 Hello Welcome to the next edition on on Builder studio as said my name is Elmo I'm the chief product officer here at slush with me is Stan Garmark from Spotify The VP global head of consumer experience. Welcome Stan. Thanks for being here. Thanks for having me. I'm excited to be here All right before we start with the topic of today Stan you've been at Spotify since 2011 Can you tell us about your personal journey at Spotify and also a little bit about your current role? Yeah, I joined it in 2011 as you said and I was I came there to build out our ubiquity strategy Ubiquity is a little bit weird word, but it's making sure that Spotify is available all types of platform speakers cars TVs integrated into apps and so on when I joined Spotify existed on the desktop And on mobile Then you know currently I got a little bit of a bigger row looking after Spotify on all consumer platforms including PC and mobile and Of course, I've had some kind of side jobs along the way to leading some other Strides for the company including the podcast stride that we're gonna be talking about kind of laddering up from our first product to our second product All right. Thank you for the quick introduction. We will dive into all of those topics deeper But now let's kick things off with a more general question If there's people who are not that familiar with the topic of today. What is the product proposition? well The way that we that we think about it. It's it's the promise it's a promise to a Potential user or customer of our service And then the experience that we build is the thing that delivers on that promise and was so fascinating with humans is that They have this weird combination of being perpetually Really happy with what they do when you try to sell the new thing. They're not interested They don't care about you because they're happy with what they have But once you have them and they're in your experience, they're perpetually unhappy about that experience and it's never good enough But that that proposition is really the thing that we think about the thing that we need to get the new user the new customer in the door So it's a really important part of the stride All right. Thank you for that for the insight now. Let's go back in time Before all of the podcasts and mobile and everything you well initially you started focusing on music Especially on on the desktop Can you can tell us about a little bit about the early days of Spotify's product journey and also what made the initial product proposition? So magical. Yeah Maybe to set the context. This is kind of hard to remember but at the time You know user found themselves In a world of you know if they want to listen to music either they had to go buy a CD for like $18 iTunes was around so you could buy a song for 99 cents Or what most people did I guess here and in Sweden was that you went to pirate bear Kazaa and you downloaded music free so you like searched a lot you Found a bunch of spam and then you know some of the stuff was good some was bad You have to work on your metadata and eventually put into your win-amp or itunes like you can do a lot of work to get a free experience But the proposition that we went to market with was basically you know imagine That you get iTunes But you've all you bought all these you know millions and millions of tracks And they're already installed in your hard drive for free and you can just hit play create a playlist So that was the original proposition. So like it was a magical like that can't be true. Are you really like I need to check that out So it like really got people Excited without having experienced it. They felt like this is a thing that have to try. It's just too good to be true and then They tried it and they couldn't believe their ears That's that's fantastic. Maybe maybe to generalize that a bit So why is this initial Product preposition so important and like what can founders do to make sure that you know their product preposition matches what you know What the world is looking for? Yeah, I Think it's really important to pick apart those two pieces the the proposition and the experience Sometimes they're the same thing something sometimes they're not exactly the same thing humans are They're amazingly poor predictors of their own future behavior Or actually what they did like earlier than today When we like to survey people what they do how much they use it. They have no idea So it's really important to with the proposition to get them excited about some to get them to try something get them to be interested a colleague a man Runs our person session He has this wonderful way of probing his product managers all the time whatever they build And like whatever he gets in front of them now ask two questions You know imagine the user and the user is confused and they don't care So how can you improve the product in the proposition? So they're not gonna care you need something for them to care And then you need to something that they engage with and that might not always be that first time So people might imagine in the beginning Oh, it's all about like finding this track that I couldn't listen to but what they ended up doing with them creating playlists But maybe selling the idea of creating playlists was not the thing that got people in the door That's what people did and that was what was retaining in the product You search you create a playlist and you listen to those playlists So I mean I can go on about this for hours But but maybe keep it there like a to good to be to proposition at the top of the funnel And then something that drives engagement that keeps you around drives retention And then conversion later on can you elaborate a little bit still on the on the playlists You mentioned like is it something that you kind of build and then you notice that people were using it heavily Or was it like we are gonna build this amazing sort of playlist feature first and then