After a long search that turned up no other buyers, Sean Fanning’s startup Snocap is being bought by music social network imeem. We first reported the deal in February. Imeem is officially announcing the deal today. Terms are not being disclosed, but we believe it was less than $5 million—a fire sale price compared to the $10 million that was invested in Snocap. Fanning, most famous for founding Napster, may be getting a double payday because his other startup, Rupture, is also rumored to have been snapped up recently. For imeem, this is its second small acquisition, after buying Anywhere.FM in January.

Imeem depends on Snocap’s digital fingerprinting technology for its entire business model. Consumers can upload any songs they like to their imeem profiles and playlists. The Snocap technology matches the music to its database of 7 million songs, which then allows imeem to allocate a portion of its advertising revenues to the music companies who own the copyrights to the songs.

When Snocap first put itself on the block last Fall, imeem founder and CEO Dalton Caldwell was hopeful that another buyer would turn up so that he could continue to license its technology. That didn’t happen, so he had to make an offer himself. If anything, this should underscore the risk startups take when they rely on other startups for the key technology that their business is built on. Caldwell himself is philosophical about this tradeoff:

In general, this is a fundamental and strategic question faced by all startups. I was always given the advice to focus, focus, focus on core problems. On the other hand, it’s important to build enterprise value. What I am saying is there isn’t really a right answer. You just have to make the right call to the best of your abilities at the time. You are also constrained by time and capital.

In this specific case, working with Snocap helped us get our ambitious ad-supported music vision out in a very quick way by using their four years’ work/experience and technology they had already built. The fact they had a working registry with existing deals with content owners (including all four majors) was great — having this existing, licensed technology definitely helped us make the case while we were doing all of our licensing deals.

Looking at this now, I think this was a really great acquisition for us because of how much time, effort, and resources would go into building the Snocap part of the technology stack ourselves. The content ID and registry piece is important to us as a social media network, not only for music but for video. Letting people upload and share music and video keeps people engaged on the site, and gives imeem a larger, richer media library — this pulls in more users, who then upload and share more music and video.

The Snocap registry is a key part of imeem’s APIs, which allow third-party developers to build their own music apps on imeem. Snocap also powers 110,000 artist-centered music stores on MySpace, and imeem will continue to offer and enhance that service.

Caldwell is gaining some key employees with the deal, including Snocap COO Ali Aydar, who was Sean Fanning’s first hire at the original Napster. “We’re now close to 100 employees,” says Caldwell. “Last week, we leased another floor in our building.” In its own way, imeem is now carrying the Napster torch.

Yet industry insiders still question whether imeem can make any money based on its generous deals with the music labels, but its service is resonating with consumers. According to comScore, imeem attracted 19 million unique visitors worldwide in February. The bet here is that perhaps at high enough volume, it can start to break even.

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

We’ve confirmed through sources that MySpace has settled the pending litigation Universal Music, albeit in a very unique way. They’ll create a new MySpace Music joint venture, with equity stakes from all the major labels (except EMI, which is still negotiating).

Expect an announcement next week, and a launch of the new music property in July or August 2008. The news was first reported by Reuters, with additional information from SAI.

The new company will own the MySpace music property, get a cash infusion of $120 million or so from parent company News Corp, and distribute that $120 million to Sony BMG, Universal Music Group and Warner Music Group. In return, the litigation will be dropped and the labels will give streaming and downloading rights to their catalog to the new entity. Approximately $100 million of the News Corp. capital will go to Universal; the rest will go to Sony BMG and Warner.

Users will be able to stream music on demand, create playlists, and add widget music players to their profiles. The streaming will be advertising supported - at first via display ads (like Imeem), and later via in-stream audio ads. DRM-free downloads will also be available, either advertising supported or on a pay basis like Amazon’s Music Store.

Advertising revenue will be split among the joint venture partners according to their equity stakes, not based on play counts.

CEO Search

MySpace is currently conducting a CEO search for the new entity, which is being led by MySpace COO Amit Kapur on an interim basis. Sources say that Kapur and MySpace CEO Chris DeWolfe heavily recruited Ian Rogers, who just left Yahoo for stealth startup Topspin Media.

In case it isn’t abundantly clear - the big labels are all but giving up on charging for recorded music. Instead they’re trying to grab equity stakes in the distribution channels that directly touch consumers.

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

For those of you who thought OpenSocial was going to make things easy for developers who want to create social networking apps once and deploy them everywhere, think again. More splintering is occurring. Tonight, rising music social network imeem (an original member of OpenSocial) is releasing its own software development kit for programmers to create applications on imeem. Imeem is not abandoning OpenSocial, it is just that programmers will be able to build a lot cooler apps using the new imeem Media Platform. But don’t worry, support for OpenSocial is “coming soon.”

