Friday, March 28, 2008
Spiral Frog Gains Users, But Revenue Reckoning Is ImminentSpiral Frog paints a positive picture with its latest press release boasting that the number of monthly visitors double between January and February to more than 2 million. The number of registered users passed 850,000 during the month as well.
However, according to CNET, the day of reckoning may be close at hand as the company must report it's quarterly earning within the next few days. Spiral Frog is burning through millions per quarter, with much of that likely going to royalties to Universal Music, it's sole major label partner.
As I've said from day one, the business model is untenable, with the paltry ad dollars per download not even close to what they must pay Universal in royalties per song that gets legally downloaded onto computers.
I downloaded 5 tracks today and saw only a few banner ads (I bet the CPM is probably in the single digits). Once the songs are downloaded, you can play them back in Windows Media player so you never have to seen an ad again. Spiral Frog requires that you log in to the site once a month to keep your membership active. Songs that you've downloaded won't play without an active membership, but that's a small price to pay for what becomes ad-free music after it's downloaded.
Spiral Frog needs to acquire bet user data to target consumers and use rich media interactive ads to even have a snowball's chance of breaking even. But they may not get the chance if they don't slow down the cash burn.
By John Gartner at 12:45 PM | Comments (0)