people came That was built at the at the outset. I mean in the beginning to be to be Frank I mean the the innovation You know oftentimes when you create something that you need an innovation and some sort and there are two innovations that Kind of Spotify in the beginning one was a technology innovation in being able to stream and not having that Kazar experience of having to wait And just in instantly play that was a technology innovation But the other innovation was a business model innovation And in our experience anything truly big and meaningful that we do has both Kind of an experience innovation and a business model innovation. It's only one or the other It tends not to be a big thing at the end of it So it was a way to a different way to pay the right soldiers with advertising and And premium subscriptions that drove that all right So you obviously kind of nailed the initial proposition You had this killer feature against against the competition Competition and focused on the desktop player for a few years, but after that you went mobile and then free on mobile Can you tell us about those shifts and why where why they were so important in kind of developing this wider product proposition? Yeah, I Mean we're in a in a market where we have our suppliers are the creators the art music artists And of course they need to get paid And we needed to pay from the beginning we couldn't like create Engagement and then start to figure out monetization later which you can do if you're like a social app for instance So we need to monetize right away And then we have a free tier that was advertising supported and we had a premium tier subscriptions And in the beginning that was a desktop and the the reason to go convert to paid was to get out of get rid of the ads But then the iPhone came and The app store came And we built a mobile app one iPhone and after some Back and forth with Apple given that they had iTunes and I wouldn't particularly in love with the idea of us competing with them They allowed us to launch the iPhone app and I mean the impetus for that from us was of course music It's been mobile for a long while with Walkman's and You know music in the car and so on so it was obvious to us Just to iterate on the product to deliver more value to create more engagement To bring Spotify mobile, but it turned out to be this amazing conversion driver So that was a premium feature only in the beginning to be a mobile and it was fantastic at converting Free to pay so it was really with mobile that the full business model came to life This is very very important then we did I Mean there's a big thing that happened after that Which was go free on mobile and we actually saw This doesn't like so much come from like the demand at the time But we saw what the trend was there was a macro in coming and that was the macro in the mobile You know when the iPhone came you know You know some people had it, but most people didn't have it But there was this Mary meeker put out a report of this exponential growth for how mobile would take over the world and like desktop is going to be down here somewhere and You know Daniel on the team looked at that. Oh, our company is going to go away This is not going to work our whole stride for our customer acquisition stride Is it going to go? And we need to like pivot the whole company and flip the whole business model And we need to get the top of the funnel to be on mobile in the future and then we need to find a different way to convert So that was pretty good. That could have been the end of the company if we're in ahead of that Challenge before it came so we start working on years before And then there was another It's not a macro wind for the whole world, but we had new competition and we had YouTube So YouTube I've been growing like crazy at the same time and Kind of almost like accidentally ending up being a music player where you can play any music track on demand for free to with the video So we had that competition And Google having acquired them so as we created our mobile free tier We had to think about both this macro wind like we need to embrace a macro wind you shouldn't fight it But we also need to look at competition because it's powerful competitors and We tend to then find a way to want to counter position them so we needed a new Free tier so we created a free tier where You could stream music for free in the background, but it was only shuffle mode So you had to convert if you wanted to play on demand. There's still a limit No, there is a limitation to the product There's a counter positioning to to YouTube It was a counter position to Apple that we expected to come And the counter positioning was that we were ad funded Top of the funnel where they hate ads and they went all into privacy So we thought like Apple and youtuber are gonna take a couple years before they copy this thing and we're gonna have a very clear Differentiated proposition top of the funnel. It still would be a must have for a for a non-user sort of the long long answer there But there's a lot of nuance to that to that straight going in there But it's super powerful and then we have this massive growth spurt That we've been writing after that. Yeah, that's a fantastic exercise, especially on like reading the reading the landscape and lead like Deriving that into inter product strategy In the beginning you can mention that you were hired to Execute this ubiquity strategy, which is your term for being integrated into a lot of things From smart speakers to cars. I think I had Spotify on my PlayStation 3 like 11 years ago or something Can you kind of talk about the role of partnerships? When did that become relevant and like what are the learnings in partnering up with companies even those who are potentially Competitors. Yeah, I think a lot of companies found themselves having to partner to be a viable product I mean you need to be partnering with