Spotify has a marginal cost problem, but while the cause is unique to Spotify, the challenges are more applicable than it seems.

"The two dominant business models for venture-backed startups are advertising for consumer-focused companies, and Software-as-a-Service (SaaS) for business-focused ones. On one level, these business models are quite different: the former gives away software for free with the hope of convincing a third party to pay for access to users; the latter charges some portion of users directly. The underlying economics of both, though, are more similar than you might think — indeed, both are very much in line with venture-backed startups of the past...

Spotify has a marginal cost problem, but while the cause is unique to Spotify, the challenges are more applicable than it seems.

"The two dominant business models for venture-backed startups are advertising for consumer-focused companies, and Software-as-a-Service (SaaS) for business-focused ones. On one level, these business models are quite different: the former gives away software for free with the hope of convincing a third party to pay for access to users; the latter charges some portion of users directly. The underlying economics of both, though, are more similar than you might think — indeed, both are very much in line with venture-backed startups of the past...