This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Twitter Needs SoundCloud More Than the Reverse

NEW YORK (TheStreet) -- A report made the rounds Monday that Twitter (TWTR) was looking closely at buying SoundCloud.

No price was mentioned. SoundCloud's last financing round pegged its valuation at $700 million, so any deal would presumably be well north of that.

The deal makes perfect sense for Twitter but no real sense for SoundCloud. Here's why.

Twitter shares are still way overvalued at $32 even though that's well below their all-time high of $74 from last December. Twitter's problem is that its users are still a relatively small group for which Twitter does not have that much rich demographic data.


WATCH: More tech videos on TheStreet TV | More videos from Brittany Umar

Twitter has about 255 monthly active users. Weibo (WB) has about 180 million. Twitter's market cap is about $19 billion. Weibo's is about $6 billion. Of course, maybe there's a little extra value to Twitter's U.S. users because advertisers will spend more to reach them. But three times as much? Either Twitter's overvalued, Weibo's undervalued or the truth lies in the middle.

So what does this mean?

It means Twitter needs to diversify.

It should have bought Instagram, but it waited too long and didn't go public soon enough to be able to use its stock for acquisitions.

It did buy MoPub recently to try to show that even though it serves only 250 million mobile users, it can reach a lot more than that through the mobile ad network Twitter sells to. We will see how that plays out over time.

SoundCloud is the leading place to upload and consume audio. It's an incredibly popular place for music and also, increasingly, podcasts. Many have called it the YouTube of audio, and it's in a growth groove.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs