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Music-streaming service Spotify acquired Echo Nest today (Thursday) in a move that will have a major impact on the rumored 2015 Spotify IPO.
The acquisition is a shot across the bow to several Spotify competitors who use Echo Nest now and plan to continue using the service in the future.
Echo Nest defines itself as a "music intelligence company" that determines which songs to recommend to users on music-streaming services. The company also offers playlisting, fingerprinting, and audio analysis services to its customers.
Essentially, Echo Nest helps users discover new music, and create playlists and archives based on their music preferences.
According to the company, it has a massive library of data to pull from, including 1.1 trillion data points, more than 35 million songs, and 2.7 million artists.
Echo Nest has numerous high-profile, music-streaming customers including Rdio, Vevo, and iHeartRadio. Spotify was a customer before today's purchase. Financial details of the acquisition have not been disclosed.
Spotify's purchase of Echo Nest should improve the service's user experience and will also help to address one of the larger problems Spotify is facing ahead of its potential IPO…
Acquisition Gives Spotify a Leg Up on Competition
One of the biggest questions facing Spotify ahead of a potential IPO is how it would fare in an increasingly competitive market.
Spotify currently reports 24 million active users, up from 10 million users in 2010. Approximately six million of Spotify's active users are paid subscribers. That's up from 2.5 million in 2010.
While its user numbers are growing at an impressive rate, it still lags far behind its biggest competitor, Pandora Media Inc. (NYSE: P), with 73 million active monthly users.
But that's not Spotify's only competitor…
The music-streaming industry is crowded with services like iTunes Radio, Songza, Sirius XM, Google Play Music All Access, and Rdio all competing for users. That competition is something that has made Money Morning's Chief Investment Strategist Keith Fitz-Gerald question the Spotify IPO.