Twitter’s growth problem is well documented: the platform desperately needs new users, and, critically, it needs them to stay.
One effective way for an online business to expand its reach is through acquisition – when you buy another online brand, you also essentially buy its audience, particularly if the demographic is on point. Now, Twitter is considering buying SoundCloud, the music-sharing company, in a deal that could cost upwards of $1 billion.
Back in January, SoundCloud raised $60 million in funding which valued the company at around $700 million. A buyout from Twitter would be the firm’s largest purchase to date after they acquired MoPub for a relatively paltry $300 million in September of last year.
SoundCloud has 250 million users – which places it about the same size as Twitter – and while there’s inevitably some overlap, a Twitter acquisition would give the company access to a lot of new eyeballs. Moreover, it gives Twitter another shot at the music business, after its own Twitter Music app failed earlier this year.
As importantly, SoundCloud would give Twitter an entirely new source of revenue, plus a large audience to whom it could serve its native ads.
All in all, while the deal might not make sense on paper – it’s not quite Facebook buying Instagram – Twitter seems to be eyeing acquisitions that while not directly related to its business do give the company monetary options that aren’t wholly tied to (or dependent on) its sluggish platform growth. Which has to be good news for the company, and its investors, long term. Still, as of right now this story is just a rumour – we’ll update accordingly as the story evolves.