suppliers and maybe some distribution partners Of course, we've been partnering with the creator side since inception But here we found ourselves pretty early on You know, obviously music needs to be you know Music streaming needs to go to all the places where music used to be you know needs to be in the car It needs to be in the living room needs to be now when you're working out And you know all these social apps music has always been part of the conversation between people so we need to be there It's a pretty obvious just from a pure iteration on the on the proposition experience to go there And but we could get started on like a Windows PC and a Mac and actually the iPhone Pretty pretty open environment and then Android. We didn't have to truly partner with anyone to do that But to go into a connected speaker. Well, there was kind of no connected speakers at the time There was like sonos and one logitech speaker basically I'm always like they're gonna be these new Every other type of consumer products gonna connect be connected to the internet And they're not app environment They're embedded environment. We need to form a partnership to get integrated PlayStation is a great example So we got integrated into the operating system so you can play in the background while playing games So that's a very deep integration put a part of our library inside the operating system so And then in our world as you talk about like competitors Some of these partners are also our competitors or would be competitors or current competitors We're partnering with Microsoft. They had a competing streaming service. Sony had a competing streaming. So now our biggest Partner Samsung they had a competing music streaming service. Everyone's competitor and That's I think there's an interesting Dynamic there because in the beginning when you're small These partners that you need they tend to want to use you for something and they essentially want to like white label you And there's this tricky balance of finding a partnership that actually works and holding off We said no a lot of times most of the partnerships didn't happen with these competitors because like we were not willing To play ball, you know at a bit on the rules and then we waited a little bit more We were there were so many times with Samsung before we did this integration that we have right now They were integrated in every smartphone every Samsung brought in the whole world So it needs to make sense for both both parties and I think it's important that you know think about your own company And like who do you want to be? Watch problems. Do you want to solve it has some pretty big implications for margin and profits in the long term? You need to you need to solve a really hard problem to actually get any money out at the end of it So, you know, we stayed pretty true to like the idea like needs to be Spotify that the consumer is using through through other services and then Being very honest in the conversation figuring out what both parties need But both parties hopes and dreams are but also what the fears are to mitigate for those fears And we've been able to you know partner with Apple and Amazon and Google Still and they are also of course competitor of ours Yeah, what's what's what's been the like most difficult part of these big partnerships? Mike I Think that the most difficult part, but I also think the most fun part is just to partner with ongoing competition And and then go out it like come come with a very honest Approach to like this is what we if I were you, you know I'm mad you have to expect that everyone's a smart person that does and do rational things So, you know, if I were you I would want to do these in these things No, you know, you could expect that we probably want to do these things we we optimize for those metrics What are you optimized for? What do you care about right now? so like honest about the The situation that you're going into and like can we find something that we can mutually benefit from in this They're we didn't mitigate for the concerns that we both have can we kind of fend off some data? You know is the organization set up in such a way with this information doesn't you know doesn't leak and so on and I've been astonished in how well this works and how strong the relationships and partnerships you can build with your own competitors Yeah, so you're kind of looking for that mutual benefit instead of like the one serving the other sort of as a consultant almost Yeah, and the relationships are so important So I mean I have some so these guys on speed dial I mean if if there is a problem with the Google partnership, you know, there's someone I can text and we talk Later in the afternoon when we can resolve it because we've been working for so long And we know that we have good intentions and then we understand each other and then we can like work things work things through Exactly. All right. Next. I'd love to talk about post podcasts Kind of let's go into the decision to focus on podcasts Like why did you decide that was gonna be the sort of second product? Yeah I'm a couple of things there. I mean it starts actually with it That's analyzing what's going on on platform. We always do that quant qual what's happening in? the initial part was actually in Germany we had the Creator side that the supply side like hacking the product we like found that There were all these audiobooks being uploaded to to the service as music albums and While the German listeners were listening a lot It was a pretty horrible experience like you stop playing and you figure out where you were in what track and the experience would not build for that But still they did it and on the free tier was shuffled chapters. I mean that you can't listen there So this was premium premium just listen So there's something there and people hacking the product and I think that could also be always be a good indication That there's