I’ve been following Shazam with fascination since they started. Their basic concept is music recognition – you hear a track on the radio or at a club, dial a short code, their server “listens” and recognizes the music and sends you an sms identifying it.
It’s very impressive to demo live – I remember doing it a few years ago to a bunch of Coca-Cola bigwigs and you could hear the collective “wow” in the room when the correct answer came back.
For the first time, Shazam is now available directly on a handset – Motorola have scooped the field and other handsets are expected to follow. “At the touch of a button” you can tag a track and match it against the Shazam database for recognition.
It’s not clear from the press release how this works or what the business model is. But I imagine the matching must be done over WAP, so maybe the model is just licensing Moto some cool technology.
While I’m a big fan of Shazam, and I’d love them to become stupidly rich, I’ve always been a little wary of their business model. At its heart, this has been based on charging Premium SMS for queries via the short code currently 50p in the UK (US $ 0.94).
My worry is that not enough people will use it often enough to drive real profits. As an example, in the UK (where Shazam has been longest and where mobile culture is most pervasive) they have 2.3 million users and 5.5 million tracks “tagged”.
This means that the average number of tracks people have downloaded is only 2.4 each, which implies that frequency of use is pretty low. Bearing in mind there will be a heavy user element to this, many people seem to have used it once and never again.
This could be because they’ve forgotten how to use it, which is always a problem with this kind of service, memorable short code or not. If I were them, I’d be looking at a J2ME solution, which of course, the Moto deal could well be. In any event, usage must be made as simple and easy as possible.
A further look at the stats indicates that actual revenues aren’t that great – certainly in terms of what VC’s look to earn. 5.5 million at 50p generates a net of around £1.65 million (US $3.1m) – and don’t forget that’s over 4 years (I think they started in 2001).
Clearly there are other revenues; non-domestic markets, music and ringtone sales and radio station monitoring (for tracking copyright payments). So maybe these are insanely profitable.
Don’t get me wrong though, going from nothing to any revenues is impressive, let alone creating a business generating millions and the team are to be applauded.
However, VC’s look for far bigger returns and I hope they don’t shut them down or sell them off cheap to the wrong trade buyer.
Or maybe there’s something I just don’t know. I hope they surprise me. What do you think?
As an aside, the Shazam boys were clever enough to get 2580 as a short code – the four buttons going down the middle of most handsets. I think I’m right in saying that, no one else had spotted this potential and they weren’t charged a premium to get it.
Russell
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