Twitter's (NYSE: TWTR) CEO recently stated in an interview that the social networking company invested $70 million in Soundcloud, a popular music streaming service. Speaking about the deal, Twitter CEO Jack Dorsey said: "Earlier this year we made an investment in SoundCloud through Twitter Ventures to help support some of our efforts with creators. They've been great partners of ours over the years and their community-supported approach mirrors ours in many ways."
Soundcloud is popular as a platform for musicians to upload and share their music. Because of its status as essentially the #1 platform for anyone who want to share their music for free, it boasts 175 million listeners monthly, and has been gaining traction in its financial situation, as it recently signed a deal with Sony Music, giving it access to artists including Beyonce and Justin Timberlake. It already has deals with a network of independent labels, such as Warner Music Group, Universal Music Group and Merlin.
Though it has struggled with monetization and licensing issues, it has come a long way since, just this past year revealing a subscription based service called Soundcloud Go similar to Apple Music, where subscribed members gain access to music inaccessible to non-paying members, as well as enable offline listening to users who listen to music on-the-go.
The business-related incentives of the investment remain unclear, especially since Twitter already walked away from an acquisition deal last-minute two years ago. Soundcloud has been regarded as financially-unstable in the past two years because of the lack of a steady revenue stream. A Soundcloud representative did comment that the investment will enable SoundCloud to remain focused on building value for creators and listeners alike, and to continue the global rollout of many company initiatives such as the recently launched subscription service, SoundCloud Go.
Twitter has also been unveiling plans to make major changes to its own platform. With competitors like Facebook (NASDAQ: FB), Instagram, and Snapchat (NYSE:SNAP) dominating the attention of the younger social media audience (13-24), change is necessary for the company to stay relevant. Twitter currently has a deeply-devoted user base and is making attempts to address the demands of its users - most notably, it is making changes to remove some of the restrictions that have frustrated a user base that demanded a smoother, frictionless experience caused by the 140 word-limit.
Twitter is mainly trying to make it easier to post pictures, videos, and links, no longer taking away the number of words left in a tweet for having external media sources. It will maintain the 140-word limit, as it is critical to defining the brief, conversation-like spirit of the platform. While it may seem like right now Twitter's investment in Soundcloud is one-sidedly beneficial for Soundcloud, it is telling of the evolution Twitter is about to undertake to survive and thrive in the social networking industry.