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Why Yahoo Acquired Flurry, In Plain Speak

Spoiler: China has something to do with it.

Yesterday evening, news broke that Yahoo will be acquiring mobile analytics company Flurry for an estimated $200 million to $300 million. But what does that mean? Why does that matter? And wtf is a "flurry" anyway? Allow me give you a play-by-play of the insider baseball.

Short answer, why did Yahoo buy Flurry?
Yahoo wants to make money on mobile. Flurry is a means to do that, whether or not people are using Yahoo’s own apps.

Wait, how?
Developers embed the Flurry SDK inside their apps to track all sorts of user behaviors and embed advertisements.

I’ve never heard of Flurry. Is it popular?
Very. Flurry is actually the world’s leading app analytics firm. Its SDK is in 500,000 apps. These apps have made their way to 1.3 billion devices.

Do I have Flurry on my phone?
You probably do. Chances are, it’s lurking inside seven to 10 apps on your phone, according to Flurry.

Whoa.
I know.

So wait, Flurry can see everything on my phone?!?!?
No! And...kinda yes? This is where things get interesting in the whole mobile advertising game of chess that’s going on right now.

Technically, Flurry can only see within those seven to 10 apps on your phone. (Nobody can see the whole picture inside your OS except Google and Apple, maybe, but traditionally, no OS manufacturer is going to monetize the fact that it can track your every keystroke.)

Flurry Homepage, 7/22/2014 | Click to expand

And in fact, the way your phone’s privacy works, Flurry shouldn’t be able to know that those seven to 10 apps are actually all on your phone. But Flurry is clever. When you do things like open and close these apps, it can figure out that they all belong to you. It can also probably see your position from your phone’s GPS reporting back through these apps, btw, but Flurry blurs this information. You exist to Flurry as a mostly anonymous, highly marketable entity.

Highly marketable?
Yes. Think about it. If you’ve installed a babysitting app and a breastfeeding app, Flurry can deduce that you’re a parent. Given how specific apps get, Flurry can deduce very specific "personas" to marketers. For instance, when we spoke earlier this year, Flurry president and CEO Simon Khalaf told me that Flurry had created a "cat lover" persona for a major pet food brand.

I love cats!
Me too! But Flurry already knows that, so let’s move on.

If Flurry is such a big deal, why is it only reportedly selling for $200-$300 million? Why no IPO?
Yes, Flurry has long teased an IPO that would be in the ballpark of $800 million. