According to Ek, the notion of overnight success is "very misleading and actually rather harmful to any hope for long term and sustainable growth in this industry." Despite this fact, he calls out the music industry for doing just that and expecting to see business models proven "within months of inception."  That's just not how it works, he says, reminding us how iTunes was not initially the powerhouse it is today. In its first year, the company missed its revenue targets by 30% and most label executives doubted its staying power at the time.

While Ek realizes that comparing iTunes to Spotify is wrong given the very different business models for each company, it does prove the overall point: success in this industry takes time.

Spotify, which is currently hugely popular in Europe, has yet to launch in the U.S. due to contract negotiations over licensing agreements. However, as popular as the service is, it still has a long way to go in terms of both product and monetization. Ek acknowledges that one thing which needs to be addressed is how difficult it is for Spotify users to actually buy the music they're listening to. Yet despite the fact that nearly 80% of the company's users are unaware that they can purchase the tunes they're hearing, Spotify is still one of the biggest affiliates to music downloads.

Another challenge facing the company is how to earn a profit considering the large costs of licensing the music it plays... especially when reliant on an ad-supported model. (Spotify offers multiple service levels, one being ad-supported. It also offers subscriptions.) Earlier this year, another streaming service, Last.fm, had to do away with its ad-supported model for the same reason.

The Music Industry Needs to Change

If it was up to Spotify, the music industry would be embracing the future instead of constantly fighting against it. Ek says that in order for the industry to find success, it needs to realize that the new business model is "a mix between ad-supported music, downloads, subscriptions, merchandising and ticketing where the user comes first and where the key to monetization comes from portability and packaging access rights." If willing to adapt, the music industry could then have the potential to become a $40-50 billion industry and one that could grow stronger than it ever was.

Until that time, it looks like Spotify has a long road ahead of it, but it's good to know that it is up for the challenge. "We aren't interested in just trying to hype the company and then flipping it," Ek says. "We are in this for the long haul."

According to recent reports, however, Spotify may do things a little differently when it reaches the States. Says Andres Sehr, Spotify's global community manager, the company is considering going the "freemium" route for the U.S. market.

"Freemium" is a word coined to describe a business model where basic services are free while special or advanced features are available for a fee. That's a slightly different spin on the business model Spotify uses today. Currently, Spotify offers its European users a choice between a free, ad-supported application and a paid app which costs around about €10 (around $16.60) a month. With a Spotify "freemium" service, however, there would be just the one application in which users would pay for the extra features they want to use. Details on how exactly this would work and what features would come at additional cost is still unknown. Sehr says it's far too early say at this point. Also unknown is whether this "freemium" model would forgo the monthly subscription fees in favor of the premium upgrades.

In an interview published today in the Wall Street Journal, Sehr explained why the company is considering making this sort of change. "The U.S. is a completely different market, and the competition landscape's different," he said, adding that "when we launch there, it'll definitely be a challenge for us."

What Sehr is referring to is the particularly crowded market here in the U.S. where services like Imeem, Pandora, Last.fm, and many others are already well-known and popular destinations for streaming music online. In other words, Spotify isn't just rivaling iTunes in the U.S., it's going up against a number of other companies doing nearly the same thing, too.

Spotify on the Mobile

Where Spotify has an edge over its competition is on the mobile front. Although there are plenty of streaming music applications available for both the iPhone and Android platforms, Spotify's app does things a little differently...and considering the glowing reviews, better. Instead of simply providing a streaming radio of sorts based on a user's musical preferences, Spotify's mobile users can actually pick and choose the songs they want to listen to and build a custom playlist. That playlist can also be streamed when the mobile device is offline thanks to Spotify's caching technology.

For this reason, there were originally concerns that Apple would reject the streaming music app because selecting tracks, making playlists, and playing music offline puts it in direct competition with iTunes itself. Those concerns were soon discovered to be unfounded as Apple recently approved the app for distribution via App Store - a decision no doubt influenced at least in part by FCC scrutiny over the company's app approval process and anti-competitive tactics.

While the initial launch of the Spotify mobile iPhone/iPod Touch app is only in the European counties where Spotify is currently licensed, the Apple "seal of approval" means that (in theory), Spotify won't have any trouble making it into the American App Store, too. That is, once they get the American licensing agreements worked out.

