The business of Shazam: Why an Apple iOS partnership would be a boon
Apple may integrate Shazam's song ID technology into the next iOS. If the partnership plays out, Shazam would likely see a boost to song referral fees and more importantly set itself up for more uses for its technology.
Apple is reportedly planning to integrate Shazam's song identification system in its next version of iOS and the move is interesting on the business and technology fronts.
According to Bloomberg, Apple may partner with Shazam and use its technology to listen to a song---and increasingly television---to identify it and ultimately lead to a sale of some sort.
We recently interviewed Shazam CEO Rich Riley at the CBS Broadcast Center in New York to talk innovation. More excerpts and the video will posted in the days to come, but it's worth noting that Shazam really breaks down into three key themes:
The business of music, which is what drives Shazam revenue today.
Shazam's underlying technology that can be applied to multiple use cases. In some ways, Shazam could become akin to Nuance Communications, which uses its voice recognition technology in multiple industries.
And Shazam's focus on scale and development to improve its service.
According to Riley, people Shazam something 17 million times a day. Most of those Shazams are for songs and the company accounts for about 5 percent to 10 percent of all music purchase referrals. Shazam refers folks to iTunes, Amazon and Google to buy songs and the company gets a cut. Obviously, an Apple integration would boost iTunes referral fees. Shazam also has ads on its app.
Where things get interesting with the Apple deal is that Shazam is increasingly in TV and movie ads. Shazam an ad and there's a demonstration or sales lead on the other end.
On the technology front, Riley is very clear that it is a technology company first. I could see Shazam being more like Nuance in that its technology could be applied in other areas beyond entertainment. Riley said:
We are a technology company, and we are continuing to solve this technical problem so we can always be better at finding that song. For example, that means listening through the background noise, and so we almost always get it right. So the margin for improvement is shrinking, but we’re always working those algorithms. We always can have more songs in a database. So we have 30 million songs now. We add a million a month. We have people searching around the world for any music that we don’t have and making sure we get it first. We’re also live ingesting every U.S. TV channel and every U.S. TV ad. We want the whole world to be Shazamable and add to that index size and make that it as big as we can make it, and then return that result as quickly as we can. We recently launched a redesign that provides more content. When you Shazam something, that’s the start of the experience, not the end.
Riley added that Shazam launched Auto Shazam where the app will always listen in.
As for the scale, Shazam has a technical architecture that works well. Using graphics cards, its own servers and algorithms to fingerprint and identify songs, Shazam will be able to increase its index 50 percent this year. Riley added that the company has focused on the logic programmed into its hardware specific to its use case. After all, it takes a lot of horsepower to filter out background noise. Of course, algorithm tweaking matters too. "Our technical team (created) an incredibly scalable architecture that we think is absolutely best in the world and cost effective. The costs of Shazaming have come down massively over the years," said Riley.