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Comment by ChuckMcM | Hacker News Reader

Wow, that is an unusual exit after 6 rounds of funding. Crunchbase has it at $143M in funding up to that point.

It goes to show how the switch from radio (station directed programming) to streaming (user directed programming) has put a huge crimp in music discovery and music promotion.

[1] https://www.crunchbase.com/organization/shazam

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Question from a non-Silicon Valley professional: Where does all that money go? Obviously, some [likely big] portion of it is still on the balance sheet, but does an app like Shazam really cost that much in engineering talent to update it and iterate it and server space to keep it running?

Marketing, sales, legal (especially in the music space, though less so for Shazam), engineering (integrations with Spotify, Etc.). People cost a ton of money. :)

Just because all you see is an app, doesn't mean there isn't more software they have running behind the scenes. A lot of consumer facing companies need to have DMCA copyright compliance software, explicit content software and various "big data" integrations, both to power better recommendations engines, but also for BI purposes. They also need a way to ingest content so they can identify new music.

A good app looks like it only takes a few engineers to maintain, but in likelihood there's a lot of complexity, even that's outside of the core "platform" software going on.

An average of 50 employees with their all-in costs for 18 years, including all the other routine business expenses = $143 million.

But presumably there was revenue.

And presumably there were a lot more costs than employees. Servers and office space for one.

It varies quite a bit from company to company. They were founded in 2001 so I expect most of it was salary and physical plant.

The business is/was connecting resale opportunities to brands and artists[1] so you'll have a fairly significant sales and marketing effort although typically you will pay sales people for performance so their compensation will track revenue.

But to give you some things to think about, if you have an engineering team of 15 engineers, median salary $120K, and an 'overhead' (office, health plans, insurance, etc of 60%) then that is $200K/engineer/year (or $3M/year or $48M for 16 years [2001 - 2017]) that is just integrating cost per engineer over time using constant engineering. You can put any function in you want for head count (does it grow exponentially? does it grow in chunks? etc) and then add a C-suite team (higher median salary) and an 'overhead' team (IT, marketing, HR, etc) and you can burn through that fairly quickly.

It is a useful thing to build models for this stuff as your 'pre-operationally-cash-flow-positive' costs are really the health and future of your company.

[1] https://www.shazam.com/company

For a company with offices in the most expensive cities in the world $120K is likely closer to the starting salary than the median.

There are a lot of people that work at tech companies that aren’t highly paid engineers. GP specifically called out engineers at a higher salary, so GP was obviously including receptionists, admin staff, etc. I’d be shocked to find that the starting salary anywhere around here is 120k.

Ok, but you also seem to be doing math that assumes salary is fully loaded headcount cost; fully loaded cost is (rule of thumb) 1.5-2.5x salary.

Most of Shazam's engineering is in London. Going rates for engineers in London are way below the valley. Facebook/Google/Apple pay UK engineers about 30-40% less than their US counterparts.

I have it from a first hand account that FB pays 25% less in London than in Menlo Park fwiw.

I don't know what the share of revenue was, but they knew what everyone in the world was listening to live and they were selling that data:

https://www.theatlantic.com/magazine/archive/2014/12/the-sha...

> Where does all that money go?

Salaries for - Chief Twitter Feed Monitor, Chief Assistant of The Twitter Feed monitor. The Special Secretary to The Assistant of Twitter Feed Monitor, etc etc etc

Perhaps. Impossible to know the inside info but I can conceive of a scenario where Apple said "we are going to build this, either by acquiring you, your competitor, or starting from scratch. ... so what will it be?"

Best outcome for all in that case would be acquisition. (Just ask Flux)

I suspect the hardest part of their business was not doing the technology, rather it was building relationships with the brands and artists. Making it frictionless to push a button on your iOS device to recognize a tune and then put it in your Apple Music playlist for many future billable plays would seem to be a better model than Spotify.

Shazam has patents on the Audio fingerprinting tech and their lawyers have been great at giving cease and desist order to similar tech left and right.

This could just be Apple’s way of acquiring more patents and mind share through Shazam brand.

At the level Apple is at and the hordes of cash they have in bank, it probably makes business sense to buy Shazam just for the patents.

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