Success stories

Spotify strikes the right start-up notes

By Michelle Hammond
Thursday, 12 July 2012

feature-kate-vale-thumbIt’s been almost two months since the much-hyped arrival of digital music service Spotify to Australian shores, as part of its global expansion.


Spotify was launched in Sweden in 2008 by Daniel Ek and Martin Lorentzon, out of a desire to develop a better, more convenient and legal alternative to music piracy.


Since then, Spotify has become the world’s largest and fastest growing music service of its kind, launching throughout Europe and the United States, as well as Australia.


At the helm of the Australian team is Kate Vale, a former Google executive, who recently paid a visit to StartupSmart.


Vale is hoping that Spotify has the same impact in Australia as it has had overseas. For example, 50% of people in Sweden use Spotify, including a stunning 97% of those aged 19.


So how did a humble Swedish start-up transform itself into a global company in just a few short years? Vale points out five key tactics used by Spotify to drive its growth.


1. Don’t underestimate cultural barriers


Vale says Australia was seen as an attractive market for Spotify because of its cultural similarities to Europe. But when it was time to launch, Australia was treated as its own entity.


“Every market is so different… Australian companies tend to underestimate cultural barriers of the US and Europe,” Vale says.


Having said that, Vale celebrates Spotify’s global successes, even if they don’t relate to Australia, because they serve as a valuable form of team bonding.


2. Assemble a team pre-launch


As soon as Vale was hired in November last year, she set about assembling a team. Vale now has people across sales, label relations, marketing, PR, business development, and the list goes on.


But rather than sit through interviews with strangers, Vale says she assembled her team via social networks and people she had worked with before.


“I think one person came through Seek,” she says.


3. Target the techies


While the Spotify service is aimed at “anyone and everyone”, it did implement a strategy in order to ensure its wide-ranging appeal.


Vale says the key to creating demand for a relatively unknown service is to “get the techies first”. Once they’ve figured it out, the others will follow.


“It’s then about reaching mums and dads, and everyone else,” she says.


4. Offer something for free


The thought of giving something away for free might sound foolish (and scary), but for new entrants it can provide an ideal launchpad into the market.


Spotify has embraced a freemium model, which it credits for enhancing its appeal among younger, cash-strapped consumers in particular.


There are three Spotify services, the first of which is Spotify Free, which offers users free, on-demand access to more than 16 million songs.


Then there’s Spotify Unlimited, which offers uninterrupted, ad-free access to Spotify, and Spotify Premium, which gives users access to exclusive content, competitions, special offers, etc.


As part of its Australian launch, Spotify also offered a 30-day free trial offer, giving users access to the Spotify Premium service for a period of 30 days.


“In that month of free trial, there was an enormous uptake on mobile phones, and a lot of those people are transferring to paid models,” Vale says.


5. App-ly yourself


As part of its foray into the Australian market, Spotify made a point of partnering with local players, including Triple J, which saw the launch of the Triple J app.


The app, which has been specially created for Spotify users, showcases new tracks on Triple J Hitlist, featured albums, and includes past Hottest 100 countdowns.


The app also features all the latest music news.


Other apps include TuneWiki, Rolling Stone Recommends and Songkick Concerts. But Spotify isn’t stopping there, with other partnerships believed to be on the cards.


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