Although the company already has European deals with Universal, Sony, Warner, and EMI and it solidified an American licensing agreement with the Independent Online Distribution Alliance (IODA) in July, its the Stateside licensing agreements that are holding up the service's U.S. launch. Still, the company remains optimistic and expects to make its American debut later this year or in early 2010.

Eager North Americans have been waiting for the Spotify service to launch stateside; nevertheless, because the company looks to sign major label deals before its American release, there is no hard date for launch. According to paidContent, "Spotify hopes to launch in the U.S. in Q3 or Q4." Meanwhile, Florida-based Grooveshark just launched a premium service available to both US and international members, and an iPhone service has been submitted to the App store. While Grooveshark's current app does not allow for cached offline music, the company plans to incorporate this feature in an upcoming version. Not to be outdone, Rhapsody also submitted an iPhone app early this week. If Spotify launches in the US when Grooveshark's cached music app becomes available, it will be an interesting battle for streaming music supremacy.

We've chosen the 10 in two batches. Firstly, the services that got the most number of mentions. As expected, these are well known apps that millions of people are using (or will use when it's launched, in the case of Google Wave). We didn't want this to be purely a popularity contest though, so we've also selected 5 lesser known web apps or services. Those apps all got multiple mentions and in our estimation they're each worthy of being labeled 'exciting.'

Top 5 Apps

1. Twitter 25 votes
2. Gmail 17 votes
3. Google Reader 11 votes
4. Google Wave 11 votes
5. Facebook 6 votes

This was fairly predictable, with Twitter well out in front. There's been such excitement and activity around Twitter this year, that nobody could really argue against Twitter being the most exciting web or service around in 2009.

Twitter was followed by no less than 3 Google products, one of them as yet unreleased! (Google Wave). This shows that Google still has that aura of being 'exciting,' at least with ReadWriteWeb's early adopter readers.

Facebook slipped in at number 5, so it too seems to have kept up its reputation for being innovative.

Top 5 Lesser Known Apps

6. Spotify (RWW coverage): this Swedish online music app is about to launch in the U.S. and is highly anticipated by that market. It's so exciting that we've predicted it may even threaten Apple's near monopoly iTunes product. We'll have to wait and see what happens on that front, but Spotify certainly has a lot of people salivating! Other online music services mentioned multiple times in our poll were Blip.fm and last.fm.

7. Dropbox: this was listed as one of ReadWriteWeb's 5 Favorite Online Storage Services in September last year. At the time it had only just opened to the public, but it has since gained many fans. Its integration with the desktop is perhaps the most exciting feature of this product. Other features we like are the sharing of folders and preservation of every revision of every file.

8. Seesmic: A number of Twitter clients were mentioned, like Hootsuite and TweetDeck. But one which has impressed us a lot in recent months has been Seesmic. In July we reported that Seesmic, previously only a desktop client, had released a web-based version and a new version of the Seesmic desktop. The web-based version of Seesmic recreates most of the features that are currently available in the desktop application. Our own Frederic Lardinois listed Seesmic Web as one of his 3 most exciting apps.

9. Wolfram|Alpha: Ever since Wolfram|Alpha's admittedly much hyped launch in May, we've been tracking this innovative product closely. It's a self-described "computational knowledge engine" and while it's not quite the Google killer some predicted, it has many potential uses - which makes it an exciting app to follow for us.

10. Pubsubhubbub: With a name harder to say that 'ReadWriteWeb,' this new Google Code project has excited the web development community. It's not a product, but a protocol. The project page describes it as a "simple, open, server-to-server web-hook-based pubsub (publish/subscribe) protocol as an extension to Atom (and RSS)." In laymans terms, it delivers your RSS feeds to you much quicker - in near real time.

To understand the context of Pubsubhubbub and similar exciting initiatives more, read Marshall Kirkpatrick's fine analysis of Distributed Social Networking.

There you have it, the top 10 most exciting web apps and services according to the ReadWriteWeb community! Let us know your further thoughts in the comments.

Here is the full list, a snapshot taken when the original post had 66 comments (sans links, but Google - or Bing - any app that catches your eye).

Twitter 25
Gmail 17
Google Reader 11
Google Wave 11
Facebook 6
Blip.fm 4
Dropbox 4
Hootsuite 4
Wolfram Alpha 4
Pubsubhubbub 3
Scribd 3
Seesmic 3
Spotify 3
Wordpress 3
Apture 2
Boxee 2
Delicious 2
Flickr 2
foursquare 2
getsatisfaction 2
Google 2
last.fm 2
PixelPipe 2
Posterous 2
Skype 2
TweetDeck 2
Xmarks 2
Appboy
Bespin
Bit.ly
Bloom
Brightkite
Caspio
chi.mp
Cliqset
Deezer
Digg
Dizzler
Dopplr
Edmodo
Evernote
Feedly
FriendFeed
Gmail chat
GMX Mail
Google Analytics
Google Analytics API
Google APIs
Google Docs
Google insight
Google Maps
Google Notebook
Google Voice
Hype Machine
Instant XRay
Instapaper
iWantMyName
JaJah
JobTitled
Jolicloud
Jott
justbought.it
Know Thy Congressman
kreeo
Lala
Layar
LinkedIn
metafilter
mint
MobileMe
My Name is E
Nanovor
Newsmap.jp
Pachube
Parade
Peoplebrowsr
PocketSmith
Ponoko
PopUrls
Prezi
Primal Fusion
Salesforce
Shapeways
SocialText
SoundCloud
Sweetcron
Tarpipe
TimeXchange.net
Tracer
Tumblr
tweetworks
Twitterfall
urtak
W3C QA Toolbox
XCODE
Youtube

Cat pic: Mr.Thomas

Additionally, Bonnain went on to point out the Grooveshark artists community and quiet honestly, we were thrilled to discover it. Beyond the fantastic experience of the music discovery engine and the listener-focused features of the site, Grooveshark actually has a Bandcamp-style service for artists to promote themselves.

The Artist Dashboard allows bands to track their most popular songs, fan favorite play lists and measure play counts. Additionally, Grooveshark also allows bands to sell merchandise via Junkytees and TuniPop, license music via Creative Commons, land deals via YouLicense and crowdsource album funding via SellABand.

Within the artist's environment, Grooveshark monetizes its service by offering musicians a chance to have their music advertised and played alongside similar bands. With more than 7 million tracks in its catalogue, the company is effectively leveraging its size and existing audience to make a case as the premier destination for artist promotion. Artists can expect to see their tracks in community playlists and distributed via widgets, links and soon, through mobile playlists.

While Spotify's iPhone application has received a ton of buzz for its ability to play cached music streams, Grooveshark also has an iPhone application in the works. While the app's current iteration does not allow for offline play, Bonnain assures ReadWriteWeb that the feature is in the mobile developer pipeline and it won't cost $15 a month to try it when it arrives.

While both Grooveshark and Spotify's premium subscription programs are in their infancy, it will be interesting to see which service will find the right features and licensing partnerships to come out on top.

Unlike other mobile streaming music applications, the Android and iPhone applications allow members to cache streaming files for offline listening. In other words, there is no need to download a file for listening. It's an amazing mobile feature for users, but as a free application it would cannibalize Spotify's revenue stream from downloads. However, with the subscription requirement, the company is destined to make money from both downloads and streaming lists.

If the application doesn't make it into the App Store, Spotify has other opportunities to generate revenue with downloads. Ek announced plans in late June to launch a one-click download solution for easier on-site purchases. The company's ability to gain referral sales revenue shows potential, but the access model is less attractive than subscriptions. Spotify could offer a tiered file pricing system without compromising its existing service. The company could continue to stream compressed files for free while offering higher-quality files or rare releases for purchase and download. This option might appeal to diehard music fans, but it certainly doesn't have the cool factor of the mobile applications.

Regardless of Spotify's revenue streams, the company's US release is widely anticipated. Americans are eager to see what UK and Swedish audiences have been raving about. Some of the company's latest 3rd party tools look like amazing additions to the community. Spotify's blog featured the following:

1. SpotifiTunes: Independent web developer Phil Nash's iTunes playlist tool allows you to upload your iTunes library and generate additional links to your favorite artists in Spotify. Members can discover new album releases and sometimes surprising band collaborations from the past.

2. We Are Hunted: The curated We Are Hunted music community created a Spotify playlist complete with the site's top tracks and artists. Once users can cache this on their devices, they'll have the ability to listen to the community's 99 hottest streaming songs in offline mode.

