Spotify has reported its highest-ever quarterly profits for the second quarter of 2024, thanks to a combination of price increases and a growing number of paying subscribers. The streaming platform's CEO, Daniel Ek, shared the positive results during an earnings call, highlighting a 14% year-on-year increase in monthly active users (MAU) to 626 million. However, this figure fell short of Spotify's projected 631 million MAUs.
In a message to investors, Spotify attributed its strong performance to "healthy subscriber gains, improved monetisation and record profitability." While the company experienced some variability in MAU growth, it noted strong funnel conversion, particularly in developed markets where pricing adjustments were recently implemented.
Ek emphasised the company's continued focus on ad-supported plans in developing markets, aiming to convert these users into paying subscribers over time. He acknowledged that user engagement and conversion patterns in these markets differ from those in developed markets. To address this, Spotify plans to increase marketing efforts and enhance offerings for ad-supported users in these regions.
The company's ad-supported revenue saw a 13% growth, partially driven by podcasts. Notably, while "The Joe Rogan Experience" is no longer exclusive to Spotify, the platform maintains a distribution agreement with the comedian, benefiting both parties financially.
Looking ahead to the third quarter of 2024, Spotify is targeting 639 million monthly active users and 251 million paid subscribers. This follows a recent price hike in the United Kingdom and the United States, marking the first increase in the company's ten-year history.
Despite the positive financial results, the missed MAU target highlights the challenges Spotify faces in balancing user growth with profitability in a competitive streaming landscape. The company's strategy for addressing these challenges will likely focus on expanding its reach in developing markets and enticing ad-supported users to upgrade to premium subscriptions.
