OurStage Raising More Funding In Quest For Profitability

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Indie music discovery service OurStage decided to fill me in on how well they’re doing as a startup in the difficult online music business, and I was quite amazed to see how much they’ve progressed over the years. On a financial level, the company has fantastic prospects; they expect to hit profitability sometime next year if all goes well. That should sound like music to the ears of their investors: OurStage raised a healthy $17 million in Series A when they started out in 2007 and went on to raise an additional $3 million in Series B earlier this year.

OurStage says it intends to double the amount of financing for the Series B round, which would bring the total investment put into the company to $23 million by the end of 2009.

Since launching publicly back in April 2007 the company has been steadily attracting users to join its service, which enables people to discover new independent artists, rank and share music with others and communicate directly with upcoming singer/songwriters and bands. Thanks to viral growth in combination with dozens of partnerships with music festivals, radio networks and media companies like AOL/WinAmp, OurStage is currently nearing 1 million registered users. The company has also managed to sway 95,000 artists into joining the platform, and in combination with the strong user base they currently receive about 3 million unique visitors on the site every month.

So how do they monetize the service? By focusing on three good old revenue streams that seem to work well for them: sponsoring, advertising and data services. The latter I think is interesting: OurStage is beta testing a service called TRAViS (shorts for Track Validation Services) that is currently being trialled by divisions of four major record labels and will be publicly launched in Q4 2009, and expects to add some more services targeted at industry professionals soon.

Somehow OurStage has also found a way to get close to running a cash-flow positive business with classic advertising (powered by ad platforms like MTV Tribe, AOL’s Platform A and IndieClick) and sponsorships from major corporations like MTV2, JetBlue, Radio One as well as notable artists like Bow Wow, Busta Rhymes and John Legend. According to the company, ad revenues alone have grown tenfold year-over-year compared to the same period in 2008.

Not enough to impress you? Maybe the startup’s board of directors will convince you the company is onto something great here: it includes a former CMO of Yahoo!, David Moore (founder and Chairman of 24/7 RealMedia), the founder and CTO of Maven Networks, the former Chairman and CEO of Interpublic and since last month, former Chairman and CEO of Sony Music Don Ienner.

Refreshing to hear this type of update from an Internet startup these days.

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