Apple is near closing a deal to acquire Shazam for $400 million. According to inside sources, Apple had planned to announce the deal on Monday, December 4. However, this plan could change at any time. Once finalized, this deal provides Apple the option to integrate a popular consumer feature directly into its iPhones.
Shazam
The Shazam app (available on both iOS and Android) allows users to identify music and TV that is playing nearby. Shazam utilizes a smartphone, tablet or a computer’s built-in microphone to gather a brief sample of audio. It then creates an acoustic fingerprint based on the sample and compares it against a central database for a match. Once the app identifies a match, it sends that information back to the user. This information usually contains the song title, the artist, and often a link to download or purchase the track.
Prior to the launch of the mobile app, Shazam operated by a phone call and SMS messaging. In order to get a song identified, somebody could call the phone number “2580”. After dialing, they would hold the phone up to the music. Once the song was identified, they would receive a text message informing them of the name of the song.
The app has become one of the top ten most popular smartphone apps in the world. There have been over 1 billion downloads of the Shazam app.
Competition for Apple
Apple faces stiff competition for innovation from Google and Samsung in the smartphone market. Therefore, it needs to look at every avenue for a competitive advantage. Google recently incorporated similar technology into its high-end Pixel 2 smartphone. Google’s version of the technology constantly monitors nearby music, displaying each song title on the phone’s screen. This has led Apple to realize that it needs to offer a similar function in the iPhone to appear contemporary and modern.
Acoustic Fingerprints & Augmented Reality
The $400 million price that Apple is offering for Shazam is lower than the most recent valuation of $1.02 billion. However, that valuation may be “a bit artificial,” according to inside sources.
Shazam has raised $143.5 million from investors, including Kleiner Perkins, London’s DN Capital, IVP and strategic investors Sony Music, Universal Music and Access Industries. Later investors received a liquidation preference. That means they will get their invested money back before other shareholders. It is estimated that Shazam made $50 million in revenue last year.
Shazam is based in London, England. The company has created a database of more than 11 million “acoustic fingerprints” that it uses to identify songs. Recently developed augmented reality technology allows users to point their phones at a special label to see additional information. Some marketers have taken advantage of this tool. When making video and television advertisements, they can quickly access a website for more information. A partnership with gin-producer Bombay Saphire makes the bottle appear to transform when consumers point their phones at it.
Check out Shazam
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