MUSICALLY: WHAT NEXT FOR SPOTIFY?

After a remarkable period of rocketing growth and gushing user reports, music streaming service Spotify faces a number of challenges in order to stay ahead. Will its much-vaunted mobile app and a daring grab for the US market see them continue to dominate the markt and bring in the revenue?

STREAMING MUSIC SERVICE SPOTIFY continues to be flavour of the month among the chattering media set, with word-of-mouth recommendations pushing its UK user base past the 1m mark. But while there is a certain amount of hype involved, more important is the fact that people genuinely do love the service - its slick user experience and growing catalogue are delivering on its promises.

So what now? Co-founder Daniel Ek's recent appearance at The Great Escape conference in Brighton provided an insight into Spotify's priorities as it prepares for its next stage of growth, while it is becoming equally clear what kind of services may challenge it in the coming months, both in the UK and overseas.

One thing seems clear: trying to gauge Spotify's success in terms of the amount and value of ads that it sells is rather missing the point. It is true that the vast majority of the service's UK users are on the free version of the service, and Spotify has been keen to stress the viability of its ad-supported model with Ek claiming click-through rates five times higher than the average online advert.

But actually, what will define Spotify's success in the medium to long term will be how many people it can upsell to its premium version. Certainly much of the development work going on within the company is focused on that goal, particularly in two areas: mobile and social features.

Mobile is going to be hugely important to Spotify. It is currently the missing piece of the puzzle - those devout fans who claim it is now their sole way of consuming music go a bit quiet when you ask them what they do on the train. Suggesting that users can make use of its link with 7Digital to buy MP3s to play on their phones or iPods is a stopgap solution at best.

A couple of weeks ago, Spotify released a video demo of its first mobile application, for Google's Android platform - although it is also working on iPhone and Symbian versions. The app is as slick as its desktop parent, particularly its cacheing feature that lets users store playlists in their phone's memory for listening even when they do not have a 3G signal.