We7: Spotify’s silent killer?

You might think ‘free music’ start-up We7 would be annoyed that its competitor Spotify has been grabbing all the headlines this year.

In actual fact, that’s exactly the way they like it. As for their iPhone app? It’s ready but you can’t have it.

Grow slow

Speaking at the Northern Startup 2.0 event in Manchester, UK last night, We7 CEO Steve Purdham made clear that growing an innovative music service is a delicate business and that Spotify is heading for a fall.

By pushing for fast growth through international expansion and mobile apps, Purdham argued, Spotify is increasing its costs to an unsustainable level.

Thanks to music royalties, an increase in users equals an increase in costs. That’s why Spotify is so keen to get you onto a Premium subscription plan and why there are rumours that its delayed US launch (now expected early next year) may end up being subsciption-only with no free option at all.

We7, meanwhile, is taking the ‘Steady and slow wins the race’ approach. Its user numbers may lag behind Spotify’s but Purdham is looking at the long-game. By ensuring that advertising revenue balances with the number of users, he argues, We7 will outlast its rivals even if it means growing at a slower rate.

The iPhone app stays in the CEO’s pocket

The slow pace even stretches to We7’s iPhone and Android apps. Similar to Spotify’s hit apps, they provide mobile access to We7’s vast music catalogue. Despite having been ready for several months, they are yet to see a release.

I asked Purdham why this was and he dramatically threw the book he was holding to the ground, furiously explaining that there was no point releasing the apps until the business was ready to support them. The marketing and support costs for such a release were too high, he said. What’s more they may drive too many new users to We7 too early.

It’s about the ads, not the music

Purdham sees We7 as an advertising company that just happens to use music as its vehicle. He says that the main challenge for the future of We7 is ensuring that advertising continues to grow with user numbers.

User numbers certainly are growing. Even by relying largely on word of mouth promotion and concentrating on the UK market, the service has grown to 2.5 million unique monthly UK users, just behind Spotify’s 2.7 million.

Purdham is well aware of the challenges of growth. He pointed out that Last.fm has gone into decline since being bought by CBS – it simply didn’t know how to adjust from being an early-adopter product to a mass-market one.

We7 may not have the sexy PR of Spotify behind it but don’t let that fool you – “Steady and Slow” may yet win the race.