It's taken more than five years to get here, but San Francisco-based mobile analytics and advertising company Flurry is hinting that an IPO might be around the corner. The company just took $25 million in funding led by Crosslink Capital, the late-stage firm that backed Pandora ahead of its offering. Crosslink's Nick Mignano is joining the board.
Originally an app developer way back in 2007, the company shifted and started building analytics that are now laced into third-party apps on about 250 million smartphones and tablets. They later added app promotion and advertising, which are the basis of what is now an $80 to $100 million business every year. Revenues have grown 300 percent year-over-year and the business was cash-flow positive last quarter, CEO Simon Khalaf tells us.
“The mobile economy is growing extremely fast. Inbound interest was so high that we decided to do it,” he said. “Crosslink is the firm behind Pandora and Omniture. They understand that they're a crossover fund.”
He added that the round was oversubscribed with involvement from previous investors like Menlo Ventures, Draper Fisher Jurvetson, InterWest Partners, Union Square Ventures, First Round Capital and Draper Richards. Total funding to date is just over $51.6 million.
Khalaf said that he's not fazed by how public investors have treated other consumer web companies this year like Groupon, Zynga and Facebook. These IPOs were the most closely watched offerings of the year and all of them are down significantly. Even Millennial Media, which is probably the closest comparable to Flurry because it's in mobile display advertising, is down 67.3 percent from the closing price on the first day it traded.
“The Street was being irrational and now it's adopting more of a rational investment philosophy instead of one based on hype,” he said. “I believe everything is coming to a place where it should be and that's a very healthy way of looking at it.”
Flurry's revenue mainly comes from app advertising products like AppCircle and AppCircle Clips, where users can watch video trailers for apps and games on their smartphones. They earn revenue when a user converts and actually goes to download an app. They face competition from many, many other channels that develoeprs rely on to get new users like Google's AdMob and Facebook's new mobile app install network.
“Facebook does have a good reach from the numbers. But in terms of inventory, it's probably 15 percent of the market,” Khalaf said. “This is a highly fragmented market and it will continue to be that way.”
Flurry's closest competitor is probably Tapjoy, which we've heard from sources familiar with the company's finances that it's on a $180 million annualized runrate. That company has raised slightly more capital, which in the past has constrained its exit opportunities in acquisition discussions.
Flurry's analytics, which the company is probably best known for, are free. They kind of serve as a marketing tool for the company, and they also help Flurry gain visibility into the app ecosystem, where the company can generate ideas for new products. Flurry says it sees 1.9 billion application sessions per day in more than 250,000 apps across iOS, Android, Windows Phone, BlackBerry, HTML5 and JavaME platforms.