The hub of Europe's music community may be the London streaming site, thanks to its mashups with MySpace, YouTube, and others
Four years ago, when four German and Austrian friends founded London-based Last.FM, Web sites blending online music with community and social networking barely existed. Their idea was a precursor: a streaming-audio service that tracked user tastes and suggested new music. But then along came mashups, willy-nilly mergers of disparate Internet programs, and Last.FM zoomed off into a new world.
The entrepreneurs hardly could have imagined the opportunities mashups would unleash. Today, Last.FM is one of the richest stews of music and music-related community and content anywhere in the world. It offers not only downloadable MP3s and streaming music but also user pages, social networking, Wikipedia-style band biographies, personalized local concert listings, and a third-party e-commerce area for purchasing tickets and CDs.
Most of the features were added thanks to mashups with other sites or software—making Last.FM a kind of stitched-together online music hub. But mashups also have delivered much more than just technology, helping Last.FM build customer loyalty and extend its brand. "Last.FM is one of the most exciting startups in Europe" says James Governor, an analyst with market researcher Redmonk in London.
The Midas Touch
With 15 million unique users a month, 150,000 band biographies, and an amazing 65 million songs listed in its database, Last.FM has attracted the attention of big money. Last spring, Geneva-based Index Ventures made an investment in the company that it will describe only as "less than $5 million."
In European circles, involvement by Index is particularly sweet: It's the same firm that helped launch Skype (EBAY) and also invested in Betfair, Ofoto (EK), MySQL, and Vignette (VIGN).
Last.FM's managers have harnessed the mashup mentality almost from its beginning. Only a year after starting the company, they joined forces with another entrepreneur who was working on a related startup and merged the sites.
Since then they have opened up interfaces to Last.FM that allow it to connect with sites such as MySpace (NWS) and Flickr (YHOO). Interconnections like these are vital to building an extended community of users in the Web 2.0 world.
Love It or Leave It
All of this was unimaginable when the entrepreneurs started Last.FM, whose name tauntingly suggests the death of broadcast radio. The site was designed to pool the collective, often obscure, knowledge of music buffs by using a preference-tracking process called collaborative filtering.
Users could hit either "Love" or "Ban" in response to songs they heard through their streaming audio players. The feedback created a huge database of likes and dislikes. By comparing data among users with similar tastes, the site could then suggest new music to users that they might not know. That let music aficionados broaden their appetites thanks to the shared knowledge of peers.
The only problem was that Last.FM's software only tracked music that users heard online, not the songs they listened to on their computers via iTunes, Windows Media Player, and other programs. It was a sizable gap in Last.FM's data pool. But in 2003 the founders heard about a site called Audioscrobbler, started by 20-year-old University of Southampton student Richard Jones.
Audioscrobbler did exactly what Last.FM did not, tracking a user's listening patterns through a plug-in that worked with virtually any audio player. Felix Miller, one of Last.FM's co-founders, read about Audioscrobbler and had what he calls a "Eureka" moment.
"We couldn't believe our luck that someone had built it already and was looking for a job," Miller recalls. He and co-founder Martin Stiksel jumped on a train to Southampton and met Jones in a park to discuss the possibilities. Miller's pitch was simple: "We already have some buzz, we need your data." They soon agreed to join forces, with Jones coming on board as CTO.
Last.FM relaunched in the summer of 2003 as a mashup with Audioscrobbler and began to take off. As the Friendster phenomenon hit that year, Last.FM started adding social networking features that let users post photos and profiles and find out what their friends were listening to. In the Web 2.0 world, says Josh Bernoff, principal analyst at Forrester Research, rankings, recommendations, and other such features are often nearly as important as the content itself.
Users also played a big role in Last.FM's evolution. They demanded direct downloads, local concert schedules, and band bios. When requests for new features overwhelmed Last.FM's small staff, the company made the bold decision to create open interfaces to the site, and soon independent developers began piling in with enhancements.
Brave New Worlds
Now there are sites such as Ilovemusicvideo.net, which plays music videos from YouTube over a Last.FM stream, and SnappRadio, which pairs a Last.FM stream with band photos from Flickr.com. The beauty of the sites is that they all feed new data to Last.FM—and draw in new users.
"It's a great way for Last.FM to make its data more valuable," says Paul Lamere, a software engineer at Sun Microsystems (SUNW) who created SnappRadio. "They start to build this little ecosystem around their data, and now there's a whole economy built around it."
Mashing With the Enemy
Since Index Ventures invested in the company, Last.FM has beefed up its staff to 25 and rolled out a raft of new features. The company won't reveal its revenues or whether it is profitable, but says it makes money from advertising, premium subscriptions, and commissions from sales of CDs and concert tickets and from downloads. Advertising and premium subscriptions are now the majority of Last.FM's sales, Miller says, but he expects commissions to increase as users get more comfortable buying from the site.
Is Last.FM finished mashing? No way. Recently an outside developer created a mashup called Pandora FM that crosses Last.FM with Pandora, its rival in personalized audio streaming. Miller says he's not the least bit threatened by the move, because a link with Pandora merely increases Last.FM's reach and its reservoir of user data. In the wonderful world of mashups, even your enemies can become your friends.