Spotify black sheep among the big US tech-giants

Spotify black sheep among the big US tech-giants

To plan routes and to navigate people use Google maps, for watching series: Netflix, and for music: Spotify. All these apps are now inseparable from our daily lives. Still, Spotify is a black sheep in this list, other than Google, Netflix and other tech-giants or electronic component providers who are from the US, Spotify is from Europe.

The company, which was founded in 2006 by Daniel Ek and Martin Lorentzon in the Swedish capital Stockholm. Since last week the company is stock-noted and over the years Spotify has become a European success story. Of course, it is not the only European tech-company that made it, but it has managed to conquer a unique position among consumers. Therefore, it can be easily placed in the list of important American internet services.

The social network

Big European companies like Spotify are searching for an access, it seems that they need to be stock-listed, to take the real next step towards greatness like the other tech-giants. According to professor Eric Stam you need to have the ambition to create something big, that mentality we see more in the USA than in Europe. That does not mean, that the EU has no fertile soil. In Europe there is a good knowledge infrastructure and good programmers. The only thing that really lacks in Europe is the mentality to think bigger like in the US and on that field the company looks more like a US tech-company instead of a European.  What makes the company interesting is that Spotify is in a different position than for example social networks. They didn’t specifically need networks to grow. Extra listeners mainly provide better recommendations. The company was able to conclude the right deals with record labels and searching directly for the consumer, for example the link with Facebook. Spotify succeeds in what is more difficult for other European players, that does not mean the company is also in an easier situation. Big tech companies come up with their own music services and what makes it even more threatening is that they less dependent on the income from them there are also no physical parts, like electronic parts.

America first

For years there is a big difference in Europe between the success of American tech-companies and the European ones. Companies like Apple, Facebook and Google dominate the market in Europe, that leaves less space for European success. According the magazine Wired a big difference between the two continents is also due the fact that America is wealthier than Europe, in America venture investors earn 5 times more money as comparable companies in Europe, what should be noticed is that the magazine says that it is going to change in the future. According to the magazine, it is expected that investors such as Larry Page (co-founder of Google) and Jack Ma (co-founder of Alibaba) will look with increasing interest to the European continent.

So why be a stock-listed company?

Normally a company goes to the stock exchange to raise extra money or to change ownership. For that they create new shares which external parties can buy. Generally, companies opt for an accompanying investment bank for the entire process. The latter must then examine the interest in the new shares with the institutional investors, so that an introductory price can be set.

But Spotify tackles it differently. For example, the company will not raise additional capital,  but it simply gives existing shareholders the opportunity to sell their shares through the stock exchange. Think of it as a kind of reciprocity towards early investors in the company. As a company who deals with electronic components, there is more room to grow if you are stock-listed.