Why even popular music-streaming sites struggle
8tracks is the Wikipedia of music streaming, with seemingly endless crowdsourced music playlists. Its audience, however, is anything but encyclopedic in scope.
While 8tracks is far from a household name, as Pandora and Spotify have become, the service has amassed a devoted cadre of fans who tune in to listen to crowd-curated playlists. Around 1 percent of the user base cobbles together playlists (of at least eight tracks) for the rest of the community, uploading their own songs or nabbing them from external music platforms like SoundCloud and YouTube. That model has enabled the 8tracks to run without much venture capital — it has only raised $2.8 million throughout its seven years of operation — more or less breaking even as the company has scaled up to 32 employees.
Yet 8tracks has seen its audience growth stagnate. The company drew 2.1 million unique visitors across its site and mobile apps in March, down from 2.4 million in March 2014, according to comScore. (8tracks’ internal analytics show 8 million monthly active users, according to the company.)
“We’re not trying to do an on-demand experience, we’re not trying to do traditional radio, not even algorithmic listening,” said David Porter, CEO of 8tracks. “We think doing one thing really well — the curated playlist creation and consumption experience — makes for a more compelling product.”
8tracks has yet to run a paid marketing campaign, relying largely on word of mouth to attract new users. That’s because the margins in the music business are razor thin, so much of the revenue 8tracks earns from advertising to its users goes toward paying artist royalties.
There’s a disconnect between engagement and profit, an issue plaguing the broader music industry. Even Spotify has had trouble with the margins of the music business, growing its revenues to north of $1 billion but failing to turn a profit. That’s the primary reason that company plans to launch a video content arm ahead of its impending IPO.
Growth is 8track’s top priority this year, said Porter, but it can’t pay much to acquire new users, so it continues to focus primarily on improving the user experience. It recently hired Jon Maples, a former Rhapsody executive, as its first vp of product.
“There are a lot of people who don’t know about us yet, and for a lot of folks out there, 8tracks is just too much work,” said Porter. “So I’m trying to achieve Pandora simplicity. Pandora is really, really easy, even though it’s not really deep.”
On the monetization side, 8tracks has expanded its ad sales team to eight people to deepen its relationships with advertisers and agencies. The company has recently worked with Red Bull, Ritz Crackers and CoverGirl, among other brands. While 8tracks is a fraction the size of Pandora or Spotify, which drew 87.8 million and 28.9 million unique visitors respectively in March (per comScore), more than half its users are between 18 and 24 years old, and 60 percent are women.
“We can’t compete on scale, but we try to compete in a more qualitative way,” said Porter. “8tracks is an important platform for early adopters, tastemakers. And we have so much programming that is organized in particular verticals, so taking that tack has broadened the interest beyond just a pure music buy.”
But scale matters in the crowded music-streaming space, said John Tuchtenhagen, svp of media at digital agency Digitas. “It’s hard to make that leap from under 10 million uniques to scaled contender for Pandora dollars,” he said. “There are very few opportunities for the $25,000 test campaign these days, which is the best an 8tracks could hope for from a first time advertiser. 8tracks needs to quadruple its audience before it could hope to peel off Pandora and Spotify budgets.”
Image assets courtesy of Shutterstock
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