• Apple is buying Shazam, a music recognition app.
  • Apple will pay $400 million for the company, which was last valued at $1 billion.

Apple is close to acquiring music recognition app Shazam for $400 million, a source familiar with the matter told Business Insider on Friday.

The deal could allow Apple to integrate a popular consumer feature directly into its iPhones at a time when Apple’s innovation crown is under threat from Google and Samsung.

The Shazam app allows users to identify the music that’s playing nearby, such as a song in a restaurant or cafe. The app quickly became one of the most popular smartphone apps when it launched in 2009 and has been downloaded more than one billion times by consumers.

Google recently incorporated similar technology into its high-end Pixel 2 smartphone. Google’s version of the technology constantly monitors nearby music, displaying each song title on the phone’s screen – a handy feature that may have led Apple to conclude it needed to offer a similar function in its iPhones in order to not appear behind the curve.

Shazam CEO Rich Riley previously told Business Insider that the company would make sense insider a larger company looking for a foothold in music or advertising.

Representatives for Apple and Shazam did not respond to a request for comment about the acquisition. News of the deal was first reported Friday by TechCrunch, which said the deal was expected to be signed this week.

Reports of Apple's interest in Shazam surfaced on the same day that Apple announced that longtime executive Jony Ive will resume day-to-day management of the company's design team.

Acoustic fingerprints and augmented reality

The $400 million price that Apple is offering for Shazam is lower than the most recent post-money valuation of $1.02 billion, according to Pitchbook. However, that valuation is "a bit artificial," the person close to the deal said. Later investors received a liquidation preference and will get their invested money back first before other shareholders, including employee options.

Shazam, which was founded in 1999, made $50 million in revenue last year, according to another person familiar with the company.

The company is based in London and has created a database of more than 11 million "acoustic fingerprints" that it uses to identify songs. More recently Shazam has developed augmented reality technology that allows users to point their phones at a special label to see additional information. A partnership with gin maker Bombay Saphire makes the bottle appear to undergo various transformations when consumers point their phones at it.

Shares of Apple were unchanged in after hours trading on Friday.

Email the author at [email protected].