And the team keeps finding weird and wonderful ways for consumers to be able to do that. And I think I referenced this, but we saw searches increased by over 2,000 on a day list. So it’s a widely sought after feature people are excited to come into the app every day now to find out whatever Spotify thinks your current mood is of today. And, yes, we keep turning these types of things out. It’s kind of our way of creating content. And I’m really proud of the team and the things that they’re doing in this department and it wouldn’t surprise me if we see many more innovative things come out of it, both on, of course, on the music side, but later on also reflecting that on the audiobook side and the podcasting side as well.
Bryan Goldberg: Okay. Our next question is going to come from Benjamin Black on efficiency. What are some of the key learnings you’ve seen with the more streamlined cost structure? And as we look ahead, what’s your philosophy on headcount growth?
Daniel Ek: Yes. I mean the key things are probably not the surprising things. It’s always what happens, right? Initially, when you go through an exercise, everyone kind of says, well, we can’t cut this because then all of a sudden, everything will stop working. And it turns out that — as is true in so many cases, most things can tend to work anyway even when you go through that exercise, and it actually even killing things that sometimes sort of works is a healthy thing to refocus and reenergize people on the things that really drive lots of value. So those are some of the obvious lessons, which I think you guys have heard plenty of times before on these calls before. I think the more exciting things are the things we’re in the midst of learning this as a company.
So by no way it means things we’re fully adapted to this mindset. But I think, this is something I wrote in my internal memo that we then publish as well is, is this notion of being relentlessly resourceful. For me, that means to think constantly about the resources we’re having and not just think about getting more of them, but thinking about how we reallocate constantly everything we’re doing to the most and highest impact use case. And there, I don’t think we are yet. So I think the good news is that there is still some ways for us to go on it. And I think the way you should think about headcount growth is, we’re not allergic to it. We’re not saying, hey, we can never ever grow anything. We should grow things that obviously are working, but the hurdle rate for any new type of investments will be much higher than what it has been and more importantly, I think you’re going to see us be more diligent in shutting down things that perhaps have sort of worked but may not work as well going forward into the future.
And you’re going to see that all across the company in a pretty bigway. And I think the biggest takeaway I can give to you, that doesn’t mean that the company is any danger of any kind because sometimes that get interpreted by media and investor like, oh, if they’re no longer showing up in a big way to event X, maybe they’re in dire straits and so on. That’s not the case. We’re just simply thinking about, are there better ways for us to do this? Are there better ways for us to achieve this efficiency and try to think outside of the box. Maybe it is not to throw the lavish party. Maybe it is to have a virtual party where we could have 10 times the audience come and show up. Maybe it is about partnering with other brands and doing something in conjunction that where one plus one doesn’t equal two, but equals three or more.
So you’re going to see us, I think, still have a lot to learn, but re-question things that in the past have worked, but we need to think about how we do them going forward.
Bryan Goldberg: All right. We’ve got time for a few more questions. Our next one is going to come from Steven Cahall on margins. First quarter is typically the lower margin quarter of the year. Are there any onetime benefits in the strong implied Q1 margin guidance? Or can we assume the same seasonality of sequentially improving margins for 2024?
Paul Vogel: Thanks, Steven. I think you have sort of the right themes in your question there. I think to reiterate, as Daniel said, in 2023, we had a lot of focus areas between sort of growing our users and subs, driving sort of monetization to price increases and efficiency actions, all these has sort of taken our core business, I think, to a new stair step. And I think Q1 is sort of where that new core business is shining through. And so I think that implies sort of like a new starting point, I think, for where you can expect the margin to go. And as I said before, our focus is to continue building on that sequentially quarter-on-quarter into 2024. So we look forward to making progress in that department.
Bryan Goldberg: Okay. We’ve got question from Richard Kramer on execution. What’s the message to the organization about new growth initiatives following your recent headcount reduction? How do you mitigate the execution risk in 2024?
Daniel Ek: Yes, I think, implied in your question, Richard, is obviously this, how do you do both? How do you, on the one end, save, and how do you tell people that you want to grow? And I think this is why in my last response, I focus so much about the mindset of being relentlessly resourceful and what it actually means. So I don’t think it is either or I think it’s both. And so I think we need to become more efficient by deprioritizing some of the existing things, but we also need to invest in some of the new. But when we’re investing in some of the new, what is the optimal way of doing that? You talk about execution risk. I think it is exactly the right thing and right framing of it. It is about execution. It isn’t about strategy.
It’s about how do we — buy constraining the resources we have, how do we think about different ways to executing some of these newer growth initiatives? If the hurdle rate is X, how can we more quickly prove out that something is working? Those are some of the questions that I, Ben, Paul and the rest of the team is having when we’re looking at these types of things and when we’re talking to the teams. And I think the good news is that the teams are excited. They’re excited to show that there’s a different path to do this. They’re excited because they also see the momentum in how it currently translates to the business and that sort of momentum fuels that mind-set as well. I think it would have been honestly harder to do so from a backdrop if we had to do some of these discussions if we had 1 year, 1.5 years of slog just ever sort of going through this.
But we’ve actually gone through all the hard stuff this past year. And we have plenty of things to learn, of course, but I feel really good about now. The optimism that the team has never fun to do a riff of course. And so we’re happy to have this behind us, and we feel obviously a huge sense of gratitude to everyone who has been part of the company and then had to leave. But I know the team is excited about where we are and where we’re heading and how it’s translated into a healthier Spotify.
Bryan Goldberg: All right. We’re going to take one last question, and we’re going to take Maria’s question, Maria Ripps on podcasting. Is it reasonable to assume that Spotify is looking to structure most of its podcast deals in a similar fashion to what was reported in the Wall Street Journal regarding Joe Rogan? And how is the company thinking about the trade-off between engagement and advertising revenue or profitability by deemphasizing exclusivity?
Daniel Ek: Yes. I think, Maria, I sort of already mentioned some of these things. But generally speaking, we had multiple strategies in podcasting. It wasn’t just all about exclusivities even if that got most of the — sort of press headlines. And what we’ve been able to see here is as we’ve been learning over these past few years, is that while some of these exclusivity deals worked, generally, it wasn’t aligned with what the creator wanted. The creator wants to have broader audience. And I feel like with these new deals that we’ve been making for most of 2023, we are in a position where we’re actually better aligned with the creator. We can both deliver the growth rate, and we are equally incentivized to drive audience growth and, of course, then also drive revenue growth because we both share in that upside.
So I think the team was able to innovate and create a much smaller structure and that is the path we see going forward on more and more of our deals and I think even on the MAU side, it will be on a healthy basis because we’re in a very different position than we were just a few years ago in podcasting because today, Spotify is, in many cases, the number one podcasting player already. So exclusivity makes sense when you’re the smaller playing trying to gain scale. When you’re the bigger player, the additional value of the exclusivity is far smaller than it is about being aligned. And it feels also that from a value’s point of view, this is better aligned with who we are at Spotify too.
