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Spotify’s streamlined recognition in the audio-streaming industry by offering a highly personalized user experience, which was made possible by leveraging artificial intelligence and a dedicated team of 9,800 employees by the end of 2022. However, the company’s recent series of layoffs, which occurred in January (590 positions), June (200 positions), and this week (an additional 1,500 positions), indicate a significant shift in Spotify’s strategy. Specifically, the company is now focusing on enhancing profitability for its podcasting and audiobook divisions through increased investments in AI. Despite these changes, Wall Street remains optimistic about the effectiveness of this new approach.
In a research note, Justin Patterson, an equity research analyst at KeyBanc Capital Markets, stated that Spotify is utilizing artificial intelligence (AI) throughout its platform. The company is introducing AI DJ, which emulates a conventional radio experience, in 50 more markets. Additionally, Spotify’s streamlined AI Voice Translation for podcasts. Patterson believes that these advancements, along with the introduction of audiobooks to Premium Subscribers, provide Spotify with numerous prospects to enhance user engagement and ultimately achieve greater monetization.
Over the past six months, the shares of Spotify Technology SA, the parent company, have witnessed a remarkable surge of over 30%. Furthermore, the year-to-date performance has been even more impressive, with an increase of over 135%. However, similar to other technology companies, Spotify’s streamlined needs to downsize due to the decline in demand caused by the ongoing pandemic. Additionally, the company is confronted with the task of recovering from the substantial investment of over $1 billion in podcasting. Unfortunately, a significant portion of this investment was allocated towards collaborations with celebrities for podcast projects that never came to fruition, as well as the acquisition of podcast studios that were subsequently closed down.
In a letter addressed to the staff and published on the company’s website, Ek stated that Spotify, like many others, is not immune to the current economic slowdown and the rising cost of capital.
Embracing Spotify’s streamlined AI trend with enthusiasm.
In November, Spotify’s streamlined its collaboration with Google Cloud to revamp its approach to suggesting audiobooks and podcasts. This involved leveraging one of Google Cloud’s language models, Vertex AI Search, to enhance the platform’s recommendation system. Computer programs such as ChatGPT are designed to mimic human-like text and provide users with information based on their knowledge. These models are trained on extensive datasets, enabling them to generate responses that resemble human language.
Spotify’s streamlined “AI DJ” earlier this year and commenced utilizing OpenAI’s “Whisper” voice translation tool to convert specific English podcast episodes into Spanish, French, and German. According to a Spotify representative, the company intends to further develop this technology based on feedback from creators and listeners. Additionally, they highlighted remarks made by Ek during the third-quarter earnings call, emphasizing the frequent use of the term “efficiency” over 20 times.
How does personalization function?
For approximately ten years, Spotify has successfully tailored its user experience to be hyper-personalized. This level of personalization was made possible when Spotify’s streamlined The Echo Nest Corp, a music analytics firm, in 2014. By integrating machine learning and natural language processing, Spotify’s technology is able to create a comprehensive database of songs and artists. This database is built by identifying musical pitches and tempos and establishing connections between the works of different artists within a shared cultural context.
The user’s taste in music is determined by various factors, including metadata such as release date, as well as metrics like volume, duration, and danceability of a song. These factors play a role in curating playlists like “Daily Mix” and “Discover Weekly”. Additionally, playlists like “Time Capsules” and “On Repeat” are created to either maintain the user’s interest in their current music preferences or reintroduce songs they may have forgotten about.
Anil Jain, the global managing director of strategic consumer industries at Google Cloud, stated in an email to CNN that Vertex AI Search empowers media and entertainment companies to develop content discovery capabilities encompassing video, audio, images, and text. However, Jain refrained from providing any specific information regarding the agreement with Spotify’s streamlined. When suggesting content to users, Vertex AI Search takes into account various factors including real-time user behavior, content similarity, and content relevant to users’ search queries.
