In his book Free, Chris Anderson reckons a service with a typical freemium model requires just 5% of its customers to subscribe. Spotify looks like a great example of a freemium service, so how many paying customers does it have?
"It's not double digits yet, but we think we can get there," the Spotify CEO, Daniel Ek, told a Glasshouse event, according to TechCrunch. "We've always realised that the vast majority will be free users, but as long as that's on a big scale, that's OK ... In any freemium model, if you're getting double digits or higher, you're doing well. We'll get there."
So, Spotify is typically freemium, but it's also ambitiously freemium. In fact, Ek has high hopes: "In terms of exit strategy, there have only ever been a few billion dollar exits. I want to build a company like SAP, a big company, run from Europe, and a standalone business ... And who knows. Maybe one day, it'll be us acquiring interesting businesses."
How about the revenue split? "The majority for us will be subscriptions, perhaps 60% against 40% advertising," Ek said. That's likely because attracting £10 a month from even a minority of users will trump the cheap ad income played by the majority of users. "I believe in a freemium model, because information, ultimately, wants to be free."
Robert Andrews will be chairing a panel with Spotify MD Paul Brown at the UK government's C&binet forum in October.
