That’s not at all what we want to do. We still care about long-term growth because we believe that’s where we’re going to be able to solve real and meaningful problems for consumers and creators alike with scale. So that’s our real focus. But it’s a constant balancing act. And I think what you’re seeing us rather than sort of growth at all cost or growth, growth, growth, you’re going to see us quarter-by-quarter optimizing at various parts of that funnel. Sometimes it’s top line growth, sometimes it’s bottom line. As a general trend, we had healthy top line growth in 2023, 2024 is about monetizing more of that top line growth. That’s the general trend. But you’ll see in various geographies, we may have just MAU growth as the goal and in some others, it may be more of a just ARPU approach as an example.
Paul Vogel: Yes. I would just add, I think to everything Daniel said, if you think about the free cash flow and the acceleration of free cash flow and the better profitability, it just gives the business so much more optionality in terms of what it can do moving forward. And so I think you’ve seen that sort of inflection on the free cash flow side, you’ve now seen us on an adjusted basis, profitable for two quarters in a row with the forecast again for Q1 of next year. And so all that just puts the business in a much better place for the team to have the optionality to invest in areas that really makes sense for the long-term.
Bryan Goldberg: Okay. Our next question is going to come from Rich Greenfield on audiobooks. What surprises you most about the current state of the audiobook market?
Daniel Ek: Yes, Rich, I think it’s two parts of focus. So I think on our side, the intriguing part is we are able to bring a whole new audience to audiobooks. So internally and externally, I think the biggest surprise has been the type of titles that resonate with consumers. These are not the normal titles that traditionally does well, that do well on Spotify, and that’s pleasing to see because that means we’re bringing a whole new audience to audiobooks, the format, which is great to see. And then I think overall, I’m just happy to see that the partners we have on the publisher side and the author sides are just very excited about the innovation we’re bringing and very open-minded to try new things. And this is an industry that’s so important, I think, to the world.
And it’s great to see that there is a hunger and willingness to innovate among all of our partners there. So that’s definitely been a positive surprise. And it’s amazing to see also how much value audiobooks is adding to our subscriber base. So I feel really good about that.
Bryan Goldberg: Okay. Next question is from Benjamin Black on margins. Last quarter, you mentioned 2024 gross margin should exceed those of 2023. Is that still the case? And if so, how should we be thinking about the trajectory of gross margins throughout 2024?
Paul Vogel: Thanks, Benjamin. Building on my earlier commentary, we feel very excited about the potential for 2024 gross margins. I mentioned some of the building blocks that we have ahead of us kind of going into this year. And I think you should expect that we’re going to continue focusing on what we did in 2023, which is building sequential growth in that gross margin, and it’s about executing against those building blocks of opportunity that we have that I mentioned previously.
Bryan Goldberg: Okay. Our next question is going to come from Jessica Reif Ehrlich on the music business. Universal Music Group just pulled their music from TikTok. What are the implications to Spotify from a competitive standpoint? And how does this impact, if at all, your negotiations with your recorded music partners?
Daniel Ek: Yes. Obviously, I’m not going to comment on any sort of competitive dynamic. But what I can say is we feel really good about our relationship with our music partners. It’s probably at the best it’s been. I don’t know, whatever, it’s been better, to be honest. So I feel really good about where we are with our music partners. I feel great about the value we’re bringing to the music industry. And I think that’s being widely recognized. And yes, I don’t think it has much of an implication, any other competitive dynamic but we feel good about the partnership. We feel great about opportunities to enhance the partnership to any extent that, that creates opportunities. So, yes, we’re overall very excited.
Bryan Goldberg: All right. Our next question is from Maria Ripps audiobooks. Could you talk about what type of engagement you’ve seen with the free 15 hours of audiobooks listening? To what extent do you think the expanded value proposition is driving any of the subscriber momentum? And are you seeing any uplift to audiobooks purchases in the relevant markets?
Daniel Ek: Yes, Maria. So I mentioned that in my prior response, but the engagement has been very strong, very positively surprised about the content mix. It’s driving as well what type of titles that our consumers are engaging with not very surprising. It is a lot of entertainment. It’s a lot about culture. Maybe some of the titles that traditionally doesn’t do as well in the book market, but also pleasing is very many younger authors, newer authors as well given the model where you can take a chance on a totally new book without sort of eating up the credit, which I think kind of drove you towards more safer bets. So we’re seeing a very, very interesting sort of trend around the content consumption, which is really great and I believe, additive to the entire book industry, which is amazing.
Now as it relates to how that translates into our business, I think it’s too early to say but what we’ve seen generally speaking is the more engagement we have on our platform, the better the value is of course and then everyone knows that audiobooks is an expensive proposition where buying an audiobooks today costs a lot of money. So it’s another reason why we’re offering a great value to our consumers. And that, of course, gives us an ability to increase the value that then allows us long-term to follow through by reflecting that in the price that we have as well to our consumers.
Bryan Goldberg: Okay. Next question from Justin Patterson on revenue potential. Investors now have confidence in your operating margin potential and the redesigned app is resonating with users. As you look ahead, what should give investors’ confidence in your revenue growth, achieving the 20% targets outlined at your Investor Day?
Daniel Ek: I’ll start with this one, Ben, and then maybe you can chime in. So I think, again, this is very much a continuation of the trend of 2023. And just to level set again, 2023, we walked into the year thinking that we’ll have healthy top line growth and focus on the bottom line on efficiencies and that was pretty much the year, but we exceeded all expectations on the MAU side, which then translated into exceeding all of our expectations on the sub side and then when you top off that with price increases, that leads to a very healthy dynamic. And that top line growth has really been a continuation of that trend in all of 2023. So I’ve said this before, but I’ll say it again, MAU growth sooner or later then translate into conversion to subscriber that sooner or later then translate into revenue growth that sooner or later then translates into bottom line.
And so given 2023, I feel really good about our ability to have healthy revenue growth throughout the year and with this smaller cost structures that we’re having because of the focus on efficiency that we had really throughout 2023, we talked about it on the podcasting side. We talked about it on the employee side but also, as Ben mentioned, with cloud costs, all the other things that we’ve been focusing on, that should give you confidence that 2024 will be a great year. I don’t know if you have any addition, Ben?
Ben Kung: Yes. No, I think all that commentary is very much sort of the perspective going forward. The top — the funnel kind of our user side and subside looks very strong. And I think the focus is about sort of monetizing that, both from a premium subscription perspective as well as focusing on making sure that our ad business continues to grow at a healthy clip going forward. So we feel really strong about sort of progressing towards the 20% targets.
Bryan Goldberg: Okay. Our next question is going to come from Kannan Venkateshwar on product. Given the pricing is a bigger part of the growth algorithm. Have you considered models beyond the All-You-Can-Eat framework used today?
