What do you remember from the pre-Spotify days of music? Perhaps you listened to music on vinyl records, cassettes and CDs, or maybe you began using the MP3 file-sharing platforms Napster and LimeWire in the late 1990s. In the 2000s, you may have started buying music legally online through the iTunes store. Maybe you even used Myspace Music for a short time. Then in 2008 Spotify appeared on the scene, completely transforming the world of music streaming services. But how did a small Swedish tech start-up like Spotify experience such overwhelming success? Read on to learn how a focus on personalisation and localisation has made Spotify a household name in the music industry.
Spotify was founded in 2006 in Stockholm, Sweden by Daniel Ek and Martin Lorentzon. At the time there was a lack of legal music streaming services, and platforms like Napster and LimeWire had been shut down due to piracy lawsuits. This inspired Ek and Lorentzon to find a way to convince music labels and artists to open their catalogues and sell music legally through Spotify. The process of persuading record labels to collaborate with them took over two years, and Spotify eventually launched in Scandinavia, the UK, France and Spain in 2008.
After launching in 2008, Spotify soon became the number-one audio streaming subscription service. As of 2023, the platform has over 515 million active users every month, over 210 million premium subscribers and is available in over 180 markets worldwide. But what exactly did Spotify have to offer that helped the platform grow and expand so successfully into new markets?
An industry solution
By the late 2000s and 2010s, people had stopped buying physical media and were looking for ways to stream and share music over the internet. Producers and artists were becoming concerned as their music was being pirated online and they were seeing lower profits than ever before.
Spotify provided a solution for both sides – consumers and producers – which also benefitted a struggling music industry in financial decline. The platform enabled users to listen to music without worrying about the legality of the website they were using and whether it would be shut down in the future because of lawsuits. Music producers were able to make revenues equalling, if not exceeding, those they used to make from selling CDs.
This two-sided approach revolutionised the way in which music was consumed. Music streaming grew from representing less than 10% of the music industry’s revenue in the US in 2010 to 83% in 2021 (Recording Industry Association of America).
The freemium model
Spotify also offered a unique “freemium” model, meaning limited services could be used free of charge, while more convenient, ad-free and higher quality services were available in a premium package that had to be paid for. This meant that users could try out the free service before committing to paying for Spotify’s premium package, attracting a wide and diverse group of users around the world. By using this model, Spotify generated some revenue from its free service via advertising but made most of its money from paid subscribers.
However, this model did not come without controversy, as many artists and music companies were unhappy with it. In 2014, Taylor Swift pulled her music from Spotify, arguing in a Wall Street Journal article that artists did not receive enough money per stream and that valuable art, including music, should not be free. However, Spotify stood by their model, explaining that without the free version, the paid version would not attract as many users and artists would make even less. Without Spotify, users would return to piracy sites or free streaming services, like YouTube and Pandora, and the industry would deteriorate again.
Over the years, Spotify has built a company culture of creativity and collaboration influenced by its Nordic roots. The founders may not have chosen blue and yellow as their brand colours or used their Swedish origins as fuel for marketing campaigns, but the innovative and rich Nordic countries provided the ideal environment for Spotify to thrive, particularly in the early stages of growth.
Ek and Lorentzon already had connections in Sweden and the tech industry that would help them acquire investment from a variety of sources and recruit talented engineers to their team. Additionally, the first prototype version of Spotify was shared with bloggers in Sweden, who were able to give feedback to improve the app before it was shared with a more global audience.
Like many other Nordic brands, Spotify initially launched officially in Scandinavia, as well as in the UK, France and Spain. The emphasis on innovation, transparency and collaboration in Spotify’s company values distinctly reflect its Nordic influences.
Global expansion – Tackling the US market
While Spotify launched in Europe in 2008, it did not expand into the US market until 2011. This was because the platform needed to obtain the correct international licences for music, faced fierce competition from other services such as Apple, Amazon and YouTube, and was reluctant to move too quickly into such an expensive market. Some other competitors, like Deezer, actively chose not to enter the US market because of the enormous entry costs.
Spotify took its time, gradually entering the US when it was ready to do so. Ultimately, combining forces with Facebook is what really helped Spotify become popular in the US. Allowing users to easily sign up to Spotify through Facebook overcame the barrier of having a separate sign-up process that had to be localised to each country and user. This partnership generated one million new Spotify users in four days.
Think global, act local
In the end, Spotify has been able to scale up much faster than its competitors; for example, Amazon Music is only available in 50 countries, while Spotify now operates in over 180. One significant reason for this successful expansion has been the company’s localisation strategy, both past and present.
By embracing the slogan “Think Global, Act Local,” the localisation and product development teams at Spotify have developed the understanding of the platform’s user base necessary to attracting new users, engaging them in the platform and thus retaining them, potentially for many years after they first hit play on Spotify.
