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.

Related Link: Pandora Media Again Rumored As Takeover Target

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 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.