Shazam, the mobile app for music discovery, has failed to live up to the hype after a filing revealed that the company’s revenues only increased 14% to £40.3m in 2016. The increase followed a decrease in 2015.
The company is currently holding a billion-dollar valuation after receiving a $30 million investment from Buran Venture Capital and Kleiner Perkins Caufield & Byers in 2015. However, it is not yet turning over the revenues expected in line with such a high valuation.
The news follows Shazam saying that it has become EBITDA profitable in September, after it cut staff from 251 to 221 in 2016. The company also increased sales by 14% from £35.2m in 2015.
Despite the high profile of the app – Shazam now has 300 million active users each year – it has been having a difficult time to generate revenue and increase profitability. As music listeners have begun to shift from buying music to subscription models such as Spotify, the app has tried to keep up.
Shazam generates revenues from referral fees from services such as iTunes, but also advertising and a paid version of its app that is ad-free. Naturally, if more people are streaming music rather than purchasing it, then the referral fees aren’t going to continue to grow. Advertising currently only represents a third of Shazam’s revenue.
October 3, 2017