” platform in recent years, meaning an application to bring together all audio content (music, podcasts, audio books, etc.).
And the bet seems to be winning. With 422 million users at the end of the first quarter of 2022, Spotify can boast of being the most popular audio platform in the world. It is also present in 183 countries and territories.
The world’s leading player in the sector, Spotify has been able to invest more than a billion dollars to acquire podcast players (including the audio book specialist Findaway, acquired last year) and constitute a fully integrated offer, from production to advertising management. It now remains to be seen whether the multinational will manage to maintain its hegemony, faced with the arrival of serious competitors such as YouTube Music.