Andrew: Hey there freedom fighters, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and very fast speaker. I’m going to work on slowing down. Hey, uh, you know how in iOS8, if you hold up your phone and say to Siri, what is that song, Siri will actually tell you what it is? Well that technology wasn’t an Apple invention, that technology was created by a company called Shazam. And you probably know their app, and you know the company.
Well today you’re about to get to know the founder of the business. I invited Chris Barton to talk about how an idea that he had back when he was in school turned into this wildly popular app that so many people use. Chris, welcome and thanks for doing this interview.
Chris: Thank you, Andrew.
Andrew: You were going to Berkeley at the time, not too far from where I am, and where you are today. Were you the kind of kid who even, I guess at that point you weren’t a kid, you were an MBA student, were you the kind of guy who was just batting back and forth a bunch of ideas?
Chris: Yes, I was, I had actually, sort of during the MBA program I decided, hey, what I really want to do is start a company. Sort of, something about being in that environment with the MBA made me realize, wow, you kind of felt empowered, like you really can just start a company. And that was sort of the hit thing to do at the time. And so I went into a…along with a couple co-founders we went into a brainstorming mode of trying to think of different businesses that we could start, and we thought this is the perfect time to do it.
Andrew: This was in the late 90s, when it felt like everyone in California was just changing the world with, not an app, but with a website. Was that also part of the reason why you got excited about the whole startup world?
Chris: Yes, definitely, I mean, as you mentioned, it was just sort of boom times for the internet one dot 0. And…[??]…
Andrew: …Who were some of your inspirations back then? Chris: Gosh, you know, I don’t know if there’s, there’s not a specific inspiration that comes to mind. I think it was sort of, just, watching so many companies become huge successes in such short…almost overnight, really. So there wasn’t a specific one, but it just kind of the wave, the trend in general of entrepreneurship at the time.
Andrew: For me it was Hotmail. I couldn’t believe that Hotmail sold for $400, what was it, $450 million? I said, this is unbelievable.
Chris: That’s right.
Andrew: And so what are some of the ideas that you were kicking back and forth? Chris: So we were going through brainstorming. We used to actually meet, so I spent a semester living in London, and a summer living in London as well.
And I remember I used to meet in cafes with one of my co-founders, and we would just sit there and just brainstorm ideas for hours throughout the afternoon on weekends. And, gosh, a couple of the ideas that I remember thinking about, one was as simple as just simply selling contact lenses on the internet. Because at that time any, selling anything on the internet was an innovation. And actually some companies have made great successes out of selling contact lenses on the internet. But I remember that, that one in particular, I just felt like I can’t really get that passionate about it. It just, it wasn’t that exciting. There was another one where we thought, we’re going to try to bring the star quality, what we called, so when you go see a movie, you often do it because a star’s in it.
We considered how are we going to bring that to the internet as well? So you go to our website partly because there’s stars there, that are present. And you could almost say that has come to fruition, to some extent, with Twitter these days. We thought we would somehow find a way to bring it to, even destination websites like Amazon and EBay, and so on. But again, I think we realized the idea was a little bit too kooky, and so we didn’t go with that one either.
Andrew: So how did you come up with the idea that today many of us have on our phones?
Chris: Yes so, I think that the idea that, wouldn’t it be great to identify was song, was very obvious. And I think a lot of people thought, wow, wouldn’t it be great to identify a song. And, in fact, there were actually multiple companies that were trying to solve that problem in a far simpler technical way, where they would basically monitor what’s being played on the radio, and then you could type in your radio station that you’re listening to and, if they were monitoring that station, they would tell you what song was playing.
But, so, the real, kind of, break through, was that we thought, well it would be great to solve that same problem, but is there a way to do it in a better way? And that was the thing that we pursued with Shazam. And that was to identify the song regardless of whether it was on the radio, and without having to know the name of a radio station. It would work anywhere, a bar, a club, a cafe, a movie theater, a retail store, anywhere you heard music.
Andrew: How were those other businesses monetizing this idea that they had?
Chris: Yes, they, I don’t think that they…well, they were starting to launch their services, and I think they certainly hadn’t figured out the monetization piece either. They were very early, kind of in an early launch stage. I think they all imagined that they would be able to sell, it would be kind of, e-commerce, was the obvious thing at the time. We’ll be able to sell the music that people want to identify. And actually that does work, I mean, today Shazam, a primary source of revenue is actually selling the music after people identify it.
Andrew: But top revenue comes from that, or is from buying the premium map?
Chris: Buying the premium map is not so much of a significant revenue stream. So, selling music is definitely a significant source of revenue. For Shazam, they’ve been out, they drive over $300 million worth of music sales today on an annual basis, so that makes them one of the leading sellers of digital music, and I think selling almost six or seven percent of digital music globally.
Andrew: Oh, wow. What about the whole 900 business back then? If I remember right, weren’t there companies that said, “If you call up to get this, we’ll give it to you,” and you had to use a 900 number, which meant that you’re going to pay two to five bucks for it?
