The potential Twitter acquisition of audio-streaming platform SoundCloud would kill two birds with one stone. The popular audio-sharing service would grow under the ownership of one of the world’s biggest social media service. It would also help the social media service add much-needed users.
Twitter has a growth problem. The company’s stock has plunged this month after the company’s first-quarter earnings report showed year-over-year growth in active users had fallen to 25% from 30% in the previous quarter. The current share price of $32.07 is above the $26 IPO price but well below the $45.10 opening price and 57% under the all-time high of $74.73 set in December. Twitter is not yet profitable — it lost $132 million last quarter alone — but investors would be willing to overlook losses if the company could better grow its user base.
SoundCloud could help solve Twitter’s growth problem. Twitter is already a popular way for SoundCloud’s 40 million users to stream music. According to one recent analysis, SoundCloud is by far the most-tweeted audio streaming platform with nearly three times the tweets of Spotify and over five times the tweets of Last.fm. More SoundCloud users, a likely byproduct of an acquisition, would lead to even more sharing and listening on the Twitter platform.
SoundCloud is a more natural growth partner than We Are Hunted, an acquisition that turned into the now-defunct Twitter #Music. Twitter #Music was a chart that tracked music trending on the Twitter platform. People could use Twitter #Music as a discovery tool, listen to full tracks on Spotify or Rdio, and watch videos on YouTube and Vevo. It was a creative approach to the age-old problem of music discovery, but consumers tuned out.
Look to Vine for an example of how Twitter vertically integrates a media service. In October 2012 Twitter acquired Vine, an app that records and shares videos up to six seconds in length. Twitter has improved the product, partnered with brands and leveraged the popularity of its social platform. Vine now has over 40 million registered users, up from 13 million in June 2013.