STARTUP TO WATCH

Urban Airship’s Flight Plan: Push Out Info, Pull In Revenue

Given the growing popularity of mobile devices and the great manyapplications to go with them, you would think that this new niche hadplenty of room for newcomers. Many of those newcomers, though, will find it difficult to capture a great deal of consumer attention. Places like the Android Market and the Apple App Store are popular and growing fast, but they’re awash in apps that struggle to stand out from the crowd.

Urban Airship recognized the potential for mobile app sales, but instead of adding still more mobile applications to the multitudes already in existence, it sought to tap the market by way of offering services to application developers. Those services are designed to make developers’ apps better and give them more revenue opportunities.

In a very challenging economic cycle, Urban Airship’s co-founders beatthe odds to a successful startup by bootstraping their company withpersonal funds. They started with no customer base. Now some sixmonths later, the startup anticipates it will soon reach 2,000 paying customers andis transacting more than 100 million pieces of mobile data across 10million mobile devices.

That’s not a bad performance for a newcomer in a red-hot mobile appsmarket. Mobile users will download about US$6.2 billion worth of mobileapps this year, nearly double what was spent in 2009, according toresearch firm Gartner. Sparked by devices like Apple’s iPhone, the smartphonemarket is expected to grow 37 percent, compounded annually, between2009 and 2013, according to investment firm Morgan Stanley.

Add to this ravenous buying demand improvements in geo-locationservices and in-app technology solutions. That leaves little wonderwhy venture capitalists are showing renewed interest in funding mobilestartups like Urban Airship. The company recently won $1.1million in VC funding.

“A lot of the economic business models and components have gaps. Thisis where Urban Airship sees opportunity. I think Urban Airship seesthe chance to provide some of the app store support and push themessages to the application, even if it’s not running,” Jay Lyman,an analyst with the 451 Group, told the E-Commerce Times.

Sensing a Need

Despite this rosy market outlook for mobile app players, manystartups in this space found disfavor among VC money issuers. Lastyear, less than two dozen iPhone-focused mobile app startups securedmore than $100 million in funding, according to Urban Airshipofficials.

Urban Airship came to the table with an idea based on a perceivedneed. It turned that perception into a business necessity for itscustomers.

Similar to when Amazon pioneered its EC2 cloud services to enabledevelopers to scale with an affordable pay-per-use model, UrbanAirship is among the first to offer scalable, on-demand mobile appinfrastructure services that reduce developers’ costs for implementingnew smartphone features such as push notifications and in-apppurchases.

These sorts of features can enhance an app’s usability and provide additional money-making opportunities for developers. For instance, adding push notification capabilities to an app encourages the user to pay more attention to that application and use it more often. Combining that with the ability to execute in-app purchases gives devs the chance to continue generating revenue above and beyond the one-off sale of the app itself.

“One of the real keys in this success story is that Urban Airship istaking a proper view of the market. The company tapped into a proveneconomic model with the iPhone and Android and the App Store,” notedLyman.

Urban Airship’s 1,500-plus customers include large media companies andindependent developers alike. Both classes of customers can opt forthe multi-platform, scalable infrastructure the company providesrather than build their own.

Leap of Faith

Jump-starting a business with personal finances and no customers takesfaith and a lot of business savvy. Cofounder and CEO ScottKvetson had a lot of both of those elements. He landed his firstpaying customer within the first 30 days of founding Urban Airship.

The two cofounders launched the company in June of 2009as a mobile apps infrastructure provider. They built a customer basequickly and are now looking to see where things will go from here.

“We knew we wanted to be developer-focused. We had to generate revenuethrough a quick launch. We found a business waiting in the process,”Kvetson told the E-Commerce Times.

Urban Airship recently took a step or two closer to seeing what iswaiting around the next business corner. In mid-February, the newmobile content delivery channel provider closed a $1.1 million SeriesA funding round.

The round was led by True Ventures and included Seattle-based FoundersCo-op. Urban Airship plans to use this new funding to extend itsproduct offering across multiple platforms and to expand itsengineering team.

Early Problems

As Urban Airship’s founders worked to build a scalable infrastructurefor mobile app delivery, the company’s engineers relied on existingcloud servers from Amazon. In essence, Urban airship did not have toreinvent the wheel, noted Kvetson.

“We used a lot of open source and Amazon’s platform, so there was noneed for our own servers. Over the last eight months we added our ownmodifications,” said Kvetson.

Besides building a mobile infrastructure, urban Airship had to adaptto the complexities and challenges of each publisher. That is a taskother service providers have also struggled to achieve.

“Our goal was to meet customer demand. I didn’t spend a lot of time onwhat the competition was doing,” he said.

Bases Covered?

However, Kvetson may be well advised not to underestimate thecompetition. A sizable showing is already evident from companies suchas Ilime.com, Open Handset Alliance members and Funambol, an opensource vendor.

“I expect to see a number of other vendors coming along. Urban Airshiphas a head start. It is a new bread that won’t be the last,” Lymanpredicted.

Still, Kvetson expects to experience a big enough market to allow himsome elbow room. This market will be massive, and there is presently no otherinfrastructure to support it, he said.

The smartphone field has become much more lively over the past few years, due in no small part to the arrival easy-to-access application storefronts offering easy-to-use mobile apps. The Android Market and the Apple App Store are prime examples. Cloud computing is also making this field more interesting.

“Urban Airship sees opportunity to fill the gap for developers withapp store services. App store functionality is pretty limited. Thechallenge is how to make money in all the different applications,”said Lyman about upcoming challenges Urban Airship must meet.

New Turf

Success will continue to greet Urban Airship, Kvetson believes, if hismobile apps platform can remain flexible enough to include a widerrange of participants. He sees new interest in pocket-sized computingdevices, touchpads, netbooks and smartphones.

“This is a huge opportunity to service this mobile market. This marketwill continue to explode,” he said.

New smartphone features provide businesses and developers the chanceto increase contact with customers, enhance their brand and create arecurring revenue stream. However, these new features also call foradditional, costly server-side infrastructure. This forces developersto figure out how to support this new requirement.

That’s where Urban Airship’s scalable platform comes into play. Itenables businesses and mobile publishers to quickly integrate pushnotification and in-app purchase functionality within their mobileapps. This lets the company’s customers focus on monetizing their appsacross multiple platforms instead of having to invest in building acomplex network and infrastructure.

Tapping Tapulous

As an example of how Urban Airship is adapting to potential customers’needs, look no further than Tapulous. That vendor last summer was among thefirst mobile game publishers to introduce push notificationservices on the iPhone, which enabled its 25 million “Tap Tap Revenge”players to challenge one another from within the game interface,explained Kvetson.

Urban Airship’s services powered Tapulous’ ability to offer pushnotifications. Since then, the young company has found early successand revenue from large brand-name companies such as Universal MusicGroup and Virgin Atlantic to popular mobile app publishers such asTapulous, Yowza and Gowalla.

That’s precisely what the startup will need to do to continuebeing successful, noted Lyman. The company’s chief claim to fame mightvery well be its flexibility.

“Urban Airship is taking a broad approach by not limiting itself toany one aspect of app delivery. Part of that readiness to serve thewhole industry is probably why they recently were successful inreceiving funding. The company is rightly focused on smartphones,”said Lyman.

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