“The Switch” and when SoundCloud might flick it

SEPTEMBER 13TH, 2016 — POST 253

It might come as a surprise given the current internet landscape that is dominated by Facebook and Google that it took Facebook five years to turn a profit. In 2009, with users reaching 300 million and still three years from IPO, Facebook began to turn a profit, both from ad sales and in-app purchases (hello Farmville et al). Facebook focused on growing users by making Facebook a place people wanted to be, simultaneously growing one of the most valuable products in the internet era: an audience to sell to advertisers. One users were on board, it was as trivial as flicking a switch, the switch, with the Facebook homepage gradually becoming flooded with ads and promoted posts. The Switch has been flicked by YouTube, by Instagram, by Twitter, by basically any company that has garnered a base of users who are committed to a platform, and is one of the clearest paths to monetisation in an era of “free” platforms.

Atlas, the data and visualisations subsidiary of Quartz, yesterday published a particularly surprising fact about SoundCloud that recontextualises the current wars for music streaming supremacy. With Spotify and Apple Music in close competition (with Tidal more than just making up the numbers), one of the struggles either service faces is differentiating it from the other. Because, when it comes down to it, both basically share the same catalog, served from the same collection of licensing deals. This catalog, understood to consist of around 30 million songs, is only really augmented by certain features — like Spotify’s Discover Weekly or Apple Music’s stable of exclusive releases — keeping competition between the two feels like a fight over who can lay the best table setting when the food they’re serving is the same.

SoundCloud, the user-generated music social network and streaming app, instead boasts a catalog of 135 million “songs”, more than four times the mostly shared catalog of Apple Music or Spotify. Exactly what this chart considers a “song” is unclear, but either interpretation puts Spotify in a place of dominance their financial state — by all reports they’re bleeding money — might provide little indication of. If “songs” means strictly music (whether single tracks or entire mixes), it’s important to note exactly what they are. These aren’t songs that likely exist anywhere else, and if they do it will either be on YouTube or Bandcamp. If there’s 135 million songs on SoundCloud which aren’t (for the most part) on anything else and conceivably couldn’t be on anything else (given the user-generated nature, not some licensing deals), SoundCloud not only has a place people want to be, but a place that would be next to impossible to replicate elsewhere.

If “songs” here is used as I suspect it might be (SoundCloud’s own language refers to 135 millions “tracks”) — namely to be a catch-all for any type of upload, music or not — SoundCloud might even have more cultural leverage for when they flick The Switch. If “songs” aren’t only music, there’s one main candidate medium that probably comprises the bulk of this figure that isn’t metric. That medium is podcasts. SoundCloud has long been the server of choice by which podcasts are put online — the first stop before they’re funnelled into the feeds governed by Apple’s iTunes or something like Stitcher. Whilst it is hard to speak with much clarity on these things, I’m compelled to believe that SoundCloud probably holds the largest depository of podcasts in the world.

Beyond this, SoundCloud’s “Go Pro” page — where creators can pay for subscription for pro features like unlimited uploads and better data on engagement — boasts that “175 million people listen to SoundCloud each month”, a metric that crushes Apple Music’s 13 million subscribers or Spotify’s 37 million. But of course, it’s disingenuous to compare these figures directly: people will often listen to SoundCloud content in a variety of spaces and aren’t paying a subscription to do so. It does however reflect the penetration SoundCloud enjoys, a penetration that it seems the company is still spinning its wheels trying to unpack.

SoundCloud’s problems are similar to Twitter — they provide a product people want but it’s difficult to get those people onto the platform when the content is so easily spread across web environments out of the company’s control. Twitter fights and tweetstorms are now a common news story: the story literally just a series of embedded tweets. As a podcast server, and with an extremely robust embedding widget, SoundCloud is easily engaged with outside of SoundCloud. And to flick The Switch, that’s a problem — there’s a diminished audience product that could reliably be sold to advertisers. SoundCloud Go — SoundCloud’s recently launched streaming service — is an attempt to build user investment in the platform, but it doesn’t seem to have made much of an impact, partly because so much of what’s good about SoundCloud is still available for free.

Exactly what moves SoundCloud ought to make to be able to flick their own version of the monetisation switch is hard to work out. They’re still a weirdly niche yet vital foundational internet service. But they’re numbers — both in catalog size and monthly engagement — suggest it would be unwise to leave them out of the music streaming conversation all together.

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