an opportunity here if someone or a constituent is trying to do something they're proud that you had an intended for it We go check that out The other part was that we We thought that Looked at podcast that seems like there's something that we could add to the world here podcast been around for for a long time but nothing much it was growing slowly and Just ads for mattresses and Squarespace and Kind of felt like still and so we looked at that like it seemed like There's so much innovation going on and in video and social and internet mobile But that innovation doesn't seem to happening in Portugal. Why is that not happening? Well, it seems to be because podcast essentially being run by Apple But they don't they don't they don't have a business model for this So it kind of doesn't matter doesn't matter to them. It shouldn't matter to them and we felt that we should be better placed to Create you know create more value here and we felt that we could we can probably get Many many more people to listen to podcast. There's so much great content there, but people don't know Yes, and that means that we can help creators find an audience and then you look at the monetization technology there It was like this is 1998 ad tech when you basically burned in you had no targeting And the content the ads that you saw that the consequence of the limitations technology. So we think we could fix Monetization like truly like drive up the revenues from this to make sure that we can get have more craters And also from a business standpoint, I think there was an interesting opportunity at scale for us there This could be a high margin business And we could integrate it There's this Jim Marksdale quotes their own the two ways to make money and business bundling and unbundling and we thought that by bundling music and podcast They could drop drive kind of a shared LTV drive better retention more engagement, you know, ultimately drive more premium Conversion and and lower premium churn in addition to the ad revenue that we get there So a lot of like different reasons like it looked good Like a good opportunity from like there's something to solve for the world And and could be a good business So you kind of started from the how the users were already using the platform or let me see using maybe More more accurately. Can you kind of generalize a little bit on like what's the process of discovering new opportunities at Spotify and Like how do you validate then those? kind of new new products and I think there are the three three types of of Opportunities that we always look at is the macro trends, you know that the move to mobile Recently live the move from media apps from going to recommendations coming from your friends to recommendations coming from From the whole network and ML AI generally So those kinds of trends is something that we're always on the lookout for Then there is the we look at But people are doing on our platform and we can we can we qual quant all the time was going on It's just something that we can solve even better blow-up A need that we are not serving You know as is in the in the beginning as an example, you know people that knew about music They could search find it created playlist, but then normal pay people came in and they needed playlists for someone else to create for them So you can always iterate on that and then the third thing is competition We are in this quote the paranoid or after us That's very true. I think So we're always kind of on the lookout for what competition is doing We can never stand still if we stand still we're gonna meet and we need to always move on So those are the three ways And but then we come up with ideas by looking to qual quant From a platform and all these other trends like there's a creative Space and like a conversation that needs to happen like can we find something and then we design something Prototype something then we qual test that with user research And on ourselves and then ultimately we we a b everything with quant At the end of it, I mean at the end of the day the only actual Real Insights come from the quote at the end of it All right, that's a lot of a lot of applicable advice there All right, we're almost running out of time But I'd love to finish things off with with a bit of a broad question, but After you know 16 years, how does Spotify stay innovative? Is it something about the culture or like? How do you keep coming up with new new product innovation? Yeah, I think fundamentally this is a cultural question and Country is what what you do when your manager isn't looking It needs to start at the top So it's something you need to talk about and you take it talk about it over and over and over again So you need to create the incentives And you need to fund it. You can't just talk about it. You need to put resources against it and And then thirdly, I think you need to succeed From time to time you're not going to succeed always and we spend most of the time on all things that work There's so many things that fail spectacularly over the years that you learn from but you need to have enough of a kind of a Success rate so that you're willing to kind of keep funding new bets and they are an Important part of that whenever you do something new when you're like Spotify that they the new thing you do At least there needs to be a vision where it can be material in relationship to the existing big business and Then you need to demonstrate success along the way like you're growing exponentially at a faster rate So you're gonna catch up to that that existing business because if you don't The organizations can get distracted like eventually things gonna shut down. So I'd say those are things like that the culture talking about it from the top funding it and Having some reasonable success rate That's fantastic fantastic advice for all. I think that's a wrap Thank you all for coming and big thanks for your stand. Thank you