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Armed With Facebook Retargeting, Shazam Plans to Survive the Social TV Shake-Out

People Who Tag Super Bowl Ads to See Ads on Facebook Later

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Shazam, which was introduced in 2002 and eventually became both a must-have smartphone app and a dogged survivor of social-TV attrition, remains unprofitable as it invests, according to executives, in its long-term success. Under CEO Rich Riley, the former Yahoo exec who took the reins last April, it's also trying to get on the path to going public.

Enter another big Super Bowl play -- and a Facebook effort to extend its reach well beyond Sunday or the confines of the app.

Shazam CEO Rich Riley
Shazam CEO Rich Riley

People who use Shazam to "tag" the game's broadcast this year will be shown a new Twitter-like timeline. The live content feed will document the game -- from tweets to photos to ads -- and is designed to keep people using Shazam for the duration. But even if people tune in and out of the app, Shazam has created a new ad-retargeting program that plugs into Facebook.

"In the days and weeks and months following the game, if you [Shazam] a Jaguar ad during the Super Bowl, we can allow Jaguar to remarket to you," said Shazam Chief Revenue Officer Kevin McGurn, who was senior VP-sales at Hulu until Mr. Riley lured him away in September. Those ads could ask people to take a test drive or solicit sign-ups for the auto brand's email newsletters.

The program situates Shazam as an ally to Facebook in the social network's fight against Twitter for TV advertisers. That could give Shazam some reprieve from Twitter's decimation of the second-screen market.

The program also places Shazam in the middle of the relationship between Facebook and TV advertisers. Advertisers would purchase the retargeted Facebook ads through Shazam, which would then hand off the deal to Facebook, Mr. McGurn said. "We recognize device IDs using tools Facebook provided to map to display inventory on mobile devices as well as on desktop," he explained.

The retargeting program could spark or renew interest from advertisers that were previously intrigued by Shazam but unwilling to invest. Previously advertisers that partnered with Shazam were betting on people tagging their TV ads and were further limited because they could only market to those people within the app.

"We met with very few clients that didn't think Shazam was interesting, but when it came to down to activating on it, there was a lot of concern on size and scale," said Shelby Saville, executive VP-digital at Starcom MediaVest Group's Spark.

Since Mr. Riley took over in April 2013, Shazam has grown from 300 million users worldwide to more than 420 million. When the company received $40 million in funding from billionaire Carlos Slim's wireless company America Movil last July, it counted 70 million monthly active users. That number reached 86 million in December, and the app averages 17 million tags per day, Mr. Riley said.

The new retargeting program "gives a lot more scale to [Shazam], which makes people more open to that conversation," Ms. Saville said. "Before you really had to buy into Shazam as a standalone platform." She was not aware of any clients that have signed on to use Shazam's remarketing program, though she said a number were interested.

Shazam's ambitions extend beyond simple retargeting. Mr. Riley said the company is "definitely looking at" using its data about the types of songs, TV shows and movies people are tagging to create audience segments that could inform regular ad targeting outside of Shazam.

"We have a lot of data that's a very strong signal of interest," Mr. Riley said. "Leveraging that data to target advertising is a really big focus for 2014 on the ad side. Mr. McGurn is overseeing those efforts and has turned to his former employer to staff up the push. His hires from Hulu include Midwest Sales Director Bradley Hayes and Detroit Sales Director Bob Lanham.

Shazam execs' talk of using their proprietary data for advertising puts them in league with The Weather Company, Pandora and Amazon, which are all mining information like pollen count, song choices and product purchases to inform ad targeting. Mr. McGurn said the Shazam app ingests the live audio feed from 160 TV networks every day. That positions the app as an ally to TV networks trying to stem their share of ad spend from being siphoned online.

"One of the things we'd like to work with networks on in the future is going to market together to advertisers and potentially bundling in Shazam-enabled advertisements to their core efforts," Mr. Riley said. Shazam recently hired TV trade association PromaxBDA CEO Jonathan Block-Verk to lead TV partnerships.

Shazam is also currying favor with TV networks as a way to drive viewership. For last fall's Country Music Association Awards, Shazam pushed alerts featuring the show's air date and time to the in-app news feeds of eight million users who might be interested in watching, like those who had previously tagged a Blake Shelton song. Ten million people received such a notification for The Grammys.

Unlike other second-screen apps, Shazam isn't wholly dependent on TV to stay afloat. Historically the app has made money by pointing people who tag a song to digital music stores like Apple's iTunes to buy the download. In exchange Shazam gets a single-digit-percentage cut of the sale. Mr. Riley said Shazam accounts for between 5% and 10% of all paid music downloads worldwide, or $300 million in sales.

"My push has been [to not] take our eye off music...and then a very big push into TV and advertising," Mr. Riley said.

Shazam's revenues are in the "tens of millions of dollars," Mr. Riley said. The company is not profitable, a condition he framed as intentional, the result of a decision to prioritize a larger long-term bottom line over short-term profits. "Profitability is within our control," he said. "We're not a company in search of a business model or a company dependent on continuous external funding … We get to choose how much we want to invest."

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