Chris: Absolutely. There were companies doing that, that were pursuing those types of businesses, and that actually became an inspiration for us for Shazam. Something that wasn’t being pursued with some of the radio type things I mentioned. What we decided to do was find a close analogy to 900 numbers, which was in a 900 number you’re being charged for the phone call.
But there was another technology that was not available in the U.S. at the time but was available in Europe where we launched which was called Premium SMS, and that was basically receiving an SMS to your phone, but also along with it sort of a premium charge to your phone. That’s how Shazam first launched. In the UK market, our first market, you’d have to pay 50 pence, the local currency, for every time that you identify a song.
Andrew: All right. So, you saw an idea that was out there. People were clearly trying to solve it. They had some ways of doing it, but it wasn’t powerful enough. You saw a way of generating revenue. That mean, terrific, right? It must have been easy to build a first version, right?
Chris: Oh yeah, absolutely, very easy. We definitely had a number of challenges in getting Shazam off the ground. First one was making our algorithm actually work at production grade so that in noisy environments and make sure it scaled across large number of users and large amounts of music. We also had to implement, build, essentially, our own mini-Google, our own cluster-search engine, our Beowulf cluster of parallel processing PCs, stacks of PCs that, within the RAM, housed all the fingerprints of the music.
Andrew: What about the idea of knowing that you need to fingerprint the music and knowing how to do it? A guy who’s getting his MBA doesn’t have the background. Did you have the background to do this yourself?
Chris: No.
Andrew: No. Did you have the background to even know what was necessary to do it?
Chris: No.
Andrew: No. So, that’s really intriguing to me that you had the idea, but it’s okay as an entrepreneur to not know how to implement it. You have to know how to go and find the person who’s going to implement it. So, what’s the process that you took that eventually led you to the guy who did it, which is Avery?
Chris: So, Avery was the guy that built the original algorithm, which we knew was the single hardest thing to do out of everything to get to launch. We needed someone that could literally invent an algorithm. There’s a big difference between building a technology and inventing a technology, and in this case it really was the case that all the folks that we spoke to that were experts in this field of music analysis, shall we say, audio signal processing, were telling us that it was impossible.
Andrew: Why?
Chris: Why was it impossible? There were technologies that were able to identify and sort of analyze audio and match songs, but they all worked in clean environments like streams of radio stations coming in through a nice clean signal, and against pretty small databases of music. There were also some technologies that were used on the Internet to look at files being exchanged and identify what they were. But, again, you have nice clean environments there.
What we were introducing into the equation is significant amounts of noise, because, obviously, what you capture over a phone comes along with all the ambient noise in the background as well as a reduction in sound quality that’s introduced by the microphone on the phone as well as the noise-cancellation technologies. So, we ended up with a pretty horrendous signal to analyze, and once you introduce noise into the field of pattern recognition in general, not just music recognition, then suddenly you encounter major problems, which is why voice recognition can have trouble sometimes.
The second component, it’s combining noise and scale at the same time. That’s why, for example, if you call into a voice recognition service and they say, “Say your phone number,” or “Say your credit card number,” or “Say your Social Security Number,” well they know that you’re going to say one of only nine digits. That’s actually pretty easy. But, if they just say, “Just say anything,” well that becomes a much harder problem.
Andrew: I see. By the way, we should be saying that there weren’t smart phones in the late 90s. You sent us a series of slides that you used for presentation here in San Francisco that got Anne Marie Ward, our producer here, so excited about having you on here, and one of those slides showed what the phones looked like back then. It’s a good reminder. We’re talking about those old, candy-bar sized Nokia phones where you would have to scream into the phone hoping that your father would hear you. I remember that. That’s what you were using to do pattern recognition. So the quality wasn’t good even in a quiet environment. You also want to do it in a loud environment.
Chris: That’s correct. Yeah. So now days actually with smart phones we get a higher quality signal than we did back then with those phones. We still have significant amounts of noise to deal with. But yeah. We’re now taking sounds directly using a kind of microphone on the phone and recording sound. Back then we were actually doing it over a voice phone call. The people actually used Shazam by dialing a phone call. When you have a voice phone call you actually have a more limited band of sound being captured in a sense.
Andrew: I think it was interesting to talk about how you met at Avery Wang, the person who invented the technology. It happened because of a conversation you had with the professor. Who was the processor?
Chris: Yeah. It was a professor named Julius Smith. As we were researching and trying to identify this needle in a haystack, which was someone that could invent this algorithm, we quickly determined that the types of people that would have this expertise are people that had PhDs in digital single processing focusing on audio. And then we soon found that one of the eminent people on this space was this professor at Sanford, Julius Smith, who had been involved in inventing the algorithms behind the Yahama synthesizers and was a key electrical engineering professor in the group at Sanford known as the Center for Computer Research and Music and Acoustics.
We met with him and he loved the idea. He actually kind of became adviser to our company. He did become an adviser. Then we basically presented him with a list of names of PhD students that we’d come across that had published papers in this area. Of course, he knew most of them because it’s a pretty small community even if they’re out of Stanford, Berkeley, MIT, and so on. He is the one that helped us identify that Avery who had did his dissertation under Julius years before could be a great candidate for this.
