“On advertising you're picking up pennies per user. On a subscriber you're making $10-$20 a month — maybe $60 a year. The amount of users you have compounds so quickly, and if you have heavy retention you've got these really thick layers of cash flow that come in every year.”

Spotify vs Pandora: subscription compounds; ad-revenue picks up pennies

Pandora was the US incumbent when Spotify was a small Nordic startup. Spotify asked users to decide if the product was worth money — a hard ask — but subscription revenue at $60/year per user versus pennies per ad impression means compounding at entirely different rates. Each subscriber funds better product, which attracts more subscribers. Pandora optimised for reach; Spotify optimised for LTV. The chart of their revenues over the following decade tells the story.