Shazam’s Will Mills on Courting Ads While Staying Faithful to Music (Q&A)

In February, the music recognition app Shazam signed up its 300 millionth user. One of the app revolution’s first success stories, the London-based company has been aggressively expanding its business, broadening its use-case from identifying songs to interacting with advertisements and live events. And it hasn’t taken its sights off the music world, either. Recently, the company, which says it now drives $300 million in digital music sales per year, announced that it would expand its vast database by adding the catalogs of Beatport and CD Baby.
We caught up with Will Mills, Shazam’s head of music content, to find out where else the company might go. Just this year you guys have partnered with Beatport and CD Baby for access to their catalogs. Is that future of Shazam? Will you continue to make these kinds of content deals?
Will Mills: We definitely are really heavily investing in the music proposition. You may have seen some of the stuff we’ve done on the TV and advertising, but music is very much front and central to Shazam and it’s why people use Shazam, primarily, even when they’re using it with TV. So to have the widest and deepest catalog possible is really important. Whether that’s Beatport for EDM or CD Baby for sort of longtail, indie and esoteric music, we want to have that edge over the competition and we feel we’ve achieved that. We have a couple other deals coming up around international music and stuff, but our database is pretty big at the moment, it’s got pretty much everything.
But there’s still that nightmare scenario where you bring up Shazam to tag a song and you get a message back that says “Not Found.” How do you stop that from happening?
Ah, yeah. Well, I think a lot of music discovery is about speed. That’s the challenge. It’s about having the record at the same time KCRW is playing it or Pete Tong in the UK is playing it, or whoever the tastemaker may be. Most of the majors, and a lot of the independents, now give us their music at the same time they’re giving it to Zane Lowe, because they know that off one spin they can get tens of thousands of people interacting with their song. They recognize the critical importance of it.
On the technical side, we’ve already covered a lot. We account for DJs doing mashups and mixing two records together, pitch-shifting, etc. I think the biggest thing is keeping on top of new genres. And also adverts are big for us and sometimes pieces of music are specially composed for those, which is a challenge. Noise resiliency is also something we work on, meaning when someone’s in a club or something and there’s too much background noise.
What are the most important growth opportunities for Shazam?
At this point, 10 million songs are tagged per day and about 10% of them are purchased, which means we’re doing a million in sales per day. We drive over $300 million in sales every year now, which is a very substantial amount for the music business. I think when people have heard music that they love and they’re engaged and in the moment, to just press it and buy it for a buck is a very frictionless experience. So if we can continue to grow those numbers, that’s a huge opportunity for us. There’s been a lot of talk about the growth in streaming royalties, but a la carte downloads are still growing something like 10% year-over-year, from a base that’s like 10 times as big.
And then there’s advertising. In the U.S. we’ve done over 200 ad campaigns. We have a really big sales force working day-in and day-out. A brand will give us some audio and we’ll put it in our system and then they can build a richer result for the tag, so instead of it just saying this is the artist Alex Clare –- “Too Close,” it’ll also tell you “Here’s Internet Explorer,” or whatever the ad is for. The premise of that is that instead of 30 seconds of watching an advert, it’s 3 min+ of engagement on a second screen. And in some cases, some of our repeat advertisers in the U.S., like Progressive Insurance, they’ll do a click to get a quote, or someone will do click to buy a product, or click to win a prize.

