The Promising Evolution of Spotify's Ad Business
Offering a free, ad-supported tier has been key to Spotify (NYSE: SPOT) becoming the leader in music streaming, representing a funnel of users that the company works to convert to premium subscriptions. While that business is less profitable -- it had a 15% gross margin last year compared to the premium segment's 27% -- Spotify has an opportunity to improve profitability as its ad business continues to evolve.
In no uncertain terms, much of Spotify's financial future will hinge on the ad segment.
Image source: Spotify.
Source Fool.com
