Fast-growing Imeem Inc. said Monday that it had bought Snocap, a struggling online music service co-founded by Napster creator Shawn Fanning.
By buying Snocap, Imeem, which owns a social-networking site that lets users listen to free music and watch videos, signaled its intention to offer new ways to search, discover and sample digital media. Analysts said it also might mean the firm will start selling music and other content.
The terms of the deal were not disclosed. Both companies are based in San Francisco.
Fanning's Napster gained notoriety in the late 1990s for facilitating illegal music downloads and was shuttered as a result of a record industry lawsuit.
But Snocap struggled as the popularity of authorized music file-sharing failed to keep pace with LimeWire and other peer-to-peer networks that followed Napster in letting people swap copyrighted music illegally.
In 2006, Snocap shifted its strategy and created MyStore, a tool for artists and users of News Corp.'s MySpace social network to sell music and other items from their profile pages and on other websites. More than 110,000 unsigned and unaffiliated artists, as well as artists with independent and major record labels, used Snocap's MyStore to sell music online.
Fanning left Snocap in 2006 to start Rupture, a social network that enables in-game communication among friends playing video games. It is still in the testing phase.
Snocap has dramatically downsized in recent years. Fifteen employees are expected to join Imeem, said Chief Operating Officer Ali Aydar, another Napster veteran. It once employed 60.
"As a stand-alone entity, extracting the value out of the technology platform was a challenge," said Aydar, who is joining Imeem as vice president of operations.
Founded in 2004 but not launched until 2006, Imeem is the third-largest U.S. social networking site, with 24 million monthly visitors. Imeem shares revenue with music companies and other partners it generates through displaying advertising and sponsorships.
Imeem links to Apple Inc.'s iTunes store and Amazon.com Inc.'s MP3 store, which pay fees to the social network. But by owning Snocap, whose technology it began to use last year, Imeem could be setting the stage for selling music and other digital media, said Mike McGuire, an analyst with Gartner Inc. Imeem declined to comment on retail plans.
"They are going to want to enable some direct selling," McGuire said. "That's a natural extension of the platform."
Quinn reported from San Francisco and Menn from Los Angeles.