Analysts and those ubiquitous industry observers have long understood that if an enterprise could aggregate enough customers and, more to the point, useful data about those customers, that financial benefits would follow.
Shazam Entertainment, the company that makes the app that identifies the name and artist singing/playing songs you hear randomly on whatever technologies you are using at any given time may well be the best example of the realization/monetization of that power.
The technology uses sound waves to 'name that tune.' But the more important accumulation of data applies similar techniques to advertisements on various media as well as information about those doing the listening and requesting. This may be the purest evocation of data binding consumers to products and to the enterprises wishing to sell them more. JL
Lisa Fleisher reports in the Wall Street Journal:
Shazam packs a hidden weapon: customer data. People use Shazam more like a search engine, to find out more about the products and places around them, valuable geographic and interests data to add to the information about the musical tastes of its customers.
Shazam Entertainment Ltd. has reigned for years as a must-download app because of its ability to name that song with just a tap. Over the past few years, Shazam has been among the top 40 free iPhone apps, according to Apple Inc.
Since the debut of its first product in 2002, the London-based company has cycled through several business models. The app’s rank among free U.S. iPhone downloads has been slipping along with the growth of the App Store, though the number of people who use the app every month rose to 100 million in 2014 from 70 million in 2013, according to Shazam.
Investors poured in $30 million in a deal that closed Tuesday, company officials and investors said. The new investors’ stake is equivalent to just under 3% of the company, valuing Shazam at roughly $1 billion, according to Executive Chairman Andrew Fisher. He declined to identify the investors, but he said they hadn’t previously invested in the company.
Shazam’s popularity stems from its ability to quickly scan sound waves from a piece of recorded music, compare the pattern with its database of 35 million songs and return matching information such as the artist, song name, album, lyrics and where to listen to or buy that song. Before smartphones, people could call Shazam, hold their cellphones up to a speaker and get a text message back with the song’s name.
The company initially earned money by charging for each match, then started taking a cut of digital-music downloads from services such as Apple’s iTunes. The company says it is still responsible for one in 10 digital song sales. But customers are increasingly turning to subscription music services, such as Spotify Ltd.
Meanwhile, the company has had to fend off threats from technology giants such as Yahoo Inc., Google Inc. and Amazon Inc., which have started to try their hands at Shazam’s core function of identifying music.
Shazam Chief Executive Rich Riley said the company is “intentionally not profitable” as it invests in technology and staff, growing to 250 employees globally. The company’s most recent filings in London show that Shazam incurred a loss of £5.8 million ($8.8 million) in the six months ended Dec. 31, 2013, on revenue of £16.9 million.
In recent years, Shazam has moved beyond music recognition. In 2010, the company started making television ads “shazamable” by adding the commercials to its database. The app listens to and identifies a commercial, pulling up more information about products or special offers. Soon, people will be able to use Shazam to identify print ads, products or stores using their phone’s camera or wireless sensors.
“Our vision is to connect people to the world around them,” said Mr. Riley, who was recruited away from Yahoo in 2013. “It is still early days. People still aren’t yet used to ‘Shazaming’ print ads and soda cans and that kind of stuff, but we think that is where the world’s going.”
Mr. Riley said he wanted people to be able to walk into Grand Central Terminal in New York City and use Shazam to get special offers at stores or pull up a subway map. In November, Shazam announced a deal with Mood Media, which provides soundtracks for retail stores. In Office Depot and OfficeMax stores in the U.S., customers can open up Shazam to receive promotional offers to use in those stores.
ENLARGE Shazam also packs a hidden weapon: customer data. If people use Shazam more like a search engine, to find out more about the products and places around them, the company will have valuable geographic and interests data to add to the information about the musical tastes of its customers. But executives feel they have to tread lightly. If customers don’t see the benefit, they will delete the app.
The company wants the brand to be known as a service that lets people pull up more information while they are watching television shows, attending live concerts or even shopping in a grocery store.
Some analysts say it is too soon to tell whether such advertising will be successful.
“The fact that people are using two screens doesn’t necessarily mean that they’re any more receptive to advertising than if they were using one screen or no screens,” said Paul Verna, an analyst with research firm eMarketer. “I’m just not sure that that is going to materialize the way marketers and app developers think—or wish—it would.”
Mr. Riley says Shazam’s popularity will help it stand out, as smartphone users cut down on the number of apps they keep on their phone. Other companies have to persuade people to download their app, while Shazam is frequently already there, he said.
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