Spotify said on Wednesday it expects to reach annual revenue of $100 billion over the next 10 years. To meet its ambitious goal, Spotify will need to increase its revenue nearly 10x from the $11.4 billion revenue in 2021.
On Wednesday, the company hosted its first investor day since going public in 2018. Spotify CEO Daniel Ek also predicts gross margins will increase to 40% and operating margins to 20%.
“Spotify will put out these pretty audacious targets and we are going after these because that’s how we see the world and we are going to invest behind that,” Ek said.
Spotify also expects its podcast business to become profitable in the next one to two years. The company has invested more than $1 billion to become the #1 name in the podcasting business. For the podcasting business, Spotify acquired Podsight, Chartable, Whooshka, Podz, and Megaphone.
Executives said at the presentation that pressure on margins will ease after 2022. Chief Financial Officer Paul Vogel said that in the next three to five years, Spotify predicts podcasts will generate between 30% and 35% gross margin. In the longer term, the company expects margins of between 40% and 50%, an increase of 10 percentage points over previous estimates.
Vogel said podcasting revenue grew by over 300% to reach €200 million ($214 million) in 2021. However, the business reduced gross profit by €103 million.
Officials said the big goal is a “Spotify machine” that will offer many types of listener programming in a single app. They said this will attract 1 billion users worldwide over the next ten years.
Podcast consumption now accounts for more than 7% of all listening hours on the platform, with Spotify monetizing 14% of that listening time, said chief content and advertising business officer Dawn Ostroff.