Editor's Note: This article was originally published on Real Money at 11:30 a.m. on June 16.
Twitter(TWTR) - Get Report ended its week-long rally Thursday, falling in morning trading as the fallout from Microsoft's (MSFT) - Get Reportacquisition ofLinkedIn (LNKD) settled. The company's fundamentals are back in the spotlight; the market may be paying more attention to its latest investment in SoundCloud.
Twitter -- a key holding of the Action Alerts PLUS charitable trust -- invested $70 million in the music streaming service in a funding round that could top $100 million, according to Re/code; it values SoundCloud at about $700 million.
"Earlier this year we made an investment in SoundCloud through Twitter Ventures to help support some of our efforts with creators," Twitter CEO Jack Dorsey said. "They've been great partners of ours over the years and their community-supported approach mirrors ours in many ways."
A couple of years ago there were rumblings that Twitter was considering buying SoundCloud outright, before Twitter walked away from the deal by letting the exclusive negotiating window lapse. Two years later, Twitter came back and made a major investment in the company.
"We can confirm that Twitter has made an investment in SoundCloud. Both companies facilitate and inspire contemporary culture to happen in real time while reaching millions of people around the world," SoundCloud said in a statement.
"This investment will enable SoundCloud to remain focused on building value for creators and listeners alike, and to continue the global rollout of many company initiatives such as our recently launched subscription service, SoundCloud Go."
While there are similarities between the two companies, the investment is small and does nothing to change Twitter's long-term outlook, according to Action Alerts PLUS senior analyst Scott Berman.
"A positive of the move is that it at least indicates that they remain hard at work in improving their platform -- whether their efforts will be rewarded or not is the big question. They have made many product updates since Jack Dorsey has returned as CEO. Many have failed to make a positive impact and resonate with users in a meaningful way," Berman said.
Twitter isn't the only company making a foray into the music streaming space this week, however. Growth Seeker portfolio holding Amazon (AMZN) - Get Report is making plans to launch its own streaming service, according to Reuters. Amazon will charge $9.99 per month for the service, which will launch in the late summer or early fall, Reuters sources said.
Amazon is currently in licensing negotiations with music labels and music rights-holders, according to reports, but enters a business sector that is already crowded. Apple(AAPL) - Get Report , Spotify, Tidal and SoundCloud already have significant subscription numbers. Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
Apple Music has about 13 million subscribers paying $9.99 a month, while Tidal has over 3 million subscribers -- half of whom pay $9.99 a month for the base service, while 1.35 million pay $19.99 per month for the premium service. Spotify leads the pack, with 30 million subscribers.
What Amazon does have over those other services, though, is the ability to pair their streaming service with its popular interactive speaker, Echo. The Echo has sold 3 million units since it debuted a year ago, with plans for the product to expand to Europe later this year.
"It makes perfect sense for Amazon to unbundle its Prime Music from its Prime offering to go after incremental subscribers," said Growth Seeker co-portfolio manager Chris Versace. "Combined with Apple's efforts, this is going to make it a challenging environment for Spotify, Pandora (P) and others. As it relates to Amazon, it's likely to lead to a sum-of-the-parts analysis by the consumer on the value to be had with an overall Prime membership, rather than cobbling together Prime Music, Prime Video and so on."
While Amazon is on sure footing, Twitter has been struggling with user engagement recently. Whether music streaming can be a profitable endeavor remains to be seen, especially with so many different players, but Amazon and Twitter are willing to roll the dice with their respective investments in the space.
"Through SoundCloud, it seems that Twitter is attempting to help with this problem, as any integration with the music-sharing service could potentially increase engagement. Again, while it seems like a positive move from a bird's-eye view, it is yet to be seen whether the platform has simply missed its opportunity to recapture the magic that many once thought it had," Berman concluded.