3. Share My Playlists: This site contains almost 4000 pre-compiled Spotify playlists for your listening pleasure. The service offers amazing potential to leverage the popularity of existing celebrity deejays, music bloggers, labels and music properties. Just think about the range this service could offer. From indie electronic labels to Motown, if brands were to release weekly tribute playlists you can bet there would be listeners.

After this sort of a build up for the North American launch, it would be a let down if American audiences thought the service was anything short of fantastic. We won't have to wait long for a reaction, the release is expected before the end of summer.

Luckily for jailbreakers, problems like those above are less of an issue. There's currently an open source Spotify client app available for download and the third-party GV Mobile app for Google Voice is coming soon.

Like the official Spotify iPhone client, the third party client app called Spot, available from Cydia, also requires a Premium account in order to work. Also like the official app, Spot lets you search for songs and build playlists. However, where the official client will let you cache playlists to listen to when the AT&T network fails or you lose your connection, the Spot application has yet to implement this type of feature according to a forum posting. That's a big drawback, unfortunately, since the caching ability is precisely what makes Spotify feel less like a streaming service and more like a real iTunes alternative.

There's also another major issue for jailbreakers here in the U.S. looking to get on board with Spotify - the premium account. In order to run Spot, you need a premium account to sign into the app. However, in order to get a premium account, you have to sign up at Spotify.com, a site which currently prevents you from doing so because Spotify is not available in this country yet. So what good is an open source app if you don't have a premium account, right?

Fortunately, there are a few workarounds for this issue. For one, you could access the Spotify web site using a UK-based (or other European country-based) proxy server. A quick Google search presented us with several options for doing so, although we won't point to any exact resources since this isn't exactly the most legal way of going about things. Let's just say this: we got to the sign up page and it was only a matter of putting in our name and account details.

Another option is to purchase an account from an overseas friend who has access to the service in their country. Have them purchase the account and you pay them back after they give you the username/password. (Obviously, you'd want to go with a real friend you trust here, not some random stranger from the internet.)

Either way, getting access to Spotify via Spot is a bit more difficult than we hoped it would be, but it's not impossible if you're really motivated.

GV Mobile Coming to Cydia

Although there aren't any Google Voice alternatives available just yet, we hear that one in particular is coming soon. The third-party client application GV Mobile was among the Google Voice apps just pulled from the App Store. According to a tweet from the developer Sean Kovacs, he plans to upload the latest version of the application to Cydia ("or similar"...perhaps referring to Icy) soon. You may want to follow his Twitter account for more details as to when that occurs.

For more details on jailbreaking, check out our how-to guide here.

This sort of ease-of-use is exactly why Spotify already celebrates an estimated 5 million member user base despite only being available in the UK, Sweden, Norway, Spain, France and Finland. The company already has European licensing deals with Universal, Sony, Warner and EMI and it solidified an American licensing agreement with the Independent Online Distribution Alliance (IODA) last week. The recent deal brings Spotify's catalogue to well over 7 million files. The company plans to launch in the US before the end of the year.

According to Forbes journalist, Javier Espinoza, "Another looming threat [to Spotify]: Microsoft is launching a very similar music streaming service later in July, a service that also allows users to download the music, something Spotify still won't allow members to do." Nevertheless, the question is, will Microsoft be able to provide cross-format support and separate itself from its lackluster music devices in order to build a site that consumers will enjoy? If it can't, Spotify will have nothing to worry about.

Besides, in late June, Spotify co-founder Daniel Ek made the following statement to the Register, " We're working on a one-click download solution with 7Digital, press buy, press OK and you buy a recording. My hope is to get it out in the next couple of months."

Demonstrated at Google's late May I/O conference, Spotify's Android already caches music for easy offline play. An iPhone app version is already reportedly in the works.

If you can play all of your favorite music from your cached play list, how important is it for the average user to have the access to the original file? Below is a look at the current Android app, let us know your listening habits in the comments below.

Trend: Illegal File Sharing Sites Go Legit

The interesting trend, here, though, is that a lot of companies and services that were previously known for being 'illegal' hubs for file sharing are now trying to go legit. Napster, the grandfather for Kazaa and most of its brethren, is now a respectable paid service, and the Pirate Bay may offer a legal version of its service soon.

As Eric Pfanner pointed out in the New York Times, we are now getting to the point where using legal services like Spotify or Lala are actually so much more convenient than illegally downloading music. Given this trend, it makes sense for centralized services like Kazaa to slowly drift to a legal model. At the same time, decentralized file sharing options like BitTorrent, which don't depend on a single company to work, will still continue to be popular. Chances are, though, that users will probably share less music through torrents over the next year or so, as more cheap and free options allow users to legally access music more conveniently.

