Shazam’s Contradiction: Wildly Popular, Still Unprofitable

Twelve years after it was first founded, one of our most successful digital media startups is still making a loss.

2009/10 losses for mobile music identifier Shazam grew from nearly £90,000 ($147,124.13) to just over £635,000, ($1,038,042.46) despite revenue growing from £7.3 ($11.94) million to £10.6 ($17.32) million, says MusicAlly, reporting the numbers from Shazam’s latest Companies House filing.

In truth, Shazam is really only a three-year-old business. Although it started in 1999 to identify songs played by users over a phone call, it was only the arrival of the smartphone app economy which has rocketed Shazam – thanks to its iPhone app, its user base doubled to 35 million in just the seven months from September 2008. Its free app remains king of the iTunes music apps chart, but it’s new paid app is still riding high, too.

Now it’s hit all its user targets, with over 100 million users, and has, as its revenue streams, settled mainly on paid app renewals, affiliate income from music sames download partners and using its underlying audio-ID engine for marketing and broadcast partners.

With early investment from Acacia Capital and DN Capital, plus 2009 funding from Kleiner Perkins Caulfield & Byers, Shazam is surely approaching the stage of some kind of liquidity event.

But, until it’s in positive territory, likely reluctance from profit-hungry investors on the public market may point instead to a private buy-up.