SpiralFrog loses $3 million in three months

SpiralFrog loses $3million in three monthsSpiralFrog, the ad-supported music download service that we reviewed back in September, is bleeding cash at a rate of $1 million per month over the last three months.

Marshal Kirkpatrick, over at our sister blog Read/WriteWeb writes:

According to financial filings required by the company’s investors and dug up by Joseph Weisenthal at PaidContent, the company reported a Q3 loss of $3.4 million on revenue of only $20,400, leaving only $2.3 million in the company’s bank account.

Such huge revenue losses based on a measly turnover of only $20,400 doesn’t seem to bode well for SpiralFrog’s business model. It’s hard to comprehend how the company has such high operational costs, although it’s a lot easier to decipher why there has been such low take-up of the service. Getting music for “free” sounds great until you factor in the inconvenience of having to log in regularly to sit through more ads and surveys in order to stop the music you’ve already downloaded from expiring so that it will continue to play. Couple this with the fact that the music only works on a Windows PC through Windows Media Player — no transferring to portable devices, let alone an iPod — and it’s clear that SpiralFrog is no competitor to piracy or other more traditional download services such as iTunes.

The company’s answer? Marketing, marketing and marketing — including ‘hiring’ bloggers.

From SpiralFrog’s SEC filing:

“Execute marketing campaign in the United States aimed at 13-34 year olds, through one or more of the following approaches: hire gorilla marketing firms for unconventional promotions; consumer targeted press releases; advertising on some of the youth community sites; or hiring ‘bloggers’ to attract attention to us on the internet.”

Also see: Music industry: five alternative business models

last100 is edited by Steve O'Hear. Aside from founding last100, Steve is co-founder and CEO of Beepl and a freelance journalist who has written for numerous publications, including TechCrunch, The Guardian, ZDNet, ReadWriteWeb and Macworld, and also wrote and directed the Silicon Valley documentary, In Search of the Valley. See his full profile and disclosure of his industry affiliations.

2 Responses to “SpiralFrog loses $3 million in three months”

  1. David Mackey says:

    Mmm…Thats gotta hurt. I think they have to streamline their method. Make it as easy to listen to music as Napster. Thats what I use now when I want to listen to a song legally, but not buy it (yet).

  2. phil says:

    ‘gorilla’ marketing firms? That can’t be ‘sic’ – surely not. If it is, they deserve all the woes they get. Muppets.

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