AI the Right Way $SPOT

March 29, 2023

Spotify chatter is on the rise…and this time it’s not because of its year-end listening review or even Joe Rogan. ‘

About a month ago the company began rolling out its personalized DJ bot, powered by artificial intelligence. Note the uptick in consumer interest on the trend chart below.

The new feature queues up personalized tracks alongside real-sounding-voice commentary from a digital DJ. Imagine your discover weekly and Spotify wrapped playlists melded into an on-demand music lineup, just for you, whenever you want it.

The curated music list (and raspy-cool DJ voice) is winning over listeners.

But Spotify’s DJ isn’t the only move the company is making in AI.

Yesterday SPOT debuted “Niche Mixes,” which are tens of thousands of unique, user-generated playlists based on moods, vibes, and genres.

Users can find these mixes in the made for you hub.

Here is a preview of my personalized Grunge Mix if you want to check it out – and don’t let the name scare you. It’s 90’s at its finest. You’ll notice when you click and open in your own Spotify, it will be customized to YOU.

These applications of new technology are cool, for sure, but investors should key in on 3 key takeaways:

1. The successful application of artificial intelligence is increasing Spotify’s value proposition from user-directed listening to passive enjoyment as well.

This was previously a large pain-point for consumers who wanted to be able to flip a switch and allow someone (or something) else to pick the playlist. Artificial intelligence is one of the fastest growing trends in the LikeFolio universe.

2. Personalization tools are increasing consumer engagement.

Spotify happiness levels have improved by +2 points on a YoY basis. But more telling: Spotify purchase intent mentions – or mentions from consumers downloading and streaming Spotify – have increased by +15% YoY.

3. SPOT shares remain significantly below 2021 levels and -17% lower YoY.

The stock has garnered some momentum over the last 6 months as user growth continues to push higher.  The company’s revenue is driven primarily through subscriptions (ad supported revenue accounts for 14% of total revenue). Improvements in advertising spend at large would likely benefit Spotify, who is uniquely positioned to capture this rebound thanks to its strong podcast positioning.

LikeFolio data suggests Spotify is a poster child for how best to leverage AI to provide user personalization and improved consumer experiences.

We’ll continue to monitor metrics through the end of quarter to confirm momentum, but current trends support a longer-term Bullish outlook…especially if the company can make progress toward profitability.

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