Interview: Daniel Ek, CEO, Spotify: Going Mobile, Saving The Music Business

imageSince launching in private beta in October, music service app Spotify has attracted glowing reviews, a strong following and is emerging as perhaps the likeliest of the unlimited music access platforms to succeed. Now it just needs to attract enough advertising or paying subscribers to make a business. CEO and co-founder Daniel Ek revealed Spotify’s clickthrough rates, confirmed mobile plans and told me the future of music is in the celestial jukebox

Can ads click in the downturn?: Having launched mainly with inventory from public agencies, now the big ad buyers are warming to Spotify. “We launched probably at the worst possible time in 70 years for advertising, so it’s taking some time for the market to know how to react, especially to new players; we were prepared for that. But we’ve been able to prove that we can give results, especially in a downturn; we now have A-list brands.” Already, Spotify is seeing average listening times of over an hour per user per day, Ek said.

How many paying subscribers?: Spotify hit the million-user mark last week, but that’s across its ad-supported free option, £0.99-a-day service and £9.99 unlimited offering. Ek wouldn’t break it down: “The vast majority are in the free, ad supported model, but we’re positively surprised by the number of paid-for subscribers that we have. Rest assured, we haven’t really started doing the kind of features that we think will really drive adoption of becoming a paid user.” Ek hinted these features will include user-created radio stations, content like interviews and cross-platform interoperability. More details after the jump…

Future plans: “One of the things we’re trying to do, which I haven’t really showed yet, is to enable Spotify as a platform. Currently people are exchanging music via their friends on MSN Messenger, on Facebook or other networks. What Spotify is trying to be, and we’ll show a lot more of this over the coming months, is – we want to be a platform play, where people can just share and don’t have to worry about being legal. That’s where we want to be and that’s ultimately what’s going to differentiate us from the rest.”

But is the free option, with a mere one audio ad every 20 minutes, annoying enough for users to upgrade? “We’ve also got display ads as well, so the number of ads is more than just three per hour. We have clickthrough rates that are very much better than the industry standard – for audio, it’s one percent; display is a bit lower but certain advertisers are getting 1.6 percent, even up to two percent. There are lots of different formats and we’re still experimenting.”

When will Spotify turn a profit?: Though Ek, a former Stardoll CTO, and co-founder Martin Lorentzon are Swedish and the R&D team works from Stockholm, Spotify, which is fast adding staff to its team of 70, now counts London’s Soho as its corporate headquarters. “It makes sense commercially for us to be in London. Most of our users will be in the UK, I’m pretty much based here as well, a lot of the commercial team are here.” The proximity to London’s VC community can’t hurt – but, for now, it’s not necessary. “We have invested about