So what’s so special about this API that would make programmers bother to take the effort? It offers access to imeem’s vast music library and all the profile data of its 24 million members worldwide (comScore says 19 million, but who’s counting?). It is also the same platform that imeem itself uses to creates its own applications. CEO Dalton Caldwell realizes he is not going to convince developers to ditch Facebook or OpenSocial, but he does think he is offering something unique enough to pique their interest. He admits:

This is a baby step. We are just shipping code. This is something we built for our own consumption. We are not saying just, “Hey, port your existing app to imeem.” That is played out. What we think is cool is enabling new apps by saying, “Hey, you can access this insane library of music.”

Developers will be able to tap into imeem’s fully licensed library of millions of songs from all the major record labels and create their own music apps on imeem. Imeem’s media player, music search, recommendation engine, member profile data, contacts, playlists, videos and photos will also be exposed in the APIs. The apps will all be built on Adobe Flex to start, with support for Javascript coming down the line. And there will eventually be a way to port OpenSocial apps to the imeem Media Platform.

The types of apps that could be created include music players with new skins and controls, dating apps based on musical compatibility, smart playlists automatically generated from a user’s list of favorite bands, a “Name That Tune” quiz, or a playlist based on what your friends are listening to. All of this would be great if programmers could take these apps to other sites like MySpace. But for now they can’t (there are a few little licensing issues to work out). So is this dead in the water or will imeem’s large audience and music library be enough of a draw?

Here is the full list of the imeem Media Platform’s capabilities:

* Access any music, videos, and photos available on imeem

* Fully customize the imeem media player (via a “chromeless” player)

* Upload music, video or photos, and modify metadata for that content

* Access imeem’s social graph, including users, friends, and associated profile data

* Create, edit, and manage new playlists, or access millions of music, video and photo playlists created by imeem users

* Search imeem’s media content by keyword, artist, song title, or album name

* Ability to favorite media and playlists back to the user’s profile

* Access imeem’s recommendation engine and discovery tools

Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

In the global race to be the top social network, MySpace and Facebook are neck and neck. In January, 2008, MySpace was still the biggest social network worldwide with 109 million unique visitors, according to comScore. But Facebook was close on its heels with 101 million. (Meanwhile, the data in the U.S. for Facebook at least shows a possible slowdown in growth).

While MySpace and Facebook are fighting it out for the top spot, back in the second pack some interesting sprints and scuffles are going on that are worth keeping an eye on. Everyone in that second pack (Hi5, Freindster, Orkut, Bebo, Imeem) are about a third to a quarter the size of the leaders in terms of worldwide unique visitors, so I’ve isolated their performance in the chart above (it is harder to see if you include Nos. 1 and 2, MySpace and Facebook).

In January, both Hi5 (No. 3, in red) and Friendster (No. 4, in blue), made moves to pull away from Google’s Orkut (No. 5, in green) and Bebo (No. 6, in yellow). The latter two maintained a more steady pace. Coming on strong from behind is Imeem (No. 7, in purple), which surpassed Multiply (No. 8, not shown). The chart below has most of the stats, except for the last two—Imeem had 17.8 million global visitors in January, 2008, a 477 percent annual growth rate (Multiply had 17.6 million, a healthy 203 percent rise from the year before).

For Hi5 and Friendster, global growth is a major part of their game plan. Friendster, for instance, which dropped off the radar for most of us in the U.S., is now the single largest social network in Asia. It’s top five countries are the Philippines, Indonesia, Malaysia, the United States (legacy members who never left, plus new growth among Asians here), and Singapore. Friendster has kept its growth going by launching fan profile pages for Asian pop singers, launching four new languages since September (Chinese, Japanese, Korean, and Spanish), and letting developers create apps for its site.

So does that mean that Friendster and Hi5 are worth more than the $1 billion Bebo is rumored to have sold itself for? Not necessarily. It depends on the actual composition of their members, click-through rates, and other financial factors. Generally speaking, advertisers like to target their campaigns by geography, and pay less for ads that target populations with lower per-capita spending power than in the U.S., Japan, or Europe. So not all members are worth the same to advertisers, and thus to potential acquirers. But as social networks become saturated here in the U.S., everyone will have to look overseas to keep growing.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

Digital music wholesaler Snocap, long searching for a buyer, is being acquired by music streaming site Imeem. The price will likely not be disclosed.

Snocap was founded in 2002 by Napster creator Shawn Fanning, Jordan Mendelson and Ron Conway. The company raised $10 million from Conway, Morgenthaler Ventures and WaldenVC and did high profile distibution deals with MySpace and others, but the business failed to scale (since people don’t really pay for music any more). Last year they also partnered with Imeem, who may see an acquisition as a better end result than Snocap simply shutting down.

