iLike: a model for the recording industry

Ali and Hadi Partovi, the sibling duo behind iLike, know something about creating a successful Web company. The twin brothers both sold their startups, LinkExchange and TellMe, to Microsoft for $265 million and $800 million respectively. Now it seems they are well on their way to creating another blockbuster venture.

On July 21, the brothers announced that iLike, the two year old music service best known for a popular Facebook application by the same name, has 30 million registered users. The number makes their service one of the most visited on the Web. Not bad for a company with only 29 employees.

More promising than iLike’s user base, however, is its diverse business model. Unlike many Web 2.0 companies, iLike isn’t just banking on advertising revenue. The company has tapped several revenue streams relating to music thanks to an array of partnerships with everyone from Ticketmaster to Rhapsody. “We have designed our strategy so that artists make money through merchandise sales, record sales, ticket sales, ad sales,” says iLike CEO Ali Partovi. “It’s not quite clear which model will prevail.”

ILike users have spent more than $10 million through the service buying music, tickets, and other merchandise, says Hadi Partovi. The company collects a fee for every paying customer it sends to iTunes or IAC’s Ticketmaster, which bought a 25% stake in the service in 2006 for $13.3 million.

ILike also takes a cut of the sales it drives through TicketsNow, an online reseller purchased by Ticketmaster earlier this year. Through its Rhapsody partnership, iLike is also fueling business for the record labels, which are paid an undisclosed amount each time full songs are streamed on the service through Rhapsody.

Much of iLike’s revenue comes from ring tones, says President Hadi Partovi. In the future, however, Hadi believes that concert tickets and ad sales will drive more revenue.

The same day iLike announced its user milestone, it unveiled an advertising network for concert promoters that allows them to target fans of artists or genres near particular venues. The service will launch by September.

The company also announced plans to open up its codes so that developers can bring portions of iLike to other Web sites.

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