How do you grow your company’s revenue while losing customers? Find out on today’s episode of the ‘Unnamed’ show.
A month ago, Deezer, the French music-streaming app, announced that it was filing for an IPO on the Paris-based stock exchange Euronext. Four days ago, it confirmed additional details about the listing. The company’s plan is to raise at least $343 million.
As promising as this move is, the fact that Deezer has also lost customers is noteworthy. In December 2014, Deezer had 6.9 million subscribers and by June 2015, the numbers had fallen to 6.3 million. But despite this, it also enjoyed a 40.9% jump in revenue in the first six months of 2015, compared to the same period last year. The company reported a revenue of $106.4 million by June 2015.
So, how did it grow revenue despite the fall in customer numbers? The answer lies in the different classifications of Deezer’s customer base. You see, its user base is divided into three categories:
- Standalone subscribers who pay a monthly subscription (€9.99 in Europe).
- Active bundle subscribers who got a subscription with their mobile phone plans.
- Inactive bundle subscribers who don’t use the service (this happens if you haven’t streamed at least 30 seconds of music over the past month).
As of December 2014, Deezer had 1.29 million standalone subscribers, 1.57 million monthly active bundle subscribers and 4 million monthly inactive bundle subscribers. Fast forward to June 2015, they now have 1.57 million standalone subscribers, 1.45 monthly active bundle subscribers and 3.34 million monthly inactive subscribers. So, while the number of monthly inactive subscribers and monthly active subscribers dropped, the number of standalone subscribers grew by 28%.
The bundle subscribers get hooked to the Deezer service through telcos. In France, for example, Orange subscribers have the option to subscribe to Deezer. This is what results in the number of active and inactive bundle subscribers. The standalone subscribers are the people who subscribe to Deezer directly, without the telcos involved. It is this particular number, which is the true strength of Deezer, that has grown.
So, the thing is, while Deezer may have lost customers in the general sense, its most valuable user base has grown. The growth of standalone subscribers has contributed to the company’s growth in revenues.
And though there may strength in numbers, as the saying goes, only the right numbers will matter eventually. Remember, it took just 300 Spartans (not Romans, someone needs to tell this to Kanye West) and a few hundred other soldiers to push back the Persian king Xerxes 1 at the Battle of Thermopylae.