Spotify: Why a Freemium Model and Social Stickiness Could Soon Deliver It 50M Users

As you learn about new bands, share your favorites and build playlists, your loyalty to the service will grow — certainly more than your loyalty to Walmart, anyway

Daniel Ek is an unlikely prophet for the music business.

The founder and CEO of Spotify is a computer geek who spouts terms like "real-time data trends" and "cost for distribution."

But the young Swede was (forgive me) spot on in his predictions at the Fortune Brainstorm Tech conference. He sees two mega-trends that he believes will power his online music service from 10 million to 50 million users: social media and connected devices.

When you join Spotify through Facebook, you are immediately connected to your friends and can see their entire music library (yes, you control who sees that library).

As you learn about new bands, share your favorites and build playlists, your loyalty to the service will grow — certainly more than your loyalty to Walmart, anyway.

"Back in the day, the most interesting part of Napster was discovering new bands," he said. "That's what we want to create, but make it even simpler."

All that's free. If you want to get rid of the ads, you pay $4.99. If you want to stream from your phone at up to 320 kbs or download tracks to play offline, that's $9.99.

The take-away: you probably don't want to listen to your music on just one device. Spotify hooks you on your computer for free, and then lures you to the mobile phone with a premium offering.

Naturally, you can also buy the songs outright if you choose.

Whether Spotify, which launched recently in the U.S., will achieve its 50 million person goal remains to be seen. It's up against entrenched online music competitors like Apple, Amazon and Rhapsody.

But its freemium model and its social stickiness could give it an important leg up.