Thoughts on why Twitter didn’t pull trigger on Soundcloud

Yesterday Peter Kafka reported on acquisition talks between Twitter and Soundcloud.

Turns out the deal wasn’t to be.  According to the Wall Street Journal, Twitter let an exclusive negotiating window expire, deciding in the end the numbers didn’t add up.

I suspect the bigger reason the company backed out is that, while Soundcloud has social in its DNA much like Twitter, what it isn’t is a Beats or Spotify, which is in reality what Twitter is probably looking for rather than a publishing platform.

Which is exactly what Soundcloud is. a publishing platform. In essence, they’re a social-centric WordPress for sounds, and much like WordPress, the company’s main path to monetization is through paid accounts for publishers.  And while I can envision huge benefits for Soundcloud that would come from tying together more closely with Twitter (they already have a nice integration for Soundcloud embeds within tweets), I don’t see as much upside for Twitter.

Why? Because it’s apparent from the company’s recent moves that they see their path to monetization through media and commerce.  On the media front, social engagement and analytics for big media (i.e. TV) is one path they’ve invested in heavily, and on the commerce side its recent Amazon deal makes it clear they see social chatter morphing in some way to social commerce.

And while Soundcloud has been strong in the indie music community as a discovery platform, it’s only found moderate success with bigger artists, and it’s not certainly not a streaming or sell-through service for major label music today.

And that, in the end, is what probably caused Twitter to pull out of the negotiations. They have this social publishing thing down. What they need to do is figure out how to make money.

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Michael Wolf

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