UPDATE: Representatives from Apple and Shazam confirmed that the companies have entered into an acquisition agreement in statements provided to The Verge on Monday, Dec. 11. 

Brief:

• Apple could announce a deal to acquire the Shazam app, which has been downloaded more than 1 billion times, as soon as Monday, according to a report from TechCrunch citing unnamed sources. 
• The purchase price could be “in the nine figures,” one source told TechCrunch, or around $401 million, according to another. 
• Shazam was launched in 1999 as an SMS-based service and became an early app for iOS. It has evolved since then to offer a number of ways for users to identify and engage entertainment content across music, TV, film and advertising media. 

Insight:

The deal, if it happens, looks designed to help Apple keep consumers inside its walled garden while offering them the kind of image- and music-driven engagements that are popular on mobile, either by keeping Shazam as a standalone app or by integrating its technology into iOS at a deeper level.

“Build it or buy it is a recurring question for Apple and that’s especially the case when it comes to music,” said Jeff Hasen, mobile strategist at Possible Mobile, in a statement emailed to Mobile Marketer. “Shazam’s early model — keyed by an SMS code and a behavior that was foreign to mobile users — would’ve been of no interest to Apple. But Shazam’s advancements in AR changed the view in Cupertino. Then you throw in a large Shazam user base soon to be reachable by Apple and there’s a there there. And, of course, with Apple’s war chest, it can afford to make bets that may pay off in a big way or may not matter much in the long run.”

The deal would make a lot of sense in a number of ways. Shazam continues to be a popular app — it is used by more than 100 million people each month, according to Shazam, which has raised $143.5 million from investors like Kleiner Perkins, Sony Music and Universal Music. However, the marketplace for standalone apps is increasingly competitive as consumers consolidate their time spent in apps on a few favorites ones and big players like Facebook expand services to prevent users from leaving. In this way, the news — whether a deal happens or not — reflects the consolidation that is likely to take place in mobile as the space matures.

Being acquired by Apple could help Shazam by giving it access to Apple’s famously deep pockets and more direct access to iOS users, if the decision is made to keep Shazam as a standalone app.

It’s also possible that Apple wants Shazam to integrate the app’s offerings more deeply into its mobile operating system, in which case Shazam might disappear as a standalone app.

In either case, the matchup looks like a potentially good one because both entities have long been focused on providing consumer-friendly experiences around entertainment-related media and pairing this with the latest mobile technology.

There are likely to be some synergies related to augmented reality, which Apple is making a big push into with its ARKit software development kit and the iPhone X. AR is expected to be a significant force in mobile going forward, with Google, Snapchat, Blippar and others also competing for consumer attention in this space. 

Shazam, which has a long track record with major brands like Mountain Dew, Coca-Cola, Beam Suntory and more, launched an AR platform in March following its introduction of visual recognition in 2015. Users can scan Shazam codes, or QR codes, to launch 3D animations, product visualizations, mini-games and 360-degree videos.