Spotify has proved a huge hit with music lovers, but founder Daniel Ek says the company still faces major challenges

Spotify still has "a long way to go" before it starts making money, says founder Daniel Ek in his latest blog.

"The notion of overnight success is very misleading and actually rather harmful to any hope for long-term and sustainable growth in this industry," says Ek.

Despite its popularity, many observers still wonder how Spotify will make sufficient money to survive when its streaming music service is free if you're prepared to listen to the ads.

The recent launch of the Spotify iPhone App may help, as you have to be a premium subscriber paying £10 a month to listen to Spoty on your phone, but Ek admits "we've yet to figure out the differentiation between free and paid music".

Streaming is expensiveSo far Spotify – based in Stockholm and London – has raised 71m Euros (£65m) from investors and says its advertising revenue has passed the "millions of Euros per month" mark. But the cost of streaming alone could stretch into millions of pounds.

More after the break

"We've not made it easy for our users to buy music," says Ek. "That's an area we need to improve."

"The truth is the most successful digital business to date, iTunes, missed its revenue targets in its first year by 30 per cent, and record label executives were far from convinced that this was the future."

In for the long haulBut Ek says Spotify is "in this for the long haul. We are committed to building a music service that works across different devices, enables you to share music socially and that gives you the ability to choose how you want to access music".

The key areas for future development are better monetisation, better library handling, making Spotify socially capable and improving portability, says Ek.

You can read Danei Ek's full blog here.

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