Finding their Groove
Discovering the next best mobile music app requires a tricky formula that includes a sound algorithm, novel idea, flashy specs and a dollop of luck. The industry is a buyer’s market in which the majority of music apps are fool’s gold, with few gems, such as Rdio and Spotify. A Montreal-based startup believes it has a winning alchemist’s touch with its flagship music app.
Incorporated as Zikera, or “muZIK-era,” the company is “revolutionizing” the way music is consumed from a passive to an interactive activity with its app Groove, says Tri Nguyen, its chief executive.
Software developers Mr. Nguyen, Eduard Lucic and Bruno Sylvain created Groove from an idea music aficionados Mr. Lucic and Mr. Sylvain, now chief product officer at Zikera, had to fill the gap in the market by creating an app that had “intuition” to create “the best listening experience ever, period,” Mr. Nguyen recounts. Actually, it was pre-app and their original conception was a desktop-based prototype.
“When the App Store was launched, it gave us amazing visibility. We couldn’t have achieved such visibility only with a Web page,” says chief technology officer Mr. Lucic.
Since its launch in 2009, the app has enjoyed gentle growth, but hit tech celebrity in the past few months. While it clocked more than 1.3 million downloads in the App Store in two years, it rose to a fever pitch after it was offered free in June, with more than 85,000 downloads in 24 hours. Within 72 hours it was at 165,000 downloads, and reached 350,000 in a month — an average of 2,000 a day. Groove snared a Top 10 spot in more than 20 countries, including South Korea, France and Japan. For a while it was even the most popular app for Canadian iPad users, beating out heavyweights Pandora, Songza and Rdio. But recently Groove’s standing has cooled.
“Groove is helping fans rediscover their music. The next step is to reconnect them with artists they love,” Mr. Lucic said. Beyond albums and artists, the app will recommend merchandise and concerts.
But a free app won’t feed full-time entrepreneurs who left secure 9-to-5 jobs. Zikera is staying afloat with $200,000 in FounderFuel and Business Development Bank of Canada funding as the founders explore ways to monetize the app. They hope to drive revenue by working with affiliate programs, such as iTunes’ affiliate partner system, and through in-app purchases and promotions.
However, generating a profit in the app store, where shelf space is scarce and competition fierce, is a difficult feat. The App Store is home to more than 900,000 apps, Apple chief executive Tim Cook revealed in June. Of those, 5% are music apps. Apple has paid mobile developers US$10-billion since its App Store launched in 2008.
Most developers now recognize that a “freemium” (i.e., cost-free) model is a more lucrative revenue platform than paid apps because it secures consumer loyalty and takes advantage of in-app purchases (IAP) and affiliate sales, says Thiuri van Agten, with app analytics firm Distimo in Utrecht, Netherlands. Subscription fees are another way of profiting from music apps, a model Spotify has adopted.
Groove’s mentors at Found- erFuel advised the trio to embrace the freemium model to “build a community rather than a commodity,” Mr. Nguyen says.
The best way to monetize free apps is through in-app purchases, Mr. van Agten says. They allow consumers to block advertisements and buy additional features or skip levels. IAPs generated 76% of revenue for the App Store this past February, versus 53% in January 2012. However, he contends, music apps need to publish on both the App Store and Google Play to be successful. There are exceptions, such as Finnish developer Supercell’s two hits Clash of Clans and Hay Day, only available on iOS devices.
With Gartner Inc. forecasting global revenue from app stores to jump 62% to US$25billion this year, Groove has its work cut out for it. Apple Inc. and Google Inc. offer more than 1.5 million apps. Radio is Canada’s most successful app in terms of downloads and revenue, its in-app purchases driving profit. Apple released iTunes Radio with its iOS 7 upgrade to compete with Pandora and Spotify.
The most difficult hurdle for music app developers is the sheer heterogeneity of the genre. “[Music] is a matter of taste, so it is difficult to create an algorithm that appeals to every user,” Mr. van Agten says.
But Groove isn’t looking to knock heads with the personalized radio or streaming-based app titans. What sets it apart from the over-saturated landscape is constant engagement with its users, the founders say.
“Talking to our users, getting their feedback, understanding what users’ needs are — that’s what we do well. It’s something we take pride in. When they email us, we answer them right back,” Mr. Nguyen says.
Much of their global user base is in hyper-connected East Asia: China, Japan and South Korea, where the market for music ownership (versus streaming) is strong, Mr. Nguyen says.
Unlike Songza, which is about discovering new music, Groove is about rediscovering those lost tunes in your collection. Like a personal, eerily “intuitive and intelligent” DJ, the iOS and Windows 8 compatible app unearths tunes you might have forgotten or exposes musical gems you haven’t yet discovered in your library by observing your App Store listening habits. It automatically organizes music according to genre tags based on Last.fm user data. Groove’s trademarked social feature “Groove with Friends” works on an algorithm that uses information from two users’ playlists to create a personalized track-list that both parties can enjoy.
Working in FounderFuel’s Notman House headquarters as part of the accelerator’s 2013 cohort has been a boon for the three founders, Mr. Nguyen says.
The 12-week program, which wrapped up last month, helped them create Groove with Friends. “It’s a tight community in Montreal and we feed off each other,” he says.
Since leaving FounderFuel, the team has been working long hours in cafés across Montreal, a city labelled one of the world’s epicentres for indie music trendsetting by University College Dublin academics last year.
That hasn’t gone unnoticed by Groove’s creators.
“Montreal is a very musicconscious city, always looking for the next big sound, so we’re a necessary destination for emerging bands on tour,” Mr. Nguyen says.
The startup’s next software plans are to expand Groove with Friends from two users to an entire party of musiclovers, and to add a streaming feature.
It will also try to fulfil its No. 1 request from users — to launch an Android-compatible Groove app.