In Q4 2021, advertising revenue was $434 million, up 40% year over year, and now makes up around 15% of Spotify's consolidated revenue. But now, with Spotify's huge investments in podcasts and spoken-word content, it is trying to make advertising revenue the second big pillar of its business. This used to be an afterthought for the company, mainly a division that would sustain its ad-supported MAUs while trying to convert them to premium users. The other part of Spotify's business is advertising. However, given that Spotify runs a simple subscription model for its premium business, growth in subscribers should correlate strongly with revenue growth. User growth is great, but what really matters for long-term stock performance is growth in revenue and profits. Advertising revenue plus margin expansion

If Spotify can maintain its estimated 31% market share around the globe - which is higher if you exclude China - there's plenty of room for the service to get to 800 million MAUs and 360 million premium subscribers within the next five years. Why? Because the vast majority of people around the world enjoy listening to music and audio content All of these people will be regularly using a digital audio platform like Spotify within the next decade. With a 6.5 billion global smartphone population (5 billion excluding China, where Spotify doesn't operate), I think Spotify has a chance to double both MAUs and premium subscribers within five years. Like total MAUs, premium subscribers have almost doubled from three years ago, when Spotify had 96 million people paying to use its service. Premium subscribers, which are the MAUs that pay for ad-free and downloadable music, hit 180 million in Q4 2021, growing slightly slower than overall MAUs at 16% year over year.

This metric was up 18% year over year and almost 100% from three years ago, when Spotify had 207 million MAUs. Increasing user penetrationĪt the end of 2021, Spotify had 406 million total monthly active users (MAUs), its preferred metric to track engagement with its service.

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