When it comes music apps, there are few as ubiquitous as Shazam. Since its humble beginnings in 1999, the music identification service has grown into world renowned app with over one hundred million users and elevated itself to "unicorn" status as a private tech company with a $1 billion dollar valuation. However to achieve all of that, the company has been hemorrhaging money. According to its 2014 filings, Shazam reported an increase in revenue, but an even higher losses. Despite the bad news, its users and daily searches jumped a considerable amount.
According to recently released filing with Companies House in the UK (via Billboard), Shazam's revenue increased 113 percent to $55.3 million, though it had an operating loss of $21.2 million and net loss of $22.8 million. Even with the increase in revenue, total expenses grew 126 percent and net loss increased 158 percent.
Cash reserves for the company fell to $17 million from $29.6 million.
Despite what appears to be dire straits for the company financially, the company is showing strong signs of growth. Its user base grew from 86 million to nearly 120 million and daily searches elevated from 20 million from 17 million.
This is the dilemma that investors face when assessing Shazam. Do they continue to ride out the losses and provide the music app more capital to grow in the hope that it will eventually turn or a profit or do they deem it too large a risk without any profits? Many have decided that like many other tech companies, the promise of future profits is worth taking a loss now to grow into a large business. Shazam is banking on that model to work now.
Smartphone penetration is reaching developing markets at a remarkable rate, especially in Asia and Africa, where there will be plenty of growth opportunities for Shazam.
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