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.”