Audio streaming giant Spotify closed 2022 with better-than-expected user growth, but the latest quarterly loss increased due to investments in the growth of podcasting, among other things. The company said Tuesday it ended the fourth quarter with 205 million premium or paying subscribers, up from 195 million at the end of the third quarter and ahead of its own goal, “helped by promotional intake and family plans.”
Spotify also announced that it reached 489 million monthly active users (MAUs) at the end of December, up from 456 million at the end of September. “Net additions of 33 million represented our largest growth ever in the fourth quarter,” the company emphasized.
Stockholm, Sweden based company led by CEO Daniel, had previously predicted it would end the year with 202 million premium subscribers and 479 million MAUs. On Tuesday, it forecast it would end the current first quarter with 207 million premium subscriptions and 500 million MAUs.
Spotify’s stock rose about 3 percent in pre-market trading on Tuesday following its quarterly results update.
The company’s fourth-quarter advertising revenue continued to grow despite slowing advertising momentum at some digital giants due to recession fears. Spotify’s quarterly ad-supported revenue rose 14 percent year over year, or 4 percent on a constant currency basis, to EUR 449 million ($486 million), driven by podcasting.
“Ad-supported revenue grew 14 percent year-over-year and accounted for 14 percent of total revenue,” Spotify said. “Globally, our music ad revenue grew year-over-year at mid-single-digit growth, reflecting double-digit year-over-year growth in impressions sold, partially offset by softer pricing due to the current macroeconomic environment. Podcast revenue grew an average of 30 percent year-over-year, reflecting healthy double-digit year-over-year growth in impressions sold and awards. The Spotify Audience Network saw healthy double-digit quarter-over-quarter growth among participating publishers, shows and advertisers.”
Total sales for the last quarter of 2022 increased by 18 percent to 3.17 billion euros ($3.43 billion). But the loss widened from 166 million euros ($180 million) to 270 million euros ($292 million) due to higher spending amid “higher staff costs, mainly due to staff growth and higher advertising costs”, as well as the negative impact of Currency rates. movements.
Fourth-quarter operating expenses increased 44 percent overall, or 36 percent on a constant currency basis, “primarily driven by higher personnel costs related to headcount growth (global advertising sales force, platform investments and acquisitions) and higher advertising costs (emerging markets , Gen. Z,” Spotify said. “These investments largely reflect several growth initiatives greenlit towards the end of 2021 and the impact of recent acquisitions, such as Podsights, Findaway, Sonantic, Chartable, Whooshkaa and Heardle.”
Spotify was unveiled last week that it would lay off about 6 percent of its workforce, or about 600 people, as the streaming audio giant became the latest company in the tech space to cut back on staff amid a challenging economy. The company projected it would cost $38 million-$49 million in severance payments related to the layoffs. As part of that announcement, one of Spotify’s most high-profile executives, chief content and advertising officer Dawn Ostroff, said she would be leaving the company “as part of a broader reorganization,” becoming a senior advisor to help the company transition.
“As we evolve and grow as a company, so should our way of working, while staying true to our core values,” Ek wrote in a blog post at the time. “By 2022, Spotify’s operating expense growth was twice as fast as our revenue growth. That would have been unsustainable in any climate in the long run, but with a challenging macro environment it would be even harder to close the gap.” He added: “Personally, these changes allow me to get back to the part where I do my best work – spending more time working on Spotify’s future – and I can’t wait to share more about all things to come.”