Andrew: So at this point you’re being told, “This doesn’t make sense.” You’re being shown phones that can barely hear a person talking, let alone pick up clearly on background music. You’re going through all this work and you’re probably watching in the background all these other tech companies take off. Do you say to yourself, “Maybe the contact lens business is not so bad.”
Chris: Yeah. It was definitely a key, probably the single most important ingredient, and the phone’s success was simply raw perseverance.
Andrew: How did you persevere? Why did you say, “This is a good idea” instead of saying, “You know, there’re all these different web pages I could be making that are so much easier. Don’t need to analyze audio. Throw up some ads. The model’s out there.” Why did you persevere?
Chris: I think we just believed that this was something that was groundbreaking. That this would be incredibly delightful for users if we could actually make it work. Therefore, to do something, when you build something that’s really, really hard to build, and it’s super delightful for users, then you feel like you really have a sustainable advantage, or something that can therefore create value as a business. Some of the Google and Dropbox and these types of companies also conquered really, really hard technical problems that delighted users. That was the attraction of conquering music recognition.
Andrew: How did you know the market would be big enough to financially pay off this hard work?
Chris: We didn’t know that actually.
Andrew: You didn’t. A young guy who said, “I see an idea here. It’s going to get people excited. I believe there’s something to this.” My MBA training might have told me I should look for market size. I’m going to ignore that right now because this is something so exciting.
Chris: Yeah. But I guess I think that we all felt that there was a potential for a big market just because we could see how everyone was going to mobile phones. This was 2000 and the advent of mobile phones was running at an incredible rate. Market penetration levels of phones was rising from what it been a minority of people only the year before to pretty much the entire population. We felt that why was everybody going to carry these devices around, and they were really just making phone calls with them. So we felt like this is going to be an application that they’re all going to be able to use. It felt like a big market at least in terms of users.
Andrew: I want to get into how you got this off the ground. But there’s one more question I have to ask about this. April Dykeman in a pre-interview asked you, “What would you teach if you had to teach a class about entrepreneurship.” And you said, “How to know if you’re just wasting your time on your idea.” That’s a question a lot of entrepreneurs ask. How do you know, how do we know that the idea we have is worth pursuing and not just crazy?
Chris: Um-hmm. Yeah. It’s a problem that I think you really have to keep asking yourself all the way until the day that you reach the success that you want to reach the success that you want to reach, because it’s not really proven until you actually have a very large user base and [??] business. There’s different things that could mean that you’re wasting your time. It could be that it’s completely unfeasible to do what you’re trying to do. It could be that it’s going to be a commodity and there’s going to be so many companies offering it that basically there’s no real upside, or it could be that it’s a feature, not a business as it is sometimes here.
It could be that there’s just not enough demand, and that’s often the big one. I think a lot of entrepreneurs assume there will be a tremendous amount of demand for their idea, and anything that can be done to try to really assess how real that demand is, how great that demand is, is key. Because, you know, one quote I’ve heard is that a new idea, a new product, has to be 10 times better than its predecessors to capture people’s attention, and it’s really true. It can’t just be incremental; it has to be something just so amazing, and if it’s not that amazing, then that means you’re going to have a really hard time getting user adoption.
Andrew: I see. So you’re saying just be aware of all those places where you could be crazy, where you could be going wrong, and then investigate them. Are you crazy to assume that there will be lots of people ready to use this app? Well, if you’re worried about that, then go look into it and see how big the market is. That’s the kind of approach you’re suggesting?
Chris: Yeah, and I think there are ways to sort of test this that you can…you know, I’ve heard of people doing things like running Google AdWords to see what the click-through rate is on ads responding to different propositions. I’ve heard of, you know, obviously, we did actually a little bit of surveys ourselves, just surveying people in shopping malls to ask if they would use a feature like this. None of these are perfect. In some cases, you can launch very light betas to see what user adoption looks like and interview the users to see what their reactions are. So, anything where you can try to come at answering that question without just simply just your, you know, limited to your gut instinct.
Andrew: All right. That was me just banging into the glass here. I keep a cup of coffee here, and I’m still not used to wearing a ring, even though I’ve been married now for a few years. The whole idea that the ring makes noise hasn’t fully penetrated yet. All right. Why was the first version called 2580?
Chris: Yeah, so 2580 was actually then, it was still called Shazam back then, but we needed an access point to Shazam, and websites have a URL that you go to, but we were a phone service. Back then, as I said, there were no smart phones and no applications, so the way you used Shazam was to dial a phone number, and most phone numbers, as you know, are typically about 10 digits long. We were focused on getting an easier number, and it turns out you can get short code numbers.
So, for example, 411 is a short code number that takes you to directory inquiries. So, yeah, we thought let’s get a four-digit number and we’ll get that by partnering with mobile operators who have control of those numbers, and then we wanted to get a number that would be memorable. You wouldn’t think that 2580 would be a memorable number, but yeah, exactly. So the breakthrough or the concept was that it’s the only four-digit number that’s in a straight line on the mobile phone. So, once you realize that, then you think, OK, I’ll never forget that again, straight down the middle of the phone.
