Why is Apple interested in buying Shazam?

News broke over the weekend that Apple, the most valuable company on the planet, is interested in buying the London-based company Shazam, which specialises in recognising and identifying songs, videos or adverts from short snippets via a mobile app.

The deal has since been confirmed by Apple but not the price, which has been widely pegged at £300 million, a far cry from its unicorn valuation of $1 billion (£750 million) following a $30 million (£22 million) Series F funding round in February 2015.

So why would Apple be interested in Shazam, even if it is a unicorn at a cut price?

Firstly, it is certainly not about the money. Shazam only started to turn a profit in 2016, when the CEO told the Wall Street Journal that the company is EBITDA profitable thanks to a combination of native ad sales and the affiliate revenue it is getting via the 1 million daily clicks it sends to streaming services that pay it for the traffic and conversions when they make a purchase.

No, what Apple most likely wants from Shazam is to integrate its ability to recognise songs, films and adverts into its Siri AI voice assistant and help direct customers to the relevant content via Apple's iTunes or Apple Music channels.

Amazon is currently running a Christmas advertising campaign for its Echo devices on billboards across the country, boasting of its ability to play a song simply from a description or some of the lyrics.

It's that sort of functionality that Apple will be looking to acquire from Shazam, which has been doing exactly that since it founded as an SMS-driven service back in 2002, one year after the original iPod was released by Apple.

Now, with the HomePod nearing a delayed release with a probable price tag of £349, Apple appears to be beefing up the software capabilities of its smart speaker device.

Apple bills the HomePod as "a powerful speaker that sounds amazing, adapts to wherever it's playing, and together with Apple Music, gives you effortless access to one of the world's largest music catalogues. All controlled through natural voice interaction with Siri."

In theory a Shazam integration should be easy enough to implement for the HomePod, even this late in the game. Apple could also hurt its streaming rivals by pushing Shazam's reported 100 million monthly active users towards Apple Music over, say, Spotify. Currently when you 'Shazam' a song you are given affiliate revenue-driving links to Deezer, Spotify and Google Play Music, but Apple Music already gets the most prominent real estate.

The HomePod is coming late to the AI-assistant speaker market though, with Google Home and Amazon Echo having a serious first mover advantage.

As the devices all physically resemble one another this battle will come down to the quality of the software and services bundled up under the covers. Apple doesn't seem too interested in offering other streaming services through the HomePod though, which should worry consumers.

It's also worth noting that Apple could have easily built these capabilities itself, but perhaps at the reported price saw some value in the company as a whole, namely its brand and its expertise.

Shazam also offers augmented reality brand marketing services, where users can discover content based on pictures taken through the app, a bit like a beefed up QR code. "You came for music, stay to experience McDonald's Karaoke, MTN Dew VR Racing and much more," in Shazam's parlance.

This is very synergistic with what Apple has been working on over the past few months, with CEO Tim Cook not being shy over his intentions for the technology, telling the Independent that it could transform shopping experiences. Apple's recently released ARKit allows iOS developers to layer AR on top of images taken by the iPhone.

Full disclosure: IDG Ventures, an arm of Techworld's owner IDG, was an early investor in Shazam

Techworldhas contacted Shazam and Apple for official comment. We'll update this story as we learn more.

This story, "Why is Apple interested in buying Shazam?" was originally published by Techworld.com.


Copyright © 2017 IDG Communications, Inc.

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