It might be crowded now but the streaming market can only facilitate so many slight variations of the same, economically tricky product for so long. The question is, will Deezer be one of the few that rises to the top or gets squeezed out?
The answer will become clearer over the next few months as the streaming service’s transformation into a music business outright quickens. With that change comes an acceptance that a bulging music library isn’t enough to win people over and that in order to survive against the likes of Apple, Google and Spotify it will need to double down on giving listeners something different.
That’s where Flow comes in; the French business launched its personal music assistant in 2014 and has been fine-tuning it ever since, creating a service that uses a mixture of its own curators, an algorithm and contextual signals to surface music it knows people like as well as what they might like. Deezer is banking on this feature, which it claims will become more personalised the more people listen, to stand out from rival apps offering similar curation through playlists. Whether it’s enough of a differentiation to grow Deezer will be known in the coming months through its first above-the-line campaign (see below).
The campaign kicked off last September but upcoming ads will hone in on the personal music assistant. "If I had to define our marketing strategy, I’d say it’s based on the idea that like a small dog you have to be loud enough to be heard but cute enough to be taken home," says Golan Shaked, chief marketing and commercial officer.
“We want to differentiate ourselves through Flow and then get people to try Deezer because of it, giving them a certain number of days to do what we want them to do in order to properly configure the service to their lifestyle. If it works, you’ll be convinced. If it doesn’t work, then go to Spotify.”
As Shaked talks up the depth of personalisation he envisages Flow will eventually offer, he links it to the CRM work he and the team are doing in the background. Dubbed internally ‘Just Right’, the system is about one third complete and is set to launch at the end of the year. Like many companies, Deezer is working to send listeners the right message at the right time, particularly in the app so that they’re not being bombarded. If someone responds to a pop-up in the app for example, then that’s how it will start to deliver messages, or if they don’t want any notifications it will focus on personalising the music – “we’re not only going to learn music tastes and behaviour but also learn the way they like to be spoken to,” explains Shaked.
It’s fighting talk for a business trying to be less reliant on being bundled on smartphones for reach. While mobile carriers like Orange – also an investor – have helped Deezer accrue more than six million subscribers, many of those aren’t signing up beyond the free trial they get with their device. “The users we get organically are much more loyal [than those through telcos] and their value is higher because we don’t have to share the revenue with the telcos,” admits Shaked. “It’s much easier to see commitment from somebody who chose to subscribe to Deezer than someone who got it as a gift… customers coming directly would typically convert two or three times more than customers who get Deezer in a bundle.”
However, this doesn’t mean that Deezer is going to scrap partnerships – rather, there will be a shift in focus. Social networks as well as local tie-ups with banks and retailers are on the cards in the 180 countries where it's available. Shaked also wants to bundle Deezer with products that are associated to the music people love, though is wary of the fine line the business would need to tread – or risk diluting its proposition too much.
How hard it chases new users, whether through partnerships or marketing, is what Deezer is having to rationalise with its need to bring in more paying subscribers. Sometimes “you actually give up revenue in order to maintain good customer engagement on the free side”, concedes Shaked, who has sharpened the company’s pitch to media agencies in order to soften the financial loss with ad revenue.
You are what you play
Streaming services have cottoned on to the fact that the behavioural data they’re sitting on is a strong currency with advertisers. That’s no different for Deezer, which is mapping its listening data to online behaviour in order to pitch whether people who listen to a particular genre of music are more likely to purchase a product at certain times of the year. Creative partnerships that could see a brand sponsoring an hour or a genre for a free a user, for example, are also in the pipeline.
“It gives you more than just buying in an ad network,” claims Shaked. “We’re looking at whether we can interfere with the music algorithm and play with that. We haven’t made a full decision yet because there’s always a risk… you always want to stay true to your product, which in our case is music.”
Native ads are also a burgeoning area for the company, as is visual advertising. Given Deezer’s “big” desktop user base, the bigger real estate on screens means it can start monetising its inventory beyond just audio ad slots.
Deezer’s behavioural data isn’t just being used to woo advertisers, it’s also being put in front of record labels and artists. Rather than just showing music executives who is listening to the music, the company is able to show what mindset they’re in as they do it. Others like Spotify and Pandora are crafting similar pitches as they look to generate money from a relationship that’s usually been their biggest cost. Shelling out millions of pounds to secure music rights is a necessity for streaming businesses, though music bosses increasingly know they need such services on-side if their businesses are to expand as more people opt to stream rather than purchase tunes.
Streaming is the music industry’s fastest growing revenue source, according to IFPI’s latest Global Music Report, with revenues up 45.2 per cent to $2.9bn last year. It accounts for 43 per cent of digital revenues and is close to overtaking downloads (45 per cent) to become the industry’s main digital revenue stream. There’s an inevitability about the figures that make it clear why the “relationship between record labels and Deezer is becoming closer,” as Shaked puts it.
“We’re getting much closer in discussing the business model in general [with music bosses],” he continues. “They’re becoming much more involved in the 'freemium versus premium' discussion. The relationship now is growing together rather than 'give us the royalties and we’ll pay the fee'. There’s much more discussion with the labels now.
Elsewhere, the business has its sights set on the US, where it recently launched independently having previously only been available via partnerships with telcos. Despite competing with Apple and Google on their home turf, Deezer is optimistic about its future here. “We don’t intend to go to the US and try to outspend Apple or Spotify,” Shaked admits. “But when we position the brand in the US and people have a chance to explore us on a par with the rest of [our rivals] and go through the Flow experience, it should convince them to sign up and help us to get a strong market share.”
Personalisation, CRM and expansion; it’s clear Deezer hasn’t given up on raising new cash even if it has iced its IPO plans for now. For all the intrigue this caused when it was announced last October, Shaked (naturally) spins the decision as a positive rather than cause for concern. He feels the extra time Deezer has as a “private company” is a blessing as it’s afforded the luxury of changing its marketing and commercial strategies without having to suffer the vagaries of the stock market. “Fortunately, we are very well-funded by great investors who believe in the company and so we have a long runway to make the right changes and in positioning our ad product as long as we’re able to show growth and that we can monetise the user base enough to start showing some serious margins,” he assures.
“The increase in the number of people streaming music gives us a lot of momentum, making it a much more investable market. However, it will not be a market of 20 or 30. It will be one that ends up with five or six companies, and the question is whether Deezer be part of that group.”