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Is Spotify finding its identity after $100 Million EchoNest acquisition?


Should Spotify be a full-featured social platform or should it just be and API and library for others to develop off of?

Late last week Spotify announced they've acquired The EchoNest for $100 million. The Massachusetts-based company provides a music personalization and discovery API which powers the radio functions for Spotify, as well as Pandora, Rdio, and others. Theories as to why Spotify would acquire The EchoNest abounded, such as boxing out their competitors from getting their hands on arguably the best algorithmic radio technology. My personal theory was that it was a hedge of their acquisition of Tunigo, the Stockholm-based human curated music discovery platform - which basically means they make good playlists.

In our March 2013 interview with Tunigo CEO Nick Holmsten before the company was acquired he stressed the human element of curating music, which is why the company was staying away from fancy algorithms and instead employed professional curators. The result is a better flow to playlists rather than the somewhat jarring or odd mixes that will come from Spotify or Pandora radio. Due to this intense human focus to music, it was interesting that Spotify would also pump money also into the algorithmic side of music curation.

Josh Constine of TechCrunch secured a joint interview with Spoity's CEO Daniel Ek and EchoNest's CEO Jim Lucchese that tells the acquisition was to use EchoNest's API prowess to allow Spotify to be the library and platform developers can use to power other services. So say if you're Instagramming a video and want to add some background music, Spotify could do that for paying subscribers, or if you Shazam a track you could save and listen to that track right in the Shazam app later - through Spotify's music library. Techcrunch calls this Spotify Connect, although it's not clear if this will be an actual service name.

Spotify has seen solid growth, currently seeing over 6 million paying subscribers and over 24 million active users. Six million paying subscribers - or even 24 million isn't a very high ratio of users per people-who-like-music, suggesting they can tap into a much larger user base.

But why should these new users choose Spotify over Rdio or Pandora? As a user, the Spotify experience has stagnated. Since the platform launched in 2006, what has Spotify done for their music library that 1996 Winamp couldn't do? They've added the activity feed on the right side of your desktop window, which allows you to see what your friends are listening to. And they've added Spotify apps, which are nowhere as integrated into the Spotify experience as they should be. As a music fan and a someone who loves trying new apps in general, Spotify's apps don't do much to improve music discovery any better than a website, and without notifications or your friends in there, there's no real reason to open up most of these social apps. Which Spotify apps have you opened more than once?

If they're going to focus on the platform, Spotify needs a Facebook newsfeed experience. Not literally the newsfeed, but remember Facebook pre-newsfeed? You really had to dig into your friends' profiles to see if they've updated anything, which was dumb and time consuming, but you had to do what you had to do. When the newsfeed launched, people were upset how radically different it made Facebook, and even I joined a 1 MILLION AGAINST THE NEWSFEED group. Today Facebook is the newsfeed and we're all better off for it. Spotify has captured that clean package and initial momentum that gave Facebook that start it is today, but it feels like they've been scared of innovating the platform on its own or really integrating apps.

If Spotify's new identity with this acquisition is to be the API backend behind music it's a good thing for users, so we don't have to be locked in with Spotify's platform experience. Instead, perhaps someone else can create desktop or mobile clients that will add in more flavor, or perhaps finally we'll see the master desktop client that will combine together Spotify and Soundcloud's libraries.

"Our goal is to start pushing things that will have a real impact on the [Spotify] user experience as soon as possible. I think probably in the next three months you’ll start seeing things in Spotify based on what we did here today that will have a big impact on music fans,” Lucchese tells TechCrunch.

Perhaps we'll see some changes soon - these companies seem to try to look new and innovative right before getting in front of investors. Spotify has just this weekend obtained a $200 million credit line, meaning that an initial public offering is coming from the company sooner than later. Additionally the company was hiring for an "External reporting specialist" which hinted at preparing IPO documentation.

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