India and Southeast Asia are massive opportunities for Spotify's future user growth: CEO Daniel Ek

(Image Courtesy: Gabby Jones/Bloomberg)

India and Southeast Asia represent big opportunities in terms of monthly active users (MAU) for the audio streaming service Spotify in the near future, CEO Daniel Ek said during the company's earnings conference call on April 27, noting that these markets have been "doing incredibly well"

"If you look at the TAM (Total Addressable Market) in these regions, India alone is over a billion. So it's just a massive opportunity from an MAU perspective" Ek said.

However, he mentioned that subscriptions and revenue growth will continue to be driven by Spotify's core markets such as Europe and North America for a while longer, although they are adding more and more subscribers in some of these emerging markets. Ek expects that eventually "some of the emerging markets will pick up that pace of growth"

Spotify added 16 million monthly active users for the quarter ended March 31, 2022, taking its total base to 422 million users, benefiting from strong growth in Latin America and the Rest of World region, led by Indonesia, Brazil, and Mexico.

Spotify CFO Paul Vogel noted during the earnings call that they also saw an ongoing rebound in developing markets like India without disclosing any further details.

The surprise user benefit

Interestingly, the audio streaming service noted that its user growth during the quarter included a "one-time benefit" of 3 million users who created new accounts to log back into the service after they were involuntarily logged out during a brief service outage in March 2022. This got reversed in April 2022.

Paying subscribers grew by 15% year-on-year (YoY) to 182 million, which includes a loss of around 1.5 million members for shutting down their Russian operations.

Spotify estimates a loss of an additional 600,000 subscribers and 5 million monthly active users in Q2 2022 due to this shutdown. Overall, the company however expects to touch 187 million subscribers and 428 million monthly active users in the ongoing quarter.

The controversy over how Spotify handles misinformation on its platform, particularly over its star podcaster Joe Rogan, did not seem to have any impact on its subscribers or revenue growth for the quarter.

Revenue from subscriptions, which accounts for a majority of its topline, grew by 23% YoY to €2.38 billion (approx $2.52 billion) for the quarter while revenue from advertising increased by 31% YoY to €282 million (approx $298 million).

The total revenue grew by 24% YoY to €2.66 billion (approx $2.81 billion) while the net income rose to €131 million (approx $138.5 million) for the quarter from €23 million (approx $24.3 million) in the same quarter last year.

The service said it had four million podcasts available on its service at the end of the quarter, up from 3.6 million in the previous quarter, and the rate of podcast consumption grew in the double digits.

Spotify & Google's in-app billing partnership

During the earnings conference call, Ek shared his views on their in-app billing pilot with Google, calling it a landmark deal that "sets a new precedent for what a platform should be able to do".

The pilot will enable developers like Spotify to offer an additional billing system to users along with that of Google Play's own system. At launch, Google had mentioned that it would initially pilot this system with a small number of participating developers but Spotify was the only company that was publicly disclosed.

At the time, Spotify had said it expects to launch the first iteration of this feature across all markets where it offers premium subscription service, including India, later this year.

While Ek didn't disclose the specifics of the deal, he noted that it "ticks the box on all the three core tenets of a level playing field". This includes the ability to communicate with their consumers the way users want, the ability to monetize that relationship in a way it makes sense for the consumer and for them and access to the same tools and services (i.e. APIs) that platforms offer their own services, he said during the call.

"From our perspective, we are pretty indifferent if the consumer decides to use Google Play billing or Spotify billing" Vogel said, although he noted it could potentially unlock new business models for them, since "this is how people are going to want to pay in a lot of markets"