Social.FM, the three year old startup which helped users discover music through their social network in a similar manner to Last.fm, has confirmed it is shutting down. GigaOm carried a tip-off to that effect, now the site is carrying the following message:

To our Valued Customers,

We regret to inform you and apologize for this inconvenience, but Social.FM will be shutting down the system on July 31st, 2008.

The Company is unfortunately no longer in business and therefore cannot continue its service to you.

Regards,

Mercora, Inc.

Social.FM was the re-branded Mercora, which launched in June 2005 and raised $5 million from Norwest Venture Partners with the idea of selling ads next to music searches on its P2P network. But competition from Pandora and Last.fm made it change its strategy towards a social network. Social.FM may also have suffered from the huge jump in royalty rates for webcasting music.

Its Compete graph says it all:

The company won a deal with Microsoft last October which saw it join the Microsoft Mobile2Market Program which promotes “Designed for Windows Mobile” applications. But since all the interesting music action is really on the iPhone – and Last.fm’s iPhone application totally rocks – it looks like Social.FM’s app wasn’t going to get much use. Last.fm was last year sold to CBS for $280m and has since re-designed and switched on an aggressive play against music labels.