Shazam, a popular mobile application that allows you to ask your phone what song is playing by holding it up to the source of the song, has raised an undisclosed amount of capital from the iFund, a $100 million fund started by Kleiner Perkins Caufield & Byers. According to published reports, Shazam had previously raised $12.3 million from Acacia Capital and DN Capital, even though company officials told us last year that they had raised nearly $20 million in funding.
First of all, I am shocked to learn that the iFund is not only investing but is still around, as it’s been awfully quiet. That being said, my original thesis on the iFund and other app-focused specialty funds hasn’t changed — I think they will be as successful as the RSS Fund or the Java Fund. Secondly, despite the popularity of the app, Shazam has some business challenges.
Shazam has apparently hit the 50 million user-mark, up sharply this year — in February the company had just 15 million users. The growth is reflective of the increased sales of smartphones, including the iPhone and its phone-less cousin, the iPod touch. (Related post: How About That iPhone Bump?)
According to some reports, Shazam is looking to charge for a premium version of the service. My first reaction: good luck. I’m one of those who happily upgrades to premium services, but I really don’t think “knowing the song” is critical enough for me to pay them good money.
Shazam has to contend with the fact that it’s hard to make a living off just mobile advertising. No one uses an app enough to make that a viable business. Unfortunately the startup is going to be stuck doing one of the two things: keep licensing the software to handset makers and convince them to keep paying Shazam — a decent but limited revenue stream. Or become a fundinista — you know, those companies that constantly raise money to stay in business to, in turn, raise more money!
As Biggie Small once sang: “Mo Money Mo Problems.”You don’t need an app for that!