Depending on what analytics you look at, 80-90% of TV watchers have a smartphone or a tablet out while they’re watching. What we’re really good at is connecting the two. Now you can even Shazam any TV show in the U.S. and it will give you basic information from Wikipedia, a link to the IMDB page and a list of music that’s been used in the show.
If I’m Microsoft, how do you pitch me to do Shazam integration with my ad? Why would I partner with you guys?
Because if you’re ad has great music, than you’re going to have millions of people tagging it anyway. So that’s millions of people that you could be engaging more directly.
And then I think it’s about speeding up the process that people might organically go through. You should never underestimate people’s laziness. If you can press one button to get to the point of sale, that’s always going to be advantageous.
The second-screen is not going away. If anything it’s only getting bigger. From our standpoint, I think there’s a lot of upsides to that for the music business, and not just from the conventional shows like “Idol” and “X Factor,” but also shows with really great music supervisors that put cool independent artists in mainstream HBO shows and everything else. We see that massively when a really amazing sync placement’s gone off in a TV show. You can see the chart go [gestures skyward] as everyone watches it, and then there are little bumps from people catching it on Tivo. So I think there’s a real opportunity for people in the music business there as well to get people interacting with their content.
Given so much opportunity in advertising, do you ever see it surpassing the music side of things? Would Shazam ever become an advertising company or an extension of one?
TV and advertising will be of growing importance in terms of revenue because the advertising business in the U.S. is worth $60 billion per year, and the global music business is about $15 billion. So I think revenue-wise it will be of increasing importance because a lot of that money is moving over to mobile advertising and the second screen now. But in terms of the core usage, I think a lot of it will remain music-focused. It will just be music as used in TV and advertising. There may be only so much more that we can expand digital music sales. We do think we can expand them, especially on Android, and simply by continuing to grow. But as far as monetization, I think the ad side is of increasing importance.
But that works great for the music business as well. For example, last year we did something with Madonna, Interscope and Bud Light for the Super Bowl where if fans tagged her halftime performance they got a free copy of the new single. And Bud Light paid for a million of those with us serving as the distribution partner. We’ve done a number of those where the brand pays for the music. We did one with Linkin Park for “Transformers 3.” It’s great because the artist and label get recompense for the music and the fan gets a free song. So there’s a lot more things like that at the nexus between music and advertising that I think will be of growing significance.

A preview of Shazam's forthcoming iPad "heat map"

Everyone these days is interested in getting more data on their customers. What can Shazam provide on that front?
In terms of our data, a big thing we’re doing is a new maps visualization that will be in our iPad app coming out next month. It has geographic data that creates a sort of heat map of what’s being tagged the most by region.
Our charts also tend to be really important, especially in the U.K., but also in the U.S. They can pre-date what appears on the Billboard singles charts sometimes by months. So a track like Macklemore’s “Thrift Shop” hit No. 1 on our chart weeks before it went No. 1 on Billboard. So data is of huge importance to us and that chart is a really reliable barometer, and we know a lot of radio programmers that move records up and down the playlist based on their position on Shazam’s chart. And you can’t game our charts like you can with some of the video streams and things like that. We’re tracking verifiable user engagement.
Another thing we’ve started doing is forecasting artists that are poised to make an impact in the new year. We take a look at critics’ and bloggers’ picks and then take that qualitative data and measure it against our quantitative data to see how many of the artists are actually being tagged. This year that process turned out some pretty interesting people, including Baauer of “Harlem Shake” fame and this band Rhye, who have had some buzz. So data is really important and I think the charts are another key part of discovering new artists and new genres. We’re going to have a special Beatport chart launch in a few weeks that will specifically look at EDM.
For downloads you guys link to iTunes and Amazon, but I think it’s just Rdio in the U.S. as far as streaming services. Are you looking to integrate with Spotify and others, as well?
Those deals tend to be region- or time-limited. We’ve worked with Spotify before and probably will again. Eventually I think we’ll have ubiquity across the services so that it will automatically know who you are, where you are, and what service you want to be linked through to. This year looks like it’s going to be quite interesting for streaming, with Google and Iovine and everyone else joining in.
For us, in terms of who we work with, it’s a cost-benefit analysis. With the mobile phone you have to keep the minimal real-estate in mind. With something like the Galaxy S 3 you’ve got a little bit more to work with, I suppose, but you’ve still got to keep things simple. The beauty of Shazam is in its speed and simplicity, so you don’t want a lot of clutter. You’ve got to balance it to make sure the consumer is getting what they want and need.
What other challenges are there as far as improving the app itself?
I think speed of response is obviously very important. We’re down to 1.5 seconds now in some cases. And then it’s just the richness of the result. We’ve got something we’re doing called Shazam Spotlight where we partner with an artist to give the reader a little something extra, whether it’s additional artwork or a free single or live track or remix or something like that. We’ve done those with Macklemore and Mumford & Sons and there will be more. People love that kind of stuff. I think artwork and images are increasingly important, especially as people are discovering an artist for the first time. With screen sizes getting larger again, I think that’s an area where you’ll see some innovation.