- Apple buys Shazam at a ~60% discount from peak valuation
- The acquisition is expected to fuel marketing for Apple iTunes/Music
- Shazam’s AR capabilities could boost Apple’s AR momentum
What it Means:
- The acquisition is an example of marketing / product vertical integration
- Similar, ad-based media / product integration can capture value in media
Apple confirms its purchase of Shazam for a reported ~$400 million.
“We are thrilled that Shazam and its talented team will be joining Apple. Since the launch of the App Store, Shazam has consistently ranked as one of the most popular apps for iOS. Today, it’s used by hundreds of millions of people around the world, across multiple platforms. Apple Music and Shazam are a natural fit, sharing a passion for music discovery and delivering great music experiences to our users. We have exciting plans in store, and we look forward to combining with Shazam upon approval of today’s agreement.”
Shazam was founded in 1999. It was one of the original mobile apps, originally controlled via SMS. By most, it’s known as the app that tells you the name of a playing song. After nearly 20 years of existence, song recognition remained the primary functionality of the app. (Wikipedia)
It’s not that Shazam didn’t try to innovate. Here are a few of the services they launched with limited fanfare:
- A social network of sorts that allows users to discover content shazamed by others
- Lead conversion for brands by recognizing TV commercial audio and automatically directing viewers to advertisers’ web pages
- In-app music video streaming service
- An augmented reality app that detects signals on physical items to create video content
What does Apple see in Shazam?
Here are some ideas:
- iTunes/Apple Music Marketing – when users Shazam a song they already have the option to be directed to iTunes. Apple’s acquisition will likely tighten that connection
- iTunes Curation – Shazam’s social network data and functionality can improve the Apple’s listening experiences. Listeners can follow songs shazamed by friends/influencers and listen to playlists curated from their Shazam history.
- iMessage Lock-In – Shazam’s song-sharing Snapchat feature, could further improve the Apple iMessage experience
- AR – If Apple comes through with its promise to launch an AR headset, Shazam’s underwhelming mobile AR experiences will have new, intriguing possibilities
- A Fat Discount – the reported acquisition price is ~40% of Shazam’s peak valuation
What this means for media companies:
It certainly confirms Apple’s commitment to music and maybe even AR. Aside from that, I have to stretch but here goes…
Shazam is a marketing service that captures maximum value by being completely integrated with a service it markets like Apple’s. Shazam has 120+M monthly active users (TechCrunch). In their pre-acquisition model, they would direct users to both Apple and Spotify music services. By owning Shazam, Apple will not only eliminate affiliate fees and increase conversion Shazam conversion rates, but they also cut off a significant marketing channel for fierce competitor, Spotify.
A similar dynamic is playing out with ad-based media companies more closely integrating with the services and products they advertise, through branded content offering e-commerce.
While it’s not a one size fits all model, branded content and e-commerce vertical integration can provide ad-based media companies with new levers to expand margins.