Apple has bigger plans than just song ID with Shazam deal

Analyst spells out how Apple could generate ad revenue by baking 'audio fingerprinting' technology into iOS

Apple will integrate music identification technology created by Shazam into the next version of iOS, according to a report by Bloomberg.

But while most observers, including Bloomberg, focused on the obvious plays for Apple, others see much more in the deal and believe that Apple's intent goes far beyond simple song naming.

In a story Thursday, Bloomberg, citing "two people with knowledge of the product," claimed that Shazam's song ID feature would be integrated into iOS 8 in the same fashion that Twitter was earlier.

"It will be integrated into the mobile software in the same way that Twitter's service is currently incorporated, meaning consumers don't need to separately download it," said Bloomberg. "Among the ways it can be used will be through Apple's voice-activated search feature, Siri. An iPhone user will be able to say something like 'what song is playing,' to find out the tune's details, one person said."

Apple added Twitter to iOS 5, which went public in 2011, and since then has offered developers APIs (application programming interfaces) to connect their apps to Twitter. Apple is expected to showcase iOS 8 at this year's Worldwide Developers Conference (WWDC), which runs June 2-6 in San Francisco.

Shazam, a London-based company, and its flagship app by the same name, is best known for its audio fingerprinting technology, which uses an iPhone's or iPad's microphones to "listen" to a song, then match the audio sample with a title in the firm's database. The iOS app also offers links to iTunes for track purchases; Shazam receives a cut of those sales.

Bloomberg and others talked up the obvious reasons for Apple's move: increased iTunes sales, boosted iTunes Radio's usage and song sales from popular streaming services like Pandora and Spotify.

"At its simplest, Shazam has proven to be very effective in converting interest to purchase," said Russ Crupnick of the NPD Group in an email. "While there may be some deep competitive motive, the fact is we hear a lot of interesting new music, or songs from deep in our memory, and apps like Shazam create the identification that facilitates our ability to then buy them."

But other analysts thought Apple's decision to bake Shazam technology into iOS went far beyond what Crupnick called "at its simplest."

"I think this has very little to do strategically with music," said Aram Sinnreich, a media professor at Rutgers University. "I think this is about a new method of targeting consumers."

Sinnreich pointed out that Shazam has been indexing advertisements broadcast on television, as well as the pre-show ads shown in movie theaters, and in some cases, has stuck deals with advertisers to provide metrics of those who "tag" an ad. In some cases, tagging an ad presents the consumer with additional information, or even a special offer.

Sinnreich speculated that Apple could use the flood of data that would result from Shazam-iOS integration for a variety of revenue-driving models.

"Apple could do whatever a QR code is used for now, but sonically," said Sinnreich of the audio fingerprinting technology. "Someone tags a commercial, and that's entered into a database, effectively targeting [that consumer] for further ads," he said.

That fits with how Apple looks to make money now, Sinnreich argued. "Besides selling hardware at tremendous markups, Apple makes its money serving as a middleman for content service providers who want a relationship with its enormous customer base," he said. Any time a third party collected a new customer through the iOS technology, Apple would get its piece of the action, just as it does now for app or music sales, or in-app magazine subscriptions.

And Shazam's recent update that, with user approval, leaves the app always on -- always listening -- is a marketer's dream, Sinnreich continued. If Apple enticed its iPhone and iPad users to set Shazam as always on, or even set the option by default and disclosed that amongst all the rest of the terms users agree to when they approve an iOS upgrade, it would collect an amazing amount of market intelligence. "It would collect whatever media they consume," Sinnreich said. "Who needs Nielsen when you have millions of iPhone users?"

Apple would know who watches, say, Duck Dynasty, who watches Downtown Abby, and target each accordingly with advertisements or recommendations from the iTunes TV library.

That's not to say Apple would ignore how Shazam could boost its music business. "If I were Apple, I'd leverage this market intelligence. Say, 'We'll listen to anything, you don't have to tag things at the club, and then when you're home we'll have a playlist ready on iTunes Radio," Sinnreich spelled out.

Or Apple may have grander goals. "They could use the Shazam data to identify trending songs, spot up-and-coming acts," Sinnreich said. "I can easily imagine Apple creating its own record label, let's call it iLabel. Just as Netflix has become a TV network of sorts, Apple could come in with its Big Data, contact indie artists who aren't on iTunes, strike a distribution deal and underwrite a music video, everything sold on iTunes.

"Why give away the 30% to the record labels?" Sinnreich asked rhetorically. "And they could double the cut of the artists because there's no middleman."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

Read more about ios in Computerworld's iOS Topic Center.

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