Why Did Google Buy Songza? (Analysis)

10:54 AM PST 07/02/2014 by Glenn Peoples, Billboard
Google

Spotify rather than Beats may be in its sights, indicating a bullishness about Internet radio.

Google's announcement that it had reached a deal to acquire Internet radio service Songza marks the third entrant in the Internet radio business by a leading technology company in the last nine months. Songza gives Google a webcasting service to match Apple's iTunes Radio and Amazon's new Prime Music.

PHOTOS How Beats Electronics Came to Be Worth $3 Billion to Apple 

Why the Internet radio land rush? Research from Edison Research and Triton Digital shows Internet radio services are already mainstream. Although Songza is recognized by just 5 percent of consumers — a number likely to improve under Google's ownership — the most recognized music streaming brands are Internet radio services: Pandora (70 percent), iHeartRadio (48 percent) and iTunes Radio (47 percent). Lower brand recognition comes from on-demand services Rhapsody (40 percent), Spotify (28 percent) and Google Play All Access (24 percent).

With the exception of Pandora, a standalone Internet radio service with 77 million monthly users, Internet radio is commonly used together with other products and services. Apple uses iTunes Radio to supplement its entertainment services and complement the iTunes Music Store. Amazon offers Prime Music to boost the value of its Prime service and sell more of everything in its vast virtual store.

With Songza, Google gets a service to help attract large numbers of the young consumers desired by technology companies. About half of plugged-in Americans, roughly 124 million people, use a music streaming service monthly, according to Edison. Participation is especially high in the younger age groups. Three-quarters of the 12-to-24 age group use a music streaming service monthly compared to 50 percent of the 25-to-54 age group and just 21 percent of the 55-and-over group.

STORY Google Offered $15 Million to Buy Music Playlist Site Songza (Report) 

There's also an opportunity to engage with older consumers once Internet radio becomes more mainstream in automobiles. While 43 percent of the 12-to-24 age group listens to music streaming services in the automobile, just 27 percent of the 25-to-54 age group and 10 percent of the 55-and-over age group do so.

Finally, free radio gets people through the door. Google's acquisition might be seen as a reaction to Apple's acquisition of Beats Music, a subscription service that echoes Songza's emphasis on curation and playlists. But a closer parallel is Spotify's mobile app, a free service meant to create demand for the full-featured, paid service. Songza's particular approach could be secondary or incidental to the leverage it offers in competing with Spotify, Beats Music and other subscription competitors to Google Play All Access.

This article originally appeared on Billboard.com

comments powered by Disqus