While it takes a while for Tunerec to fill up your database with songs (we assume that for legal reasons Tunrec has to at least pretend to 'record' these songs from publically available sources), the results are actually worth the wait. If you sign up today, make sure to come back tomorrow, as you initially start out with only a few songs in your library.

We liked Tunerec's interface, including the artist pages and cover art, and the sound quality, but one feature we did miss was the ability to browse through your library without having to resort to search.

If you are in Europe, Spotify is still a better alternative to Tunerec (and sadly still not available in the U.S. or Canada), but if you are in a country where Spotify is not available, Tunerec is definitely worth a try. It is supposed to be in closed beta right now, but we signed up and got an invite within a minute.

Tunerec Introduction from gurraman on Vimeo.

Once you open your Google Profile, you might start seeing some suggested links at the bottom of the page (as usual, it seems Google is rolling this out slowly) and, as far as we can see, these links are pulled from your Social Graph. If you don't see anything there, you can help your profile along by, for example, adding a link to your FriendFeed account at the bottom of the page. After you do that, Google will suggest adding the feeds you import into FriendFeed to your profile and, from there, it draw even more conclusions about your online habits.

hCard

Also, as Chris Messina points out in this video, the profiles now also support the hCard microformat, which makes importing them into other products a lot easier.

Privacy

When Google first announced the Social Graph API, we had some concerns about the privacy implications of this. After all, nobody on the net knows more about your behaviors than Google. For now, Google seems to be moving slowly and by just rolling out suggested pages for your profile, it doesn't startle users with too much information.

The Grand Google Profile?

Google, so far, never really pushed the profile. Right now, it is only exposed in Google Maps. However, if Google starts pushing it a bit more, especially now that it is linked to you social graph, it could potentially start marketing the profile as 'the' central repository for your online identity.

Google is already a member of the DataPortability workgroup, which also advocates the use of microformats like hCard and XFN. These additions to the Google Profile could suggest that Google does indeed have greater plans for it has let us to believe so far.

If you are not quite clear about how the Social Graph API works, here is a short video of a Google engineer explaining how it works:

But the competition here is not Microsoft. For the business user, the competition is Blackberry; and Blackberry is not Microsoft. I am a long time Blackberry user and it is seldom annoying. It just gets the job done. So unlike when I switched back from Windows to Mac, which I did with a big sigh of relief, I am in no hurry to switch based on anything wrong with what I have.

And a few reviews are making me think that iPhone could be a high maintenance date. Sure, high maintenance dates can be fun, but I am judging this on boring utility criteria. For example:

1. Keyboard. I am ready to be convinced by touch-screen keyboards. But I am not sure I want to spend the time adjusting. Outside the USA, where SMS is the major use of a mobile phone, I think this is a big deal. Flipping to horizontal is neat, but does this work for email?

2. Battery. Any mobile device that cannot do a full day's work and play without re-charge is a pain. You don't want to be in "don't leave home without it" mode regarding your charger unless you are going for more than a day. On a normal day, it's plug it in before you go to sleep and pick it up in the morning.

3. It's a bit big as a phone. OK, so is the Blackberry. But, as they say, size matters when you are holding it to your ear. Some people express almost comical amusement at the idea of using the iPhone as a phone - "you still call people, how quaint". Then don't call it a Phone, because it does set that expectation.

I know that resistance is futile. I will get an iPhone eventually. Or Blackberry will give me a better browser, which is really what I love about iPhone.

The killer app for me? Skype to Skype calls over WiFi. I believe that requires an unlocked iPhone. It would dramatically change the economics of mobile phones. Which AT&T certainly knows and will be resisting for as long as possible.

Plus a really slim but full function collapsible keyboard, so I can write full length stuff as easily as on my laptop. And then a simple way to plug into any screen that's around, so I can edit docs stored in the cloud. So that I can stop lugging around my laptop; that's a big win for people who spend a lot of time away from their desk.

My guess is that the iPhone ecosystem will bring all these things to market fairly soon. The iPhone is the first real new platform since Windows (sorry, Facebook).

Image: After the iPhone Keynote, Jan 2007; pic by mac steve