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What the Heck Is SoundCloud, and Why Would Twitter Have Interest In It?

Alyssa Bereznak

What the Heck Is SoundCloud, and Why Would Twitter Have Interest In It?

(SoundCloud)

UPDATE: The Wall Street Journal is reporting that talks between Twitter and SoundCloud are off. Read below to learn about why Twitter may hae been interested in purchasing SoundCloud, an innovative, growing audio streaming service.

Twitter is hankering to purchase SoundCloud, according to Peter Kafka at Re/code, which broke news of the potential deal Monday. 

Last year, the music streaming service was valued at around $700 million, meaning that this could be Twitter’s most expensive purchase yet. Here’s a guide to understanding why it matters:

What is SoundCloud?
SoundCloud is an audio discovery service based in Berlin. It allows anyone to upload, record, and share original work via its built-in social network. People can follow, like, repost, and add tracks to their personal playlists. They can also follow their friends and any other account that creates songs, podcasts, or speeches. All this activity takes place in a News Feed-like homepage. 

The self-described “YouTube for audio” has become a platform for emerging artists, brands, and others to build a fan base. Barack Obama has shared speeches there; the popular music site Pitchfork has its own podcast on SoundCloudand some comedians even host their own audio series there.

Not to mention that musicians of all genres use SoundCloud to premiere music, including hip-hop royalty like Beyoncé and Drake

All this activity has helped tracks uploaded to SoundCloud get more play on Twitter than any other music-streaming service, even Spotify.

Also, from the perspective of a listener, SoundCloud is a pretty great service. It’s free, unless you’re a power user who uploads more than two hours of music onto the site. (If so, you pay $38 yearly for up to four hours, or $130 yearly for unlimited audio uploads.) And here’s a thing listeners like: There are no ads. Unlike most YouTube videos, you click on a link and go straight to the content for which you came.

Why does Twitter need SoundCloud?
To start, SoundCloud has about 250 million active listeners per month, as of October 2013. Twitter has about 255 million active users in total. 

The difference between a listener and a user, however, is pretty vast. Those listening to SoundCloud might not necessarily be on the company’s website or even be signed up for the service. They could, for example, be listening to an embedded stream in a blog post, no strings attached, with no knowledge that they are even playing a SoundCloud stream. But when Twitter counts its “users,” it’s talking about anyone who has created a log-in and handle for the site.

There’s probably a lot of overlap between the two, but SoundCloud may very well help Twitter expand its reach. If not of committed members, than of eyes and ears.

Also important is Twitter’s troubled history with music apps so far. The company launched a standalone Twitter Music app in April 2013 that was meant to help people discover new tunes and more easily recommend music to their friends. Interest in the app quickly waned, though, and Twitter announced that it would kill the app less than a year after its release. The project was developed in isolation from the rest of the company and lacked direction and promotion from its premiere.

The bottom line is that Twitter has failed where SoundCloud has succeeded: in the world of music sharing. Buying SoundCloud could be just the $700 million Band-Aid that Twitter needs.

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(Twitter)

And if Twitter owned SoundCloud, it’d be able to more heavily integrate sharing options on the service into its social feeds — perhaps even make it a requirement to sign into the service via Twitter (at the moment, you sign in to SoundCloud with Facebook or Google+). And then there’s the possibility that Twitter might introduce short advertisements before tracks. 

If SoundCloud is so successful, why would it sell?
Getting close to a billion dollars for your company is pretty great, for one.

And! Despite sneakily rising to be one of the best music streaming sites in the business, SoundCloud isn’t necessarily profitable. Though it has a lot of active listeners on the site, the number of people who have actually created accounts is closer to 40 million. And it’s suspected that only about 5 percent of that base actually pay subscriber fees.

Twitter, with its money, could very well help SoundCloud expand its service. You know, just like Facebook promises to do for WhatsApp. Whether that’s at the expense of SoundCloud’s fan base is unclear. Also, the deal hasn’t happened yet, so we’re unsure what Twitter’s plans might be.

If I’m a SoundCloud fan, how should I feel?
Many of the site’s die-hard fans are worried that Twitter will “ruin” SoundCloud, citing its failed foray into music in the past.

As I mentioned before, one of the ways Twitter might attempt to push SoundCloud into the green is by adding short advertisements before its tracks, much like YouTube. It could also try to charge a small listener subscription fee for heavy music listeners, to compete with the likes of Rdio and Spotify. Neither of these options is great for anyone who uses SoundCloud daily.

That’s speculation, however. 

When is this happening?
It’s still unclear if it’ll happen at all! There have been whispers from German publication Der Spiegel that Twitter has decided to hold off on the deal for the moment. And these things take time. After all, Apple hasn’t even bought Beats yet

Follow Alyssa Bereznak on Twitter or email her here