How Shazam Makes Money

Prior to universal access to digital technology, identifying music in restaurants, bars, or stores was difficult to nearly impossible. Founded in 2000, Shazam provided a readily-available solution to music identification. Initially, consumers could use Shazam’s call-in service to easily identify ambiguous songs. However, as smartphones and tablets became ubiquitous, Shazam adapted by developing an app for Apple (AAPL) and Android devices. 

In 2014, Shazam expanded business ventures from music to include television. Shazam’s service operates similarly across both mediums. Users hold their smartphone or tablet to a music or television sound clip, which Shazam then processes, producing the title of the song or program being experienced. Shazam currently boasts 500 million users with 17 million tags per day and a music database of 30 million songs. A majority of revenue is generated from investors, advertisements, and referrals to iTunes, Google Play, and Spotify. (For more, see: Spotify Makes Internet Music Make Money.)

Known for its music service, Shazam lets users listen to and identify songs by a process called tagging. Upon identifying the song, the service returns details such as the artist's name, song title, album and where one can access that song. Shazam links song purchases to major providers, such as Apple, Google, and Spotify, and receives a portion of each purchase for the referral.

A major source of revenue, Shazam estimates that digital sales generate $300 million annually. Of the 17 million tags per day, 5 to 10 percent result in a purchase, the majority of which are music, while TV shows, films and apps continue to grow within Shazam’s portfolio.

Shazam operates primarily through its mobile app, and advertising is an inherent element of its app platform. The company has been a part of 450 ad campaigns. Each campaign costs between $75,000 and $200,000 and runs for a couple of months. On its own, advertising generates a multi-million dollar business; however, Shazam hopes TV services will become its primary source of revenue.

Recently, Shazam launched a new sales platform Resonate to help TV networks and advertisers connect with consumers on their smartphones and tablets. Networks and brands can integrate the app within TV shows, delivering purchasable content to users. (The Wall Street Journal estimates that 84 percent of smartphone and tablet owners use devices while watching TV.) As TV advertising remains a multi-billion dollar industry, Shazam expects its latest venture to rapidly increase revenue and growth for the company.

Although it was founded in 2000, Shazam has seen a majority of its expansion in just the last few years. Thanks to the role of digital technology in individual lives, Shazam has experienced exponential growth. As of 2014, the company was valued at $500 million dollars.

With a majority of income generated from music referrals and advertising, Shazam sources investments to expand current and new business ventures. Notably, América Móvil tycoon Carlos Slim invested $40 million into the company to expand the service to Latin America. As a result, Shazam witnessed a 100 million increase in worldwide users. Likewise, Sony has purchased a $3 million stake in Shazam. Future investments and funding will secure Shazam’s expansion and increase means of generating revenue. (For more, see: Where Does Carlos Slim Keep His Money?)

Starting as a call-in service in 2000, Shazam has rapidly expanded to reach the forefront of music identification. With a majority of revenue generated from referral fees for Apple, Google, and Spotify purchases, Shazam has expanded to include TV identification services.

The company insists that TV advertising will become its primary source of revenue. Shazam has not neglected its music service, and continues to develop new technology for consumers. Recently, the mobile app integrated Spotify and Rdio services, allowing users to play full songs within the Shazam app.

In addition to music and TV, Shazam generates revenue from advertising within its smartphone and tablet applications. As increased technology allows for greater means of reaching large audiences, digital services like Shazam will continue to grow and generate revenue.