Andrew: You know, actually, there’s one more thing, I’ve got to go back. Avery, how did you get him to say yes? How did you get him to sign on and invent this technology for this business that you conceived?
Chris: Yeah, so we met with him in a cafe for the first time. I think that first sort of helpful thing was that we had been introduced by Julius Smith, so that brought some credibility. He thought, oh, that’s my old professor from Stanford, so that was a nice door opener. I went there with one of my co-founders, Philip, and we lunch with him and we had a little presentation that we showed him and said this is what we’re dreaming of, this is what we want to build. He saw that we had put a lot of thought into it. I mean, he could see that it wasn’t just a couple of ideas, sort of verbalizing an idea; it was a couple guys that really were on a mission to kind of make this a reality.
So he believed that, he trusted that we really were going to take this seriously. I think we had a personal chemistry with him. We also frankly got lucky — that’s often the key component in a lot of these things — in the sense that he actually had been trying to be an entrepreneur himself and he was just on the tail end of sort of a business that was failing in a way. So it was kind of perfect timing. He was trying to think what would be the next thing, and so he thought, well, this seems kind of interesting. Let’s try this out.
Andrew: What was the share split for the business?
Chris: We decided there were four co-founders, and we decided that let’s just make this really simple and easy and reduce any potential jealousies or conflicts or anything, and so we just split the equity evenly between the four of us.
Andrew: Okay. All right, so now why go the UK? Why not start here in California?
Chris: So, frankly it was a lifestyle choice initially. We thought wouldn’t it be fun to start a company in London? And be different, and have a life experience living in the UK and the vibrant city of London. And then we realized that this was an outcome that was not planned, but early on we realized well it’s a good thing we’re doing this, because our primary business model which was to charge phones using [SP: premium] SMS was only feasible in European countries.
So it wouldn’t have even worked in the United States because there was no [SP: premium] SMS. But in addition at the time venture capitalists in Europe were interested in consumer propositions in mobile. There were companies doing things like ringtones and so on, and none of that had hit the ground in the US. So in the US venture capitalists wouldn’t have even shown interest at the time in a consumer proposition on mobile.
Andrew: All right, you’ve got your inventor, you’ve got your team. You’ve got your home country, you have your idea- 2002 you launch. There is no Apple app store, there is no Google Play. How do you get people to be aware that the service exists?
Chris: We hire the best marketer you can find, we hired a great guy in the UK named Veejay Solanki. He had been the head of marketing for the largest group of radio stations in the UK called Capitol Radio. We hired him with our new bank account full of venture capital money, and he kind of thought through all the kind of nimble ways you can market a new service. With a limited budget that ranged from SMS campaigns, banners, ads, billboards you name it, almost anything you can think of, radio ads.
Just anything that could drive awareness; but frankly no matter how we did the marketing we certainly tried a variety of things. It was really tough because ultimately the cost to make someone aware of this service was significant relative to the revenue that came from that customer. So it was a real uphill battle, without this sort of organic growth [SP: world] that would later come with the app stores.
Andrew: Yeah, for 50 pence per surge how many times a day does someone need to do a search? Not that many. Boy this sounds like a lot of money actually, you’re talking about radio ads, billboards, and so on. How much money did you guys raise?
Chris: We raised 7.5 million dollars, and only a fraction of that would’ve been used for the marketing. So it was a pretty hefty raise at the time, especially for a Series A round, where we really had no consumers. All we had was a demo at the time. We needed a lot of money to get the entire business off the ground, to build the database with fingerprints of the music, and the cluster search engine and so on.
Andrew: What was the most effective, the most bang for the dollar marketing thing that you guys did in the early days.
Chris: Oh gosh, I don’t know the answer to that. I would say nothing [laughs]
Andrew: Really, it was all expensive all cost money. So then you’re spending all this money and eventually it has to start running out. Right?
Chris: Absolutely, I mean we hit really challenging financial times. Because we didn’t [SP: hit] on a model where we had this nice growth of customers, leading to growth of revenue. We just simply had a compelling service that the users who knew about it, liked it. But we didn’t really have a way to get to more users and we didn’t have the capital to do so. It was also a pretty tough financial climate at that time, during 2002 and 2003, really tough years.
Andrew: It was after the meltdown, after the bubble burst after whatever metaphor you want to use. These were hard times.
Chris: Yeah that whole period from 2002 to 2008 I don’t know, it was like a dark period for startups. So we just found ways to survive, one thing we did is [phone buzzes]
Andrew: What was that sound?
Chris: That’s just my little notification on my phone right there.
Andrew: Oh Okay.
Chris: An SMS coming in.
Andrew: I’m sorry you were saying “one thing you found”
Chris: Oh, one thing we found was we could take our technology and build B2B businesses around it. [phone jingles] So we were able to license it for, all kinds of little beeps coming up here. We could license it for monitoring radio stations, as I mentioned is an easier problem but we could do it at scale, and very cost effective.
Andrew: For who, who would need a radio station monitored?