The deal is just being closed this week, we hear from a source. It’s a good outcome for Snocap, which has gone through significant layoffs and was on deadpool watch.

This is the second acquisition for Imeem in as many months - in January they acquired Anywhere.FM. Imeem has raised two rounds of capital, although the size of the second round was not disclosed.

Fanning, meanwhile, has largely moved on to his new startup, Rupture.

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.

After less than a year in operation, the team at Anywhere.FM reached an early payday today when veteran social music service Imeem gobbled them up for an undisclosed sum, most likely in a cash and stock mix. The iTunes-style web music player had raised under $100,000 in financing from Y Combinator and angels, making an early exit likely below $5 million possible. Anywhere.FM with its 60,000 users and over 9 million uploaded songs will continue to exist as is, but the founders will be joining Imeem to complete their earnout and continue work on their iTunes-style music player at Imeem’s San Francisco office.

Both Imeem and Anywhere.FM saw a lot of synergy in the deal. Anywhere.FM has the best upload and player interfaces I’ve seen, but lacked a solid monetization method. Imeem will bring its music deals and sales team to bear on the service and hopes to leverage Anywhere’s client side iTunes sync uploader, buddy radio, and recommendation technology in particular. Anywhere’s uploader can upload your entire iTunes, WinAmp, or Windows Media Player libraries, including personal playlists, song ratings and play counts, with a single click. In an email correspondence, Imeem’s CEO Dalton Caldwell hinted at the company’s future saying, “I think that an excellent and complete product that is fully licensed will win vs. the fragmented market we are seeing out there right now.” I couldn’t agree more.

Although not currently announced, Anywhere.FM will likely have access to the same licensing deals Imeem struck with the major labels. The deals allow users to stream any of 5 million songs from their friends for free. Being included on the deals would mean Anywhere.FM could avoid web broadcasting rules that placed limits on how often and in what order songs could be played.

Inking deals with all the majors marked a major turn around in Imeem’s history by ending the lawsuits that earlier dogged the site. But the deals came with at least Universal exacting a pound of flesh in form of some stock and a large upfront cash payment. The Financial Times said the payment was $20 million, although Imeem disagrees. Michael Robertson of MP3tunes.com, and earlier MP3.com, called it a death sentence.

While the ad supported model by their executives own admission has yet to be proven, Imeem has a major leg up over the competition. They’re legal with a large library and currently have over 20 million monthly uniques and 65,000 new registered users each day according to their own stats. Comscore ranked them the top growing social site last September. If ad supported music is going to succeed, Imeem is the startup to watch.

Imeem

Loading information about Imeem…

Anywhere.FM

Loading information about Anywhere.FM…

cb_widget_report_widget(”cb_widget_1201603540″); cb_widget_report_element(”cb_widget_0_1201603540″,”imeem”); cb_widget_report_element(”cb_widget_1_1201603540″,”anywhere.fm”);

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

SpiralFrog has just announced the site is up to over 1 million uniques each month and expected to end this month with over 1.2 million uniques. SpiralFrog, for those of you who don’t remember, is the free (as in ad supported, not P2P) legal music service that unlocks over 1 million songs to their users as long as they log back in to their site at least once every month (an easy task if you update your library frequently). The songs are downloads and played as WMA files under DRM controls.

While you’d think the main advantage of a download is portability, most people won’t be able to take songs off their computer because they use iPods that can’t play the WMA files. See more details in our earlier coverage.

The songs come from some pretty unique deals with the big labels UMG, EMI, and BMI. In exchange, labels get a share of the ad revenue and affiliate song sales on the site and the comfort of control through the service’s DRM.

However, SpiralFrog was over a year in the making and only officially launched last September. A lot has changed since then. Music prices have dropped, DRM is dead (for paid tracks at least), and new legal/questionably legal sites have popped up to serve up free tunes. Competition includes HypeMachine, RadioBlogClub, Deezer, InTune.fm, Mog, Last.fm, Imeem, and a bunch of other sites. One key difference is that users on these sites stream music instead of downloading it, but that doesn’t seem to be slowing down their growth rates. Imeem, which follows an ad splitting model similar to SpiralFrog, did over 3 million monthly uniques around the time SpiralFrog launched last year. Lets not forget that Yahoo may be treading in this territory as well.

HypeMachine

Loading information about HypeMachine…

Deezer

Loading information about Deezer…

Last.fm

Loading information about Last.fm…

Imeem

Loading information about Imeem…

SpiralFrog

Loading information about SpiralFrog…

Crunch Network: CrunchGear drool over the sexiest new gadgets and hardware.