Twitter Lost Its Shirt In Its SoundCloud Investment

SoundCloud Twitter on the Music 3.0 blogIn 2016 Twitter invested $70 million in SoundCloud, which looked to be a wise venture since the company was valued at around $700 million at the time. Things in the tech world change fast though, as in it’s 2017 annual report, Twitter indicated that it was forced to write off the entire investment because that money is “not expected to be recoverable within a reasonable period of time.”

That, in a nutshell, is a prime indication of the dire straits that SoundCloud finds itself in these days.

The company brought in a whole new management team, but that didn’t change its inability to make money much, as the business model never was that sound to begin with. All attempts to find ways to leverage the platform into a subscription service have been met with resistance, first from creators (the main users) and then consumers. In fact, consumers never found SoundCloud that attractive in comparison to other services available, and that’s been its main problem.

The interesting thing here is that Twitter actually tried to buy SoundCloud back in 2014 and even offered as much as a $1 billion, but thought better of it after some negotiation and walked away from the deal. That decision now looks pretty good in retrospect, although it’s difficult to know if a synergy between Twitter and SoundCloud might have beneficial to either or both companies.

Meanwhile Twitter isn’t growing much but it did manage to bring in $2.4 billion in 2017. SoundCloud, in the meantime, is struggling to find an audience willing to pay $5 for a monthly subscription.

SoundCloud was thought by many to be the audio equivalent of YouTube, but where YouTube managed to grow and become profitable, SoundCloud was never able to turn that corner. Now with increased competition from MixCloud, Soundclick and a host of others, it will be more difficult than ever for the platform to survive.

Crash Course image
Spread the word!

Comments are closed