Chris: So there’s societies that pay out royalties when artists have their music played on the radio. In the United States the two biggest are ASCAP and BMI, so those are the types of organizations that we would partner with and it became a form of revenue for Shazam that would help pay the bills.
Andrew: And at the time they were doing this by hand. Someone would sit and listen to the radio and write it down, right.
Chris: Yeah, they literally sampled the percentage of radio and manually determined what was being played and projected what it was across all radio.
Andrew: You partnered up with them and you said, basically you sold you service to them. How did you get their feed into your system?
Chris: We partnered very closely since we were co-located with them and their actually sort of licensed for technology to them. So they were doing a lot of the implantation on their side. What we were really bringing is the technology that could do this.
Because it really was one of the beautiful things about Shazam technology is that not only did it work in Noice, but when you applied it in something like this, like a radio stations it was very, very confrontationally efficient. So just a really, really cost effect way in terms of how much infrastructure you have invest in to do this across large numbers of radio stations.
Andrew: What other businesses?
Chris: That was the main one [??] and then the second thing I would say that we did is say, you then had the early advent and in two years of the kind of first wave of mobile applications before the app stores. And they were called Java applications. And they would run on simple Nokia phones and so on. Phones that were not Smartphones but you just [??] an easy way to distribute those applications to the user. So we were able to partner in some cases with mobile operators and kind of pre-load those types of applications.
Andrew: So this is the phone that I saw, that you sent a screen chat, a picture to Ann Marie?
Chris: Yeah, I think it was probably a little bit later than that phone. That phone was . . . I’m not sure if that phone ran Java applications. But probably in the following years there will be phones not that different from it. Slightly maybe color screens. So slightly more advanced than that, but definitely not. . .
Andrew: It would play Tetris and one or two other things.
Chris: Yeah, exactly.
Andrew: Okay, and so to get it on the phones people yes, they had to go through so much work to get it on. And you realized their not going to go through that trouble so you partnered up with phone companies. How did you get into phone companies?
Chris: Oh, yeah it’s just a lot of perseverance again. We had a deal with AT&T for example were you know, many AT&T phones you’d buy the phone and one of the applications on the phone would be Shazam. And the user could try it out for a trial period and then if they like it they could actually pay for the first ever time for Shazam as a subscription price, a monthly subscription price to use it.
Andrew: How did that work for you?
Chris: And actually it worked pretty well. It had a great uptake. It brought in a nice revenue stream and helped again fund the company through some of those tough years.
Andrew: Was there ever a period . . . because right now it looks like everything just worked out. Was there ever a period were you said, this is the worst thing I ever did. I made a big mistake here and maybe we got a little depressed about it.
Chris: It probably should have been, but for some reason there was not.
Andrew: Why now, why didn’t you get depressed?
Chris: I just, it’s kind of like I just always believed it would get there eventually. I just though okay well all we have to do is the following things if we can just kind of . . . I think you could see the entire period. You’re always seem to be around the corner, and when I say around the corner I mean a year or two around the corner from another great revolution of phone technology. And so, oh wow now there’s color screens coming, oh there’s Symbian phones you know, the first rate Smartphones. Oh, there’s 3G networks that we’ll be able to enable and as digital music services . . .
Andrew: How are you living at the time? Like what are you sacrificing in order to keep on waiting for the next big innovation?
Chris: Well so you know, we actually the co-founders of the company stuck with company from 2000 to about 2004. And so that was the first several years in survival. But the company really didn’t take off I’d say, hit a sort of hockey stick curve until about 2008, with the App store and the iPhone.
So those following four years when the co-founders were not with the company but we kind of maintained a presence through our board participation. We kind of kept an eye on it. And so that’s how we survived we had other jobs.
Andrew: I see you were working at Google at the time. Starting 2004 you did strategic partnerships at Google. Why did you leave?
Chris: We left because times were tough and we had hired in sort of gray haired management to run the company, which is that’s the way things were done start-ups back then.
Andrew: You didn’t get the press that you were pushed out or had to leave your own company. That you didn’t get to be the Michael Dell of the cell world.
Chris: Well at that time it wasn’t looking like it was going to me a Michael Dell [??]. Because it was like. . .
Chris: Look I went through hard times roughly that period too. I remember just doubting myself because of it. I didn’t have smooth transition into anything. It was tough. And tough I mean from the point of view of thinking I had this great idea I invested everything of myself into it. I was going to build something at least as big as Hotmail. If not something that would actually leave a legacy for the rest of my life and now I don’t get to do it and that wasn’t an easy transition. Did you go through any of that?
Chris: No. It’s funny. If I did maybe I erased it from my memory.
Andrew: Really.
Chris: There is no doubt it was tough times raising money in those down rounds of 2002 and 2003. It was not a pleasant process. Hoping to try to keep the company alive was certainly not pleasant but I guess I have to admit I am a rationally positive person.
Andrew: But you are also an entrepreneur from the beginning. We asked you “Did you have any businesses”? You said yes. Lemonade stands, smoothies. What’s the haunted house that you had growing up?
