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Twitter Inc (NYSE:TWTR) is reportedly thinking about buying music and audio-sharing company SoundCloud, according to Re/code. Sources apparently told the website that both companies are considering striking a deal. SoundCloud is based in Berlin, and it allows users to upload audio files and share them through the web. As of October, the company had 250 million users.
Twitter seeking a pricey acquisition?
If Twitter Inc (NYSE:TWTR) really does end up buying SoundCloud, it would be the micro-blogging company’s largest acquisition by far. Through a funding round earlier this year, SoundCloud raised $60 million. That round put a value of $700 million on the company. Twitter’s last acquisition was MoPub, which it bought for more than $300 million last fall.
Twitter Inc (NYSE:TWTR) could be interested in SoundCloud because so many of its users share links to music and talk about music on its platform. The company attempted to get into the music sharing business last year by launching its Twitter Music app, although the app did not do well. Twitter dumped it in March.
Twitter looks for ways to expand
The main reason investors have begun to worry about Twitter Inc (NYSE:TWTR) is because of its stalling user growth. By purchasing SoundCloud, the company could significantly add to its user count. Twitter also has about 250 million users, although it’s likely that many Twitter users also use SoundCloud. Nonetheless, the acquisition could still help Twitter grow its user base because it’s unlikely that the overlap covers all 250 million.
SoundCloud may also be interested in a deal with Twitter Inc (NYSE:TWTR) because it could then sell some ads next to or in front of its music streams. Currently the music sharing service doesn’t have a significant advertising presence, although it did move into native ads last year. A deal with Twitter would significantly expand its presence in the ad industry,however.
SoundCloud to have a YouTube-like future?
The description of SoundCloud as the “YouTube of audio” may indeed be an apt one. Some see the company as currently being in a position similar to the one YouTube was in a few years ago. Currently SoundCloud doesn’t have a distribution deal with major record labels. The issue is that some of the songs that are on SoundCloud have been shared without the permission of the owners. Others, however, have been shared by the owners of the audio files themselves because they see value in the company’s service.
Just as the YouTube acquisition turned out to be a great deal for Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), so there’s a chance for Twitter Inc (NYSE:TWTR) to benefit tremendously from acquiring SoundCloud. The two companies already have a good relationship. In fact, Twitter had been planning on offering SoundCloud through its music app, although it scrapped those plans when music distributors complained about the lack of licenses.
In addition, users of Twitter Inc (NYSE:TWTR)’s micro-blogging platform often post links to SoundCloud files in their tweets. A survey conducted earlier this year found that users of Twitter share links to SoundCloud files more often than they do those from any other music service. The two companies also have investment links, as early Twitter investor Union Square Ventures and Twitter board member Peter Chernin have both invested in SoundCloud.