Daily Management Review

Twitter invested $ 70 million in "YouTube for music"


06/15/2016


Twitter has acquired a stake in music service SoundCloud. This was announced by Recode, citing sources familiar with details of the transaction.



Twitter invested $ 70 million in "YouTube for music"
SoundCloud is going to attract about $ 100 million in the new round of funding. Of these, $ 70 million will come from Twitter. SoundCloud’s business on the basis of the transaction will receive an assessment of $ 700 million. The service was assessed at the same amount in 2014, when SoundCloud raised $ 60 million.

Twitter CEO Jack Dorsey has confirmed that the microblogging service is now co-owner of the SoundCloud, but refused to disclose details of the deal. "We have been partners for many years, their approach to creating user communities is largely in line with ours", - he said.

Despite the comments from both sides, Twitter’s exact plans in this case remain a mystery. SoundCloud representative said that the investment will allow the company to stay focused on the audience and creators of the musical material.

"The investment will help us continue to build the product value for developers and students, and develop new areas, such as the recently launched subscription service SoundCloud Go», - he added.

In 2014, Twitter considered buying SoundCloud, notes Recode. However, then the company abandoned the transaction.

SoundCloud was founded in 2008 in Berlin by Eric Wahlforss and Alexander Ljung. As Leung told Forbes, their aim was to turn the service in an « analog of YouTube for audio content." Every minute users upload 12 hours of audio materials into SoundCloud. Basically, listening at the service online is free, monetization of the project took place on the advertising model. The subscription model, which was launched in late May 2016, will cost $ 10 per month. SoundCloud, according to the service’s own data, has 175 million active users.

Both companies have their own problems. Just like two years ago, Twitter is struggling with the problem of non-growing user base. 

SoundCloud, in turn, has the above-mentioned new service of music by subscription, which is valid so far only in the US. Non-growing capitalization and deplorable financial results do not add happiness, either (in 2013, when the company disclose its financial figures for the last time, revenue was $ 14 million, and losses - $ 29 million). With this in mind, the stagnating companies can come to a mutually beneficial cooperation. Twitter would increase users’ engagement and value, and SoundCloud Go - get out of the United States to a wider audience. 
 






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