But, what does this slogan mean? In short, it means building a user experience that is simultaneously global and local, both shared with others and personalised to you. To accomplish this, Spotify’s teams prioritise understanding local markets as much as possible as well as creating a personalised experience for every user, regardless of where they are located.
As former Chief Marketing Officer Seth Farbman explained: “The localization is much more important within music and within Spotify than it would be within most global brands. That means we continue to maintain strong regional and local marketing teams, but it also gives us the opportunity to cut across all of it. No matter where you are in the world, there are shared experiences, and they are of interest to everyone.”
Understanding local music
To be able to provide music to users from their own country or region, Spotify first invests time and money in understanding local artists and music preferences. This is particularly important as Spotify’s own research shows that national preferences for local music have increased over the last five years. While this could, of course, be partly the result of streaming services like Spotify increasing access to local music, it also means that users now expect to be able to listen to local music when they open a streaming app. For Spotify, this means creating regional teams to carry out the necessary research to discover what local users want.
For example, the regional India launch team spent time at concerts, at parties and just chatting with people around the country, which helped them understand that many listeners in India wanted to connect with music that others were listening to through the platform, and did not want to just listen to their own music. This resulted in the development of “Sound of City” playlists when Spotify launched in India in 2019, which track trending songs in Mumbai, Delhi, Bengaluru and Chennai. The team also realised that many listeners in India liked to stream songs from their favourite Bollywood, Tollywood, Kollywood and Punjabi actors, resulting in the 2019 India launch also including a series of “Starring…” playlists full of these songs.
By researching local music, not only can Spotify satisfy local users by tailoring the platform to their wants and needs, but it also continues to maintain the two-sided approach to music streaming that gave the platform so much success in the first place. Users see Spotify as a chance to discover local music and music that they will like, while artists see it as an opportunity to grow globally as their music will be shared on playlists and discovered by people all around the world. For example, the Discover Weekly playlists, which anyone who uses Spotify will be familiar with, allow users to find new music regularly through a playlist based on their preferred genre and artists. Here we can see the “Think Global, Act Local” slogan come to life once again.
Researching music habits
As well as knowing how users consume music, regional teams at Spotify also research how they might use the app differently, what their expectations are in terms of music streaming features and which adjustments need to be made for new markets.
When Spotify decided to embark on a project called “Scaling Translations” in 2021, during which it added support for 36 new languages, one of the key steps identified in this process was stripping the product down to determine precisely what mattered most to users in each market before building it back up with both standard and region-specific features.
Cecilia Qvist, Spotify’s former Global Head of Markets, explained Spotify’s approach in 2018: “The moment a user opens the app for the first time, we need to make sure their expectations—from the sign-up flow, to general onboarding, to using our algorithm-based discovery tools—are met. These expectations are different from market to market and from user to user, and we are always looking to improve them. All these seemingly little adjustments go a long way in growing the user base sustainably.”
One example of this can be found in Japan, where Spotify incorporated a karaoke feature into the platform because it realised that users expected this as a fundamental feature of a music streaming service. Without the inclusion of this, which was discovered during local market research, Spotify might not have been able to compete with Japanese streaming platforms.
Adjusting subscription cost and payment systems
Where we live plays a huge role in multiple aspects of our lives, and it certainly influences our expectations in terms of price. Cost is undoubtedly one of the greatest barriers to consumers purchasing products and services, and any global business understands this. Therefore, adapting cost, as well as payment systems, to local user expectations is an essential part of Spotify’s strategy when successfully entering a new market.
For example, a subscription to Spotify Premium is generally more expensive in Europe and North America than in Asia, Africa and South America. It is most expensive in Denmark and least expensive in India. This is somewhat in line with wages and cost of living in these countries, although some countries get better value than others. For example, in Nicaragua, the subscription costs nearly 4% of the average monthly income, while Qatar has the best value, as it costs only 0.1% of the average monthly income. So, while Spotify is affordable for many people, we don’t all get the same good deal.
Adaptation is also necessary when it comes to payment systems, as these vary greatly by country and region. Currently, Spotify accepts 130 different payment types. This means that users can pay for their subscription with ease and familiarity, getting rid of a barrier that might otherwise prevent them from subscribing. As Spotify VP Global Head of Commerce and Customer Service Sandra Alzetta explains, “We love the fact that we can expand our addressable target market by offering new payment methods. We’re also conscious that we can significantly increase inclusivity by offering the right payment methods. We don’t want to disadvantage any demographics.”
Other adaptations – Older devices and internet access
Spotify’s market research also goes beyond breaking users down in terms of region and language, as even age, internet access and device choice can determine how the platform may want to adjust its services. For example, Spotify analysed internal data and found that engagement with the platform was lower among older audiences and those with less advanced devices. The team then immersed themselves in local communities and learned that spotty internet access also sometimes limited people’s use of the app. Therefore, Spotify began to test how to develop smaller and faster versions of its app for installation on older devices, with the added benefit that these may also work better for those with worse internet access.
