SoundCloud may finally be gearing up to make some serious money

SoundCloud is one of those rare European online startups that is cornering its market: if you want to embed or share pure audio, whether it be music or podcasts, you’ll probably use this service. But that said, even if SoundCloud is the great hope of the Berlin scene, its ability to turn a decent profit has remained questionable.
A couple of moves revealed at SXSW on Monday may change that. The first is a drastic simplification and improvement of SoundCloud’s paid-for premium tiers -– the company’s primary source of income – while the second is the introduction of a so-called Pro Partners tier for brands. The Pro Partners tier is not only a serious potential revenue source, but it also introduces a visual element to the site that is likely to trickle down to ordinary consumer accounts in time.

Freemium boost

Let’s look at the simplified freemium model first (bearing in mind that free membership allows two hours of uploaded audio). Previously, SoundCloud had four paid tiers, starting on the Lite package, which offered four hours of audio for €29 ($38) a year, and grading up to a Pro Plus package that included unlimited audio and various analytics for €500 a year.
There are now just two paid tiers for the average user: a Pro package that is priced the same as the old Lite (€29 annually or €3 a month) and offers the same amount of audio storage, but with added analytics and controls; and a Pro Unlimited tier that adds unlimited storage at €9 a month or €99 a year.
In short, becoming a very heavy SoundCloud user just got significantly cheaper and more attractive.

Paving the way for ads?

Eric Wahlforss, Soundcloud co-founderThe Pro Partner program is in beta for now, with early users including Snoop Lion, Red Bull, The Guardian, Kevin Smith’s SModcast and even the Grammys (for the CenterStage talent contest). These brands and musicians are able to promote their profiles in the “Who To Follow” section, and they can also create what SoundCloud calls “moving sounds” — essentially, image slideshows that run behind the service’s trademark soundwave representations. Moving sounds can be reposted just like any normal audio stream, although they don’t work in embedded streams yet.
As SoundCloud co-founder and CTO Eric Wahlforss pointed out to me, the company has been working with artists and major labels for a while now, but this move opens up new possibilities:

“We’re changing the canvas so it becomes more visual. It’s cleaner and simpler. As an audio partner or a brand you get that canvas to express your identity on. It works for brands who are creators of audio content as well –- we’re only bringing on brands that are creators as well right now.
“Some features — or all even, we hope –- will eventually trickle down to all of the tiers.”

For artists, I can certainly see the introduction of “moving sounds” providing an opportunity for simple, stylish visual expression. The images will need to fit into the bar format used for all SoundCloud sounds, which differentiates the potential results from, say, those slideshows people create when wrangling an audio track into a terrible makeshift YouTube video.
SoundCloud RedBullBut the real opportunity here will be for advertisers. It is now much easier to imagine a scenario where brief ads are inserted into streaming playlists, in between tracks, with both audio and moving graphics being part of the deal. And, asked whether this is the direction in which SoundCloud is heading, Wahlforss certainly didn’t deny the possibility:

“In general, there is a whole movement of native advertising. We’ve seen success with YouTube with promoted content, so we feel there isn’t anything happening in audio on the native advertising side. We think we’re the best positioned of any service out there to do that and to really work with creators.
“[However] we’re in the early stages right now; it’s in the experimental phase. Right now these pieces of content won’t appear unless a friend of yours reposts the content.”

Wahlforss’s caution is well-advised: SoundCloud may be the de facto user-generated audio platform on the web now -– an expensive game to be playing -– but it is not invincible. People are willing to tolerate ads to some degree, but not if they are too intrusive. Monetizing this platform will mean walking a delicate line.