Chris: Oh yes. It wasn’t really a business frankly because I think it was free.
Andrew: Okay.
Chris: [??] model.
Andrew: Okay.
Chris: For the whole neighborhood we built an amazing haunted house that you would just basically crawl through and it was really innovative.
Andrew: What about cookies?
Chris: Yes. We used to bake cookies and sell them. Co-locate with garage sales where you already had foot traffic.
Andrew: And you would go to garage sales and you’d say “Can I sell my cookies here”?
Chris: Yes.
Andrew: That takes guts but it also takes a sense of entrepreneurship like that internal, innate entrepreneurship and so here you were, a guy who had a company who suddenly is no longer the head of a company. You now have a board seat and you are at Google. Come on. Give me like the Oprah moment. Oprah gets people to cry over this. I, Andrew, who is the worst. But no, honestly, didn’t you feel anything like that?
Chris: I didn’t. I was actually pretty excited to be at Google. I had a pretty amazing time of meteoric growth for Google. I definitely felt like I am going to stick this out and do whatever I can to see Shazam get to its success, even if it’s not me at the helm. I actually was never focused on me being the person at the helm of Shazam. I just want Shazam to succeed and I want the best person at the helm so it was never about being the guy at the top or being the CEO. I was the entrepreneur that wanted to create value and value can mean injecting the right team in some certain cases.
Andrew: Okay. You were willing to go into Google while you watched this business from your seat at the Board of Directors table and you helped it along and the business kept going. And then what was it that turned things around finally?
Chris: It was truly the App Store and the iPhone. I can remember when the App Store launched and you could immediately go into iTunes and go see the ranking of apps and I was phenomenally excited to see Shazam there in the top 50 apps and saw it maintaining its spot day after day after day and I would actually check it each day, I remember, in the first weeks of the App Store launching and realizing “Wow”. Shazam has finally broken through. People are aware of it. They’re finding it and it’s shining in the light that I always imagined it would get to and never looked back. Basically Shazam has ridden that wave as all the smart phones have reached the world and the number of apps distributed has exploded.
Andrew: At the time wasn’t there an app called Midomi?
Chris: Yes there was.
Andrew: You could hum into it. It was like Shazam was what people would talk about. They couldn’t believe their phones would actually identify the music that was going on in the background but there was this other one that you could hum into it. Why didn’t they take off as well as you guys did?
Chris: So they are still around. They actually renamed themselves.
Andrew: SoundHound.
Chris: SoundHound. Yes. I guess you could call it a second place in the same category and always remained in second place. Sort of a distant second place so less than one third or one quarter of users of Shazam. They haven’t gone away. They are still a business with a significant number of users and I think it’s always healthy to have good competition so I often think that their presence is one of the best things that’s happened to Shazam to spur Shazam along a little bit and kind of keep them . . .
Andrew: I’m on http://www.Midomi.com right now. I went to the About page. On the very bottom it says “Copyright 2008 [Melodus] Corporation”.
Chris: Yes. They still have the original corporation then.
Andrew: Yes and they still have the original copyright and when I see someone who has a copyright date on the bottom of their page that is a year older I feel like something is not fully updated. It is hard to tell how well a company is doing when that happens. I go to the home page and it’s the same thing. Now it says portions provided by All Music Guide, Copyright 2009. I guess SoundHound.com, the web page, is the place to go. They didn’t transition the domain name as well.
Chris: Maybe that’s it.
Andrew: That’s what it is.
Chris: They are still around as a company definitely. They haven’t gone away but they’re a much significantly smaller company…[??]…
Andrew: …did you ever get to look inside and see what they did differently from you?
Chris: So they…well they originally started off with just humming recognition, and so they were actually a completely different approach to music recognition. The idea is that you would have that was stuck in your head and you…
Andrew: …Yes…
Chris: And then, of course, humming is not a perfect thing, it’s not a perfect match, so they would sort of come up with a list of guesses of what the song is. And then they saw that Shazam was doing really well with real music recognition in ambient environments, and so they actually built technology to do the same kind of thing. Because they are a team of strong technologists I believe, or PHDs, out of actually the same, believe it or not, the same department at Stamford, center for computer research in music and acoustics.
So my guess is that, although they still have the humming recognition as well, my guess is that the bulk of their usage is probably similar to Shazam’s, you know, for real music identification. Because the humming thing, I think, was kind of a novelty thing. It was a neat thing to show off to a friend once, but I don’t know if you would really use that on a recurring basis.
Andrew: I don’t mean to put them down, I think what they did was innovative, but it did feel like there was this…at least I’m in the tech world so I pay attention to this stuff in a way that most people don’t. It felt like there was a bit of a horse race. I remember even listening to Leo Laporte talk about all the different apps that were available for the iPhone, and some people like Madomy [sp], some people like Shazam, and that back and forth seemed like it was a real, like, fight or horse race, and then suddenly it just felt like one just went right…one just took off and the other didn’t. I’m wondering why.