This type of adaptation isn’t always an easy task, though. While some users may want an app with fewer features that work better and faster, others find this type of app more limiting. In the end, these are subjective stories that are gathered from customers, which makes a one-size-fits-all solution challenging. Through extensive research, though, Spotify can at least paint a clearer picture of what its users want, and then use this to inform future decisions.
Adapting to linguistic differences
When entering new countries, the language barrier is certainly one that a business must break through to make a positive and effective impression on new audiences and customers. Content that is linguistically adapted, when it is done well, typically has a more powerful impact on an audience than it would in a language they aren’t as familiar with. When it comes to tech products, like apps, it is especially important, as users want an easy-to-follow interface and aren’t interested in working hard to understand how to use the app.
Spotify prioritises language localisation when entering new markets, as is made clear by their “Scaling Translations” project. Looking at industry research and experience from previous years, the management and localisation teams could clearly see that translations were one of the main drivers of growth for the business. Knowing this, they could confidently set out to expand into as many languages as possible, laying the foundation for the project. The understanding of how localisation is a positive investment for a business, both in terms of growth and retaining customers, is a large part of why Spotify has been so successful.
When Spotify launched in the regions of North Africa and West Asia, it had to offer an Arabic version of the app for customers in those regions. This was a challenge, since Arabic is a language that is read from right to left, as opposed to languages like English, which are read from left to right. This resulted in several difficulties, but the research done by the Spotify team meant that they knew what Arabic-speaking users expected and could adapt to this.
For example, in many instances, they had to flip the text and other elements to match the right-to-left nature of Arabic. This included icons and features such as navigation buttons or carousels, which Arabic speakers expect to scroll the other way to match the way they read the text. However, there are exceptions, as Arabic speakers still expect the playback controls and progress bar to look the same as they would in a left-to-right language.
Spotify’s focus on high quality localisation can be seen in every step of its internal process before launching; from conducting initial research into the market and user expectations to ensuring quality with beta tests and consultations with external agencies.
Smaller languages – Catalan, Basque and Galician
Being willing to engage in language localisation, even for smaller languages, also gives Spotify leverage to connect with users and customers in a personal manner. The best example comes from the 2022 partnership with FC Barcelona. After becoming a sponsor and partner of the famous Spanish football club, with the historic stadium even renamed Spotify Camp Nou, Spotify also decided to add a new language to its repertoire; Catalan. This was a strategic move to engage with FC Barcelona fans by demonstrating a commitment to the local culture and pride in the Catalan language and identity.
In 2023, Spotify expanded its offer to include Basque and Galician, two other languages also spoken in Spain. In the press release announcing this, the company writes that “This expansion will unlock an even more personal experience for our users, giving them the ability to access Spotify in their native or local tongue. And the more people who can use Spotify, the more connections we can foster between creators and their audiences.”
The final piece of the puzzle in Spotify’s localisation strategy is the adaptation of images based on differences in cultural norms and traditions. This is important, as Spotify wants users to be able to relate to the images so they can “feel not just included, but like they can actually see themselves in their Spotify experience.” This includes choosing images that help users feel represented and images that make them feel comfortable and safe.
For example, Spotify consistently celebrates cultural traditions and holidays in different regions by creating curated playlists that are available to users in those regions. In 2022 a series of celebratory playlists, devotional playlists and other festive features were created in India specifically for Diwali, or the Hindu Festival of Lights. As Nick Dahl, Senior Product Manager, explained, “This is just the beginning of our commitment to building a better-localized product for listeners worldwide.”
Beyond cultural celebrations, Spotify also researches what might be deemed sensitive in certain countries and regions and changes images based on these norms. For example, the “Pure Seduction” playlist in the USA was rebranded as the “Love” playlist in Saudi Arabia, with an image of two people kissing replaced with hands touching. This ensures that audiences in Saudi Arabia are still able to access the same content, but in a way that fits in better with their values.
Since images can have such a different impact depending on the location and background of the audience, Spotify primarily tries to use images that are “borderless.” This might mean using sunglasses or a beach – images that are universally associated with warm weather – to represent a summer playlist. Image localisation is an enormous part of how Spotify connects with its users, ensuring that they feel represented and understood when using the app.
A successful strategy
As an innovative, practical and collaborative Nordic company, Spotify’s commitment to the user experience as a personal one is impressive. Not only has this helped the company grow financially year after year, but it has also allowed Spotify to build a powerful connection with its customers, who have become passionate advocates for a brand that they love.
It is hard to imagine what the world would look like without Spotify, especially as the music streaming service will be expanding into even more markets in the coming years. Spotify’s approach shows that slow expansion, backed up by plenty of market research and a developed understanding of user expectations, can be a very effective strategy for global expansion.