Spotify ended the second quarter of 2021 with a record 365 million Monthly Active Users (MAUs), up 22% year-on-year, and with 165 million paid subscribers, up 20% on the same quarter a year ago.
The music streaming service added 7 million subscribers in Q2, with strong performance across both Europe and North America. Spotify expects to finish the year with 400-407 million MAUs, and 177-181 million total Premium Subscribers.
In addition, the company posted revenue up 23% y-o-y to €2.331 billion, with Premium Revenue up 17% to €2.056bn and advertising revenue up 110% to €275m. Gross profit reached €663m, up 38% year-on-year, with Spotify posting a positive operating income of €12m compared to losses of €167m for the same quarter in 2020.
“Q2 was a strong quarter for Spotify overall, with the majority of our major metrics performing better than expected," said Spotify CEO and founder Daniel Ek.
Leading indicators are back on track
Ek added: "While MAU growth was softer than expected in the first half of the year, we are seeing that trendline reverse and all the leading indicators show that we are back on track. By accelerating our pace of innovation and investing for the long term, we continue to cement our standing as the preferred audio platform around the world.”
The bulk of Spotify's MAUs were located in Europe (34%), followed by North America (24%), Latin America (22%) and Rest of the World (20%). Spotify said that on a per user basis, global consumption levels "returned to Y/Y growth in the quarter, led by gains in developed regions such as North America and Europe."
Better growth patterns
Meanwhile, Europe continued to be Spotify's leading reagion for Premium subscribers (40%), followed by North America (29%), Latin America (20%) and Rest of the World (11%).
In a letter to shareholders, Ek said the company's MAU performance "was slower than expected due primarily to lighter user intake during the first half of the quarter" as the Covid crisis "continued to weigh on our performance in several markets, and, in some instances, we paused marketing campaigns due to the severity of the pandemic."
Explained Ek: "Overall, we saw a return to better growth patterns in the back half of the quarter. Although we continue to face near-term uncertainty with respect to Covid-19, we remain confident in the underlying health of our user funnel, and our existing user retention activity remains consistent with historical trends."
Strong podcast consumption
Podcasting trends were "strong" with consumption up 95% year-on-year in aggregate and more than 30% on a per user basis. Podcast share of overall consumption hours also reached an all-time high. At the end of Q2, Spotify had 2.9 million podcasts on the platform (up from 2.6 million at the end of Q1).
Spotify said it was continuing to test its controversial Discovery Mode feature, which allows artists to prioritise tracks that will receive additional exposure through the platform's algorithm. The service, which does not require upfront payments, is open to artists or labels that accept instead to have a "promotional royalty rate," lower than that standard rate, applied to the track(s) they prioritise.
Spotify said the test are continuing with "a small set of labels and licensors including major labels, independent labels, and independent artist distributors."
More data on Discovery Mode
The platform discloses that thus far, "artists with tracks in Discovery Mode have found over 40% more listeners on average compared to pre-Discovery Mode." In addition, 44% of those listeners had never listened to the artist before.
"We are integrating feedback from our early partners with a broader rollout of Discovery Mode expected later this year with the main goal of facilitating more artist to fan connections," said Spotify.
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