It’s clear that Spotify is the most popular on-demand music subscription in the world. Less clear is how many people actually use it.
Let’s start with Spotify’s latest numbers as of March, which a spokeswoman sent Evolver.fm yesterday. It shows that over three million people pay for a subscription to the service, while over 10 million use it each month to listen to music:
Spotify has required that new users log-in via Facebook since September, so that 17.5 million figure could even be on the low side. Older users may have decided not to connect their Spotify to their Facebook, in which case Facebook might not see them.
Either way, why would Spotify want to seem like it has fewer users than it might actually have? Don’t all companies want to seem like they have as many users as possible?
A source who works for a competing service suggested that Spotify might want to appear as if it is converting a higher percentage of free users to the paid version — and besides, 17.5 million is technically “over 10 million” anyway. Another possibility: Facebook’s number is way off.
For any freemium service that hopes to turn casual users into paying customers, “conversion rate” is a key metric. Ultimately, the goal is to convince people to pay for the ad-free version. In the case of Spotify, reasons to do that include all kinds of perks like the ability to listen on a smartphone for longer than 30 days, offline playback, better sound quality, and no more ads (a key point with Spotify, which unlike other services, pauses the audio ad if you mute your computer’s audio to make sure you hear it).
Regardless of the reason for this discrepancy, Spotify needn’t be too concerned. Even a 17 percent conversion rate (3/17.5) from free to paid — nearly as much as the 20 percent Spotify claims — would represent a massive improvement over what musicians, labels, and publishers get paid when people listen via bit torrent or even YouTube for that matter.