Consolidation started on Monday when struggling professional social network LinkedIn (NYSE:LNKD) was approached by Microsoft (NASDAQ:MSFT) but by mid-week the market was digesting news that Twitter (NYSE:TWTR) has bought a chunk of audio file sharer SoundCloud.
Social media has seen some consolidation in the past two years in spite of the regular launch of new products, but events this week are certainly turning heads as we reach the summer Solstace.
Indeed, Twitter shares were still rising from the LinkedIn news as many now see struggling Twitter as a possible takeover target.
This week Twitter announced that it had bought $70mln of SoundCloud. Not quite consolidation, however. Two years ago Twitter mulled buying SoundCloud. This time it has decided to take a stake, which some analysts reckon would swell to $100mln in the coming months.
SoundCloud, however, is now valued at $700mln – the same as it was in 2014 when Twitter had expressed an interest before walking away. In a sense, SoundCloud and Twitter are both in the same camp – both need help!
Twitter only owned up this week to its SoundCloud stake, but apparently the purchase was made earlier this year.
At this stage no one knows whether the stake marks a strategic partnership. But Twitter stands to increase growth and engagement with a new add-on service while SoundCloud has found a new outlet through which to promote its newly launched subscription service SoundCloud Go, which is crucial to the company’s success.
But what exactly does SoundCloud offer? It is not a music streaming service in the guise of Spotify which catalogues only official record releases. SoundCloud, on the other hand, offers an outlet mostly for new talent, podcasters, students of music, or those promoting their sampled creations. DJs have been known to add 60-minute audio club mixes on the platform, taking a fair whack of server space in the bargain.
SoundCloud’s nearest rivals include YouTube, only the former is limited to audio while the latter handles audio and video creation.
YouTube is owned by the IT behemoth Google () and has a smaller user base.
Pundits may well ask what SoundCloud can offer that YouTube already doesn’t. Were it not for the LinkedIn effect, Twitter shares might have dropped this week, not risen.
Twitter shares closed up 3.9% at $15.96 on Wednesday.