According to market reports, an average U.S. mobile phone user spends more than 127 minutes a day on mobile apps. Of that time, nearly 43% is spent on gaming apps, followed by 26% of the time being spent on social media apps like Facebook and Twitter. Entertainment apps, which include music and TV viewing, account for 10% of the time spent on mobile apps. Utilities account for the remaining 10% of time spent. Gartner expects the global mobile app industry to be worth $25 billion this year. The market is projected to grow to $46 billion by the year 2016.
Hammersmith, U.K.–based Shazam was founded in 2002 as a service that helped make listeners aware of music they had heard but did not know the name or artist of. Since then, the company has released its now popular app that listens in to a snippet of music and matches it with its database to come back with information about the song. Today, Shazam is among the top ten most downloaded apps on iTunes App Store and boasts of more than 300 million users spread across 200 countries. Within the U.S. alone, their app is estimated to be available on 20% of smartphones.
Soon after their music app success, Shazam launched an app geared towards the television industry. Their TV app makes TV programs and commercials more interactive by providing information on the music being played on the program, cast, and tweets relating to the shows. Advertisers can also connect with the consumer through Shazam’s TV app. The app was launched in the U.S. in 2011 and was extended outside the country last year. Shazam now has more than 250 TV ad campaigns worldwide, including a presence in countries like India and Turkey. Shazam expects to earn $75,000-$200,000 in revenues from each TV ad campaign.
Analysts believe that the TV app will take Shazam to the next level. Last year, the company signed up with Comcast’s NBC Universal for access to the 2012 London Olympics. As part of the agreement, NBC’s viewers were able to use the app to unlock information about the event such as player stats and athlete information. Viewers were also able to take polls and share content on social media sites like Twitter and Facebook. According to Nielsen, 86% smartphone owners and 88% of tablet owners in the U.S. use their mobile device while watching television at least once during a 30-day period. Shazam is targeting this population to drive user engagement. Last year, Shazam had entered into a similar agreement with UK broadcaster, ITV, to create Shazam-enabled ads for the program “Britain’s Got Talent.”
The basic ad supported app by Shazam is free to download. But they also have a premium version, Shazam Encore, that is priced between $5.99 and $6.99 and comes with features such as no advertisements, instant tagging, and the ability to buy, share, and comment on music scores. In addition, Shazam earns revenues through in-app purchases and when users use the app to buy digital music.
According to market reports, last year, Shazam helped Apple to generate $300 million in revenues from music downloads. Shazam earns a percentage of that revenue as its share. For the year ended June last year, Shazam is estimated to have earned revenues of £21.8 million (~$25.64 million) reporting 40% growth over the year. The company is still suffering losses and ended the previous year with a pre-tax loss of £3 million (~$3.53 million). It does not expect to turn profitable soon, but it does expect to continue to report strong revenue growth in the years to come.
Shazam remains privately owned, with $62 million raised in private funding and from venture fund investors that include Kleiner Perkins Caufield & Byers, Institutional Venture Partners, and DN Capital. But the company is looking to go public soon and recently hired ex-Yahoo executive Rich Riley as CEO to take it public. Shazam is now planning a “billion dollar-plus stock market floatation as early as next year.”
I am not sure how a sub-$50 million revenue company gets to $1 billion plus valuation, but these days, it seems that we’re once again in the valuation-without-revenue realm.