How the Yahoo acquisition saved Flurry from an uncertain fate (exclusive)

The roughly $240 million Yahoo paid for mobile-analytic standout Flurry last week must have come as a relief to the 110 employees of the San Francisco-based company.

It means that, at least for today, they still have jobs. Some even have equity.

Before Yahoo ponied up the stock and cash to buy it, Flurry’s coffers were running thin. A $20 million debt loan it had secured earlier was running out, and the $66 million in venture capital the company had previously raised from some of the Valley’s biggest VC funds had been spent to keep the company afloat, sources close to the company told VentureBeat.

While Flurry was once among the most successful mobile-analytics plays in the nascent space, times had changed. By the time 2014 rolled around, its fortunes began to shift. It was profitable, but mobile was changing rapidly, and Flurry found itself looking for funding to keep its analytics and media going, VentureBeat has learned.

And besides, in the first quarter of this year, a small number of junior-level executives and other staffers had headed for the exits, lured by the temptation of high-paying jobs elsewhere and concerns about the financial health of the nine-year-old company, VentureBeat has learned.

A small round of layoffs also occurred, according to VentureBeat’s sources, but a Flurry spokesperson said this was untrue.

In fact, Flurry and its chief executive, Simon Khalaf, were some of the first pioneers in mobile analytics a decade back. But the data they collected eventually became a commodity that others largely gave away. The rub became the issue of monetizing it.

This left Flurry at a crossroads.

“There was a confluence. Flurry was profitable in 2011 and 2012. But they went from being a profitable company to ‘things aren’t going well.’ Flurry’s data centers, and the servers holding the data, were very expensive to run, and they didn’t outsource their data storage to Amazon. So Flurry needed more capital to keep things going,” a source close to company executives told VentureBeat.

“They found themselves in a position where the cost of the analytics was outpacing revenue,” this source added.

A Flurry spokesperson declined to comment and referred my questions to Yahoo.

A data powerhouse

Flurry was — and still is — a data analytics powerhouse.

Flurry’s analytics capabilities were legendary, and it procured the raw data that advertisers covet from 1.2 billion smartphones and tablets every month from consumers around the globe.

Then in 2013, the company launched Flurry Marketplace, a mobile-advertising platform that could match the right advertisers with the right content publishers.

A second source, with deep connections to Flurry’s management, told VentureBeat that by giving away its software for free, the company needed to add new revenue streams. Which Flurry did by building out their advertising services.

“Flurry has an incredible footprint and was the first real analytics provider in the mobile app space. The greatest difficulty with analytics is that people expect to get it for free, a precedent created by Google Analytics. This forces analytics providers to consider alternative means of monetization,” this second source told VentureBeat.

In order to do this, Flurry began tweaking its business model, adding features on the ad side to pick up the slack.

“Flurry needed to show strong and sustained revenue growth. They weren’t charging for analytics, so they turned toward selling advertising to developers and also paying other app developers for showing ads, like Flurry App Circle. Launching an ad network like this exploded the company’s revenue and quickly became the primary revenue source,” the second source told VentureBeat.

But the good times didn’t last long, and Flurry found itself again looking for outside capital.

“Over time, the revenue began to plateau,” this source added. “They explored building a bidder for ads and various other advertising products, but it doesn’t appear they were able to do this successfully on their own and see the revenue materialize. Eventually, they began to run out of money, even taking some venture debt to tide them over.”

The executives spoke to VentureBeat on condition they not be named because they were speaking of a deal that was still being finalized.

Yahoo is getting a heck of a deal when it comes to the consumer app data stored in Flurry’s servers. That will help Yahoo with its own ad business. Flurry’s massive storehouse means publishers, app developers, and ad companies can launch pinpoint campaigns, accruing downloads and purchases along the way.

The Flurry deal shows the value of precise consumer data, which Apple, Google, Facebook, Yahoo, and others all increasingly seek. While some rely on outside analytic firms to accrue data, others, like Facebook, are building their own capabilities. Or buying company’s outright to do it for them.

Indeed Facebook, for example, is rumored to be interested in buying analytics outfit AppLovin, but chief executive Adam Foroughi declined to comment.