Spotify has been looking for ways to recoup some of their 2017 losses following their recent IPO filing. A couple weeks ago, the company sent out a slew of email warnings to users who were caught using hacked versions of the popular music streaming app to get around ordinary free account restrictions. As these hacked app versions allowed free users to suppress ads, Spotify's decision was understandable.
That said, the number of users taking advantage of these hacked apps was never made clear until now. In a recently amended SEC IPO filing, Spotify disclosed they detected "instances of approximately two million users" using hacked apps to dodge ads on their platform as of December 31, 2017.
Two million illegitimate users may not seem like much compared to the company's other 157 million legitimate users but their actions could still be taking a sizable bite out of Spotify's revenue. Not only are those users essentially depriving the company of ad revenue but they would also have little incentive to pay for Spotify's $9.99/month premium subscription which removes ads entirely.
In the amended IPO filing, Spotify said their business model is "at risk of artificial manipulation of stream counts and failure to effectively manage and remediate such fraudulent streams could have an adverse impact on our business, operating results, and financial condition."
In the amended filing, Spotify said their business model is "at risk of artificial manipulation of stream counts and failure to effectively manage and remediate such fraudulent streams could have an adverse impact on our business, operating results, and financial condition." They did not specify exactly how significant this "adverse impact" has been on their business, however.