Spotify registers 23% growth in revenue at €2.3 billion in Q2
Ad-Supported Revenue grew 110% Y/Y to €275 million
Audio streaming platform Spotify has reported 23% growth in revenue at €2.3 billion in Q2 due to significant advertising strength and subscriber outperformance. Premium Revenue grew 17% Y/Y to €2.05 billion while Ad-Supported Revenue grew 110% Y/Y to €275 million.
Within Premium, average revenue per user (ARPU) of €4.29 in Q2 was down 3% Y/Y. Excluding the impact of FX, Spotify saw a benefit to ARPU from its Q1 price increases along with a marginal initial impact from Q2 price increases, offset by the impact of product mix shift.
Ad-Supported Revenue outperformed our forecast, driven by strong underlying demand (benefiting sell-out and pricing) and aided by favourable comps vs. last year's COVID-19 lows. The strength in Ad-Supported Revenue was led by our Direct and Podcast sales channels, with the latter benefiting from a triple-digit Y/Y gain at existing Spotify studios (The Ringer, Parcast, Spotify Studios, and Gimlet) along with contributions from the Megaphone acquisition, the exclusive licensing of the Joe Rogan Experience, and Higher Ground.
Ad Studio grew 165% Y/Y due to the success of the video product within Ad Studio and international market contributions. During the quarter, Spotify Audience Network was launched in the US in April. The rollout allowed Spotify to increase monetizable podcast inventory in the US by nearly 3x. Additionally, for opted-in podcast publishers we’ve seen a double-digit increase in fill rates, a meaningful increase in unique advertisers, and a double-digit lift in CPMs. On July 1, we expanded the Spotify Audience Network to include Australia, Canada, and the United Kingdom.
Operating Expenses totalled €651 million in Q2, an increase of 1% Y/Y. Excluding the benefits of currency movements, Operating Expenses were modestly higher than forecast as lower than expected marketing expenses arising from campaign timing shifts were offset by higher personnel costs.
Total MAUs grew 22% Y/Y to 365 million in the quarter, finishing below guidance range and forecast. Despite underperformance, Spotify added 9 million MAUs in Q2, which drove double-digit Y/Y growth in all regions.
MAU performance was slower than expected due primarily to lighter user intake during the first half of the quarter. COVID-19 continued to weigh on our performance in several markets, and, in some instances, Spotify paused marketing campaigns due to the severity of the pandemic. Separately, a user sign-up issue associated with a global third party platform created unexpected intake friction, which also impacted MAU growth. This issue has since been resolved.
"Overall, we saw a return to better growth patterns in the back half of the quarter. Although we continue to face near-term uncertainty with respect to COVID-19, we remain confident in the underlying health of our user funnel, and our existing user retention activity remains consistent with historical trends," Spotify said in a statement.
Global consumption hours continued to grow meaningfully in Q2 on a Y/Y basis. On a per-user basis, global consumption levels returned to Y/Y growth in the quarter, led by gains in developed regions such as North America and Europe.
Spotify's premium subscribers grew 20% Y/Y to 165 million in the quarter, towards the upper end of our guidance range and modestly ahead of forecast. We added 7 million subscribers in Q2, which drove healthy double-digit Y/Y growth across all regions. We saw strong performance of our Standard product across both Europe and North America.
At the end of Q2, Spotify had 2.9 million podcasts on the platform (up from 2.6 million at the end of Q1). Internationally, Spotify released 100 new Originals & Exclusives (“O&E”) podcasts across markets including 5 adaptations of existing formats. We expanded Your Daily Drive to include Mexico (Ruta Diaria), Argentina (Ruta Diaria), and Brazil (Caminho Diário).
The launches included bespoke content from 28 partners across the region, such as notable new organizations like Infobae and La Nación (Argentina), W Radio (Mexico), and 123 Segundos (Brazil), a Spotify original. One of the top podcasts in India, The Ranveer Show, which covers topics like health, spirituality, and lifestyle, also came exclusively to Spotify in June.
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