Why Is Twitter Interested In Buying SoundCloud

Reasons why Twitter is considering a deal to acquire SoundCloud, the music and audio-sharing company, according to people familiar with both companies.

Twitter-music soundcloud

Twitter is in a mood to shop now after Yahoo and Google. In a recent development reported by re/code, it is being said that Twitter is in talks to acquire Berlin based SoundCloud, the music and audio-sharing company.

SoundCloud often described as the “YouTube for audio” is a free service that lets users upload and share audio files around the Web. In October 2013, the company announced that it had 250 million users.

While both the companies have chosen not to comment on the rumors but if the deal sees the light of the day then it would be encouraging for Twitter in many ways.

Reach and Reach

Twitter has been struggling with user growth from last two quarters. Revealing its financial results for Q1 2014, Twitter had announced that the service’s user growth slowed while its mobile advertising share had grown. The recent design changes and the profile re-design was a move that was being looked at to attract new users. But looks like it is not enough so it makes good sense for Twitter to acquire a startup like SoundCloud that has a similar user base and a significant degree of overlap.

SoundCloud is already considered as one of the premiere destinations for sharing music. With independent artists as big as Snoop Dogg using the platform SoundCloud has been also equated as Twitter of music. “We want to make sure it stays personal, like you’re connecting with the creator,” says SoundCloud CEO Alex Ljung. “They’re real people, and there’s real action happening there. It doesn’t become a dead place. It’s a bit more alive, like we’re used to with Twitter.”

In fact earlier this year, Music tech hacker Peter Watts who had been tracking the popularity of music services on Twitter for the last 15 months declared SoundCloud as the winner. Other services like Spotify and Last.fm came second and third.

SoundCloud began and has thrived as a platform to host, embed, and annotate any kind of audio, not just music. But it’s also quickly become a place where artists and fans connect with one another — artists with fans, artists with artists, and fans with fans.

Snoop is one of SoundCloud’s new Pro Partners, a program that hopes to capitalize on and expand that side of the company’s business. Pro Partners gives artists and brands Facebook-like banners on their sites and allows them to upload “Moving Sound” slideshows that blend texts with images. Other partners participating in the pilot program include Red Bull, The Guardian, Chris Hardwick’s Nerdcast, the producers of the Grammys, and Blue Bottle Coffee.

Speaking with Verge, Ljung says, “We probably have the widest range of sound creators in the world.”

SoundCloud – a hit in Asia

SoundCloud which has 250 million community of users is also a quite a rage in Southeast Asia. In a recent survey it was informed that smartphone users in some populous, fast-growing Southeast Asian countries, where many streaming services aren’t available, are turning to music sharing site SoundCloud and local, country-specific apps to access tunes on the go.

In a survey conducted this month among 700 smartphone users in Indonesia, India, the Philippines and Vietnam, respondents picked SoundCloud as their top choice for getting tunes. The music sharing and streaming site is reportedly the most used in Indonesia at 31 percent, and the third most used in the Philippines and Vietnam at 12 and 23 percent, respectively.

SoundCloud co-founder and chief technology officer, Eric Wahlforss told the Wall Street Journal this trend could be attributed to the “high levels of social networking engagement in Southeast Asia” given that the app allows people to share sound clips to social media sites.

Twitter which has been struggling in Asia for growth due to the splurge of messaging apps like WeChat, Line, Kakao Talk, etc. wouldn’t mind to tap this growing trend.

Second attempt in music

While reach remains the primary reason for Twitter to go for SoundCloud, this also means Twitter gets a second chance to crack music on its platform. In its first attempt Twitter failed miserably and it pulled out its Twitter #Music app earlier in the year.

The app, which attempted to harness conversations around music and artists on Twitter to create a new way to discover music, failed to peel listeners away from the many competing music apps on the market.

The #Music app was built by the team behind the music-discovery service We Are Hunted, which Twitter acquired in 2012 and subsequently shut down. However, the company had also shared that it was looking for new ways to incorporate music into Twitter.

One  of them was the partnership with Billboard to work on real-time charts that the companies hope will be “the new industry standard for tracking and surfacing the conversation around music as it happens.” However, the partnership with Billboard was another way to work with traditional media outlets to offer data and insights.

And obviously contextual ads

If the deal happens it is very likely that Twitter will push for native ads, appealing SoundCloud to give a real shot at selling ads in front of or alongside its music streams. However, SoundCloud already offers a pro service with its intention to move into “native ads”. But its lacks the Twitter powerhouse of advertising  operations that made a total of $226 million, an increase of 125% year-over-year in last quarter. Mobile advertising revenue was approximately 80% of total advertising revenue.

If the deal goes through, this is going to be the second big acquisition from Twitter after its IPO; it acquired mobile ad company MoPub in a deal that valued that company above $300 million. With SoundCloud being valued at $700 million it would be interesting to find out for what prices it sells, provided it is revealed officially.

Twitter and SoundCloud marriage definitely makes business sense but we will have to wait for an official statement from the companies.

Image credit: Mashable