Spotify's "freemium" business model got some good news this week. The company has taken the top spot in its first appearance in the Online Media Owner Survey by the Institute of Practitioners in Advertising (IPA), a professional body for advertising, marketing and communications agencies in the U.K.
The IPA's survey asked 259 digital planners, strategists and buyers in media agencies to rate 14 attributes of media owners with which they have relationships. In rating Spotify, 83.5% of the respondents agreed or agreed strongly with the statement, "My overall experience of dealing with this supplier is a good one." Tribal Fusion ranked second and AOL Advertising ranked third. Facebook was tenth and Google/YouTube was 15th.
Advertising is a vital component of Spotify's "freemium" business model. Users of the free service receive audio and display ads while streaming music. Spotify claims to have over 10 million active users and "well north" of 3 million subscribers. This means roughly 70% of active users are using the Spotify's free service. The goal is to convert free users into paying customers, but those paying customers incur royalties that must be paid to rights owners. The survey's results indicate Spotify has built a strong ad sales team in the U.K. - one of 13 countries in which it operates, not including the Faroe Islands - and is working well with the people who decide how advertising budgets are spent.
Spotify topped its peers in quality of response to brief, demonstrating an understanding their product and delivering innovative, creative solutions for advertisers. It ranked third in understanding respondents' objectives and finished in the top ten in numerous other categories.
Specific Media showed improvement in delivering innovative, creative solutions as well as three other categories, but the company fell in ratings in nine other categories. The company topped the IPA's survey a year ago.