Despite being profitable for only the third time in the company’s history, Spotify’s latest financial results revealed issues with the company’s ad-supported model.
The European streaming company had an operating profit of €54 million ($87.16m), with 248 million monthly active users (113 million of which are paying).
However, the ad-supported revenue came in below expectations for the company.
In a press release, Spotify said that about 80 per cent of this miss was due to “self-inflicted implementation and integration issues we experienced with the rollout of a new order management software to replace Google’s Doubleclick Sales Manager which was sunset in July”.
“This resulted in a combination of lost orders and under delivery of other orders totaling about €9 million ($14.5m) of “lost” revenue. The balance of the revenue shortfall related to a slowdown in programmatic growth from 65 per cent Y/Y in Q2 to 48 per cent in Q3, mostly related to a slowdown in video PMP revenue,” the company continued.
“Programmatic revenue was sluggish early in the quarter but regained momentum during Q3.”
On a call with investors, Spotify CFO Barry McCarthy spoke about the migration.
“We were just simply unable to run it on the sites. And the ad business today is performing strongly. So I own that miss. It’s embarrassing, but it’s not related to the strength of the biz,” he said.
Additionally, the transition from DoubleClick resulted in less inventory being sold, according to McCarthy.
“Normally, we deliver about 99.5 per cent of what we sold. We’re currently delivering 97.5 per cent. So there is some small residual tax on the business,” he said.
He added that he expects to see this figure return to 99.5 per cent.