Chris: Well I think there was a…there were a bunch of things. So one was that Shazam had been building this technology of music recognition for many years, I mean, it had been live in production since 2002. Whereas Madomy, they had to put it out to market right there in 2008. So things were breaking down for Madomy, I recall. Like in those early days, like, it would sort of, the service would maybe not work at certain times and so on.
This was the very first months of the app store, and we have fuzzy memories here. Secondly is that Shazam was lucky enough, and this probably tied in to the last point I made but, Apple selected a few apps they thought it would be great to profile on TV advertisements. These were literally TV ads, so they literally built a TV ad that was exclusively demonstrating the Shazam app, and mentioning the Shazam name. And so Shazam was one just of a small handful of apps that was chosen for that. That was an incredible boost to driving awareness even more, that Madomy, or SoundHound didn’t have. And there’s probably partly based, I’m guessing, on Apple doing its due diligence in checking which apps were working most reliably and so on.
So that helped, and then you get that kind of momentum effect of users, and brand, and people talking, word of mouth, and so on, and that, kind of, maintained Shazam’s momentum. I mean, there were times when Sound Hound or Madomy were…they were real, you know, significant competition for Shazam, and they were actually implementing certain things very, very well, and keeping Shazam on its toes. In terms of initial period of times, like speed of the app, and speed of the recognition, and so on. They were actually the first app of the two to go completely unlimited for free. So it was a period of time when they were free, and Shazam had a cap of five tags per month, and you had to pay if you wanted more. But luckily that changed pretty quickly. So they definitely kept Shazam on their toes and I have a lot of respect for that team and that company.
Andrew: To get to company to the next stage, at one point you had to raise more money and you had to accept difficult terms. What are some of those terms that you felt were most tough?
Chris: Are you talking about terms with the venture capitalists?
Andrew: Yes.
Chris: Well that’s a tough one to, you know, obviously they’re all confidential terms, so that’s a tough one to address. But ultimately it just comes down to, I mean, every entrepreneur’s familiar with the fact that whenever money comes in to a company, dilution comes with it. And being that the level of the dilution is a direct function of, essentially the success of your business. And then the success of the business drives your evaluation and your negotiating leverage and so on. So that’s a, ultimately is dilution, is the consequence that we faced as a result of having to raise money in times when we did not have incredible momentum with either users or revenue.
Andrew: Before Carlos Lamb [sp], I think invested $40 million in the business?
Chris: Yes, I think that number sounds about right, yes. Andrew: Before that, what was your share in the company? Did you still own anything?
Chris: Yes, I can’t disclose my share, but yes, absolutely, I mean, I continue to own a share of the company today.
Andrew: More than 5% of the business?
Chris: Sorry?
Andrew: More than 5% of the business?
Chris: I’d rather not get into the specifics of that.
Andrew: Okay. Actually, maybe we don’t have to get into the specifics, but here’s what I’m wondering: Did you make out well? I don’t mean just okay; I mean did you end up making, making out really well from this idea that you pushed through when so many people said it wasn’t going to work out, where you found a guy who invented a solution. You still had to rough it out in Europe…well, it wasn’t roughing out, but you had to figure out every part of the process. It wasn’t easy. Did you do really well as a result of this?
Chris: Well, here’s how I can answer that question. Shazam has over 500 million users of all time, all time, over 100 million monthly active users. It’s a global brand, and I haven’t made a dime out of the company yet.
Andrew: I see. You still own shares in the business, you haven’t made a dime, and there was talk of it going public, but it doesn’t look like anytime soon, right?
Chris: Yeah, exactly. You’d have to have your exit, obviously, and so, yeah, there hasn’t been an exit, but the company’s doing really well. I think at the last valuation that was sort of announced in the press or indicative valuation was around the 500 million mark. So, I mean, it’s become a really highly valuable business and obviously has its sights on much higher values. So, it’s definitely on the upward trend.
Andrew: What about this. I know for my company, if I want to talk about it to someone and show it to them, I have to go and dig up an old, and old article about it or show the webpage as it looked in the Internet archive and go, “See that. That’s what I did a few years ago, 10 years ago.” You don’t have that. You can sit at home, watch television, suddenly a commercial comes on while you’re watching with your friend, Shazam is right in there. They’re telling people in the audience, “Shazam it to see more information about this commercial.” Shazam is all over. How does that feel? Has there ever been a time where you saw that and you said, “I did that.”
Chris: Oh, it’s absolutely amazing. I mean, it’s the biggest reward ever. Sometimes that happens. Actually, my favorite times are when you’re out, when I’m out somewhere and I see someone Shazaming. It’s happened several times. I’ve been out at a bar or dance club kind of place and seen people dancing to music and someone pulls out and tries to Shazam a song. I was once at my gym working out and I saw one of the gym instructors putting his phone up to the speakers to Shazam a song.
So it’s been several instances where you see that live occurrence happen of someone Shazaming, and I just think, “Wow. It’s amazing. Someone’s using Shazam.” Also, quite often on the train, I’ll just overlook someone’s phone and see the app, of course, on their phone. Yeah, it’s very, very rewarding, definitely.
Andrew: It’s got the kind of icon that stands out. If you’re looking at a sea of icons, it always stands out. What about now? You’re at Dropbox. I think you’re doing business development there, right? Head of…where is that…head of mobile carriers — of course you should be doing that — business development at Dropbox. Does it help that it comes out that you’re the guy who invented Shazam?
Chris: You know, actually, I actually rarely mention that, just because, I don’t know, it’s just not my style and approach. So, I think it helps me in the sense that, through my ongoing, board-level role at Shazam, I have a lot of insight into the way the mobile industry thinks and the app world works, and this knowledge comes from Shazam and also my experience at Google and so on, and so that’s the main, primary way it helps is just thinking through the mentality of the mobile industry and how they think about applications that they want to distribute.
Andrew: All right, so if someone’s listening to this and they have an idea, they want to see it through, and they want to take one big lesson from your experience, what would that be?
Chris: Big lesson from my experience with Shazam? I think it’s…probably the two things that come to mind are, if I can give two…
Andrew: Yeah.
Chris: …is one is that, so we talked about perseverance, but in order to have such incredible perseverance, which is pretty much always necessary in getting a startup off the ground, you also have to have passion. So, it’s so important that, whatever it is that the business you’re building is, it’s something that you just truly feel passionate about, because that’s going to be your fuel for all that persistence. So I think that’s, I think that’s one big lesson. I think the other one is just, you know, is just trying to identify what is that thing, what’s that problem that you can solve that no one’s really ever solved really well and identifying something.
One of my big learnings with Shazam that I didn’t think this way back then when I was starting Shazam but I certainly think this way today, if I ever put my entrepreneur hat on, is how big is the market, as you alluded to earlier, and really thinking about, you know, is this a big market? Am I solving a problem in something that’s just a really, really big market, because that one becomes, again, the source of all the potential revenue and therefore potential funding that you could raise.
Andrew: Was there a way for you at the time, before the app store, to know how big the market was for people who would pull out their phones and dial a short code to get a song identified? How do we do that? Because there’s some ideas like that that aren’t as easy to figure out what the market is.
Chris: Yeah, it’s really, really tough. I mean, I remember we looked sort of things that we thought that were sort of bench marks that sort of try and arrive at [??]. I recall now that we believed that 6% of people with mobile phones would use Shazam in that kind of world. Were you have to dial a phone number and 50 pence per use?
We thought 6% people would use it, and we thought an average four times a month. And if you think about that 6% of all mobile users paying 50 pence, four times a month that actually adds up to pretty significant revenues trim.
And interestingly so we never got to that 6% in those early days of those phones. But today we’re far more than 6% of Smartphones, so we actually exceeded that kind of guesstimate number that we came up with back then. Of course the other thing that went away is the 50 pence per use. And so that completely changes the economics of the business.
But, yeah I mean, it’s a really tough one. Market sizing what your opportunity is, is tough. I think you kind of have to look at what’s the totally potential user base for something, the total number of people that would really find something compelling. And in our case it was people who were pretty passionate about music and had mobile phones.
Andrew: You know what I remember in school they made it sound like it was so easy. You just have to figure out the market size. And then they would tell you about these different reach if you’re creating a business plan for your class you can look up what different resource companies use for market size.
And it just seems like such BS, I think what you just said is the answer that sometimes you just have make it up based on what you know and except that it’s a guess, a guesstimate, as you said. And hope that you’re going to get it right. But keep connecting the dots until you get there.
Chris: Yeah, absolutely. Refining the analysis, you have more information.
Andrew: Well it’s great to have on here to hear your story. You know, what I’m wondering why did this. I’m really proud to have you on here. But, you heard me look in the beginning of the interview before we even officially hit record. I said, I wanted to make it so that is was a useful interview for you, not just for me.
And I couldn’t come up with anything. It’s not like you have to get Dropbox on more peoples computers or you have a new start-up that you want more people to register. I’m really glad that you’re doing this but what’s your incentive for doing this interview?
Chris: I think that I have the experience of starting Shazam made me feel very connected to entrepreneurs and to the challenges that they’re facing. Passion that’s required. And it was really just I feel like anything I can do to sort of, you know, provide lessons that could be helpful to them I think is just something that I find rewarding, really. That was the main motivator for me.
Andrew: That’s the reason why I put together Mixergy and it’s great to have here to share your story. I also heard that you killed at Steve Young’s event. It was really hard for him now to do a follow-up event because people came to watch you. Right, you were Steve Young’s event?
Chris: Yeah.
Andrew: I was looking for that to, maybe I got it wrong I was looking at your face I thought maybe I was getting a wrong signal. But it seems like you did so well, they said, ”How I’m I going to follow him up.” But now we can’t come up with someone as good.
Chris: Wow, that’s great.
Andrew: So if you know someone else who’s in mobile apps, who maybe doesn’t have to be as good but whose App did well, introduce him to Steve. Anyway I want to say this Chris thank you so much for doing this.
Congratulation on your success with Shazam and I really appreciate you sharing your story here today.
Chris: Thanks for making the time for me as well, I appreciate it.
Andrew: You bet. Thank you all for being a part of it. Bye everyone.
