Free Internet Services = Little Customer Value?

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This recent billboard article written by Glenn Peoples discusses the status of music streaming services, and internet companies in general, stating that most registered user accounts (in some cases over 70%) go inactive.  Problem – free internet services (even Facebook & Twitter) are having trouble converting consumers into customers.

We love free internet services.  Spotify free is great, comes with all the music we need, is easy to use, operates a satisfactory radio service, and social connectivity with Facebook is a breeze.  Many vouch for the paid service to skip out on ads and listen offline, many do not because they are cheap like us and don’t care about that annoying Spotify jingle.  However, paid subscribers only account for small portion (approx. 20%) of Spotify users, creating a challenge to build revenue, hence the advertising.  The advertising is targeted towards the 80% that are using Spotify free, which is great, because there are gazillions (not actual number) of Spotify free registered users out there.  The problem is that over 70% of these users sign up and never look at the Spotify app again.  Might have something to do with the old analogy that free stuff means no value or too good to be true.  Lessons learned from the free back rub offer on craigslist…

So the question is:  do you focus on growing your advertising revenue or do you focus on growing brand loyalty with your 20%?  Can you effectively do both?

Peoples states that “The paying customer is a far stronger driver of a music service’s revenue than advertisements that target the free customer”.  If this is true, one scenario could be a loyalty rewards program, either by reducing costs of a membership over time for the most active subscribers to hold on to users.  Or maybe a reduced rate for referrals where new subscribers can list those who referred them to the service, allowing the referrer to receive a discount on music downloads, merchandise, donkey rides, what have you.  Referrer. (needed to type it 1 more time)

Just a few ideas.  Feel free to pay us directly once these ideas are implemented.  Cool thanks.

Keep it funky,

TAT

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