SoundCloud Moves Into The Advertising Realm
SoundCloud, a fast-growing privately held music streaming service, launched a plan to carry advertising for the first time Thursday.
"I am very optimistic," SoundCloud investor Fred Wilson said in a post Thursday on Business Insider.
Wilson, a partner in Union Square Ventures, is among venture capital investors that have poured more than $100 million into SoundCloud. Others include Kleiner Perkins Caufield & Byers and Index Ventures.
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Typically, venture capitalists seek an exit strategy that features an initial public offering or sale of the venture.
SoundCloud, sometimes called the YouTube of music, was valued at $700 million in a funding round in January, according to the Financial Times. It claims to reach 350 million people a month, including 175 million who click "play" at least once.
Accepting advertising is part of a licensing deal with major record labels designed in part to avoid lawsuits of the sort that once sunk Napster, according to a report Thursday in The New York Times.
The labels will obtain an equity stake in SoundCloud as part of the licensing deal, the Times said.
In June, Twitter (NYSE: TWTR) was reportedly in talks to acquire SoundCloud for as much as $2 billion, but apparently withdrew.
"It's a good bet Twitter will come back," Forbes contributor Bobby Owsinski wrote last month.
Owsinski said major labels are seeking an equity stake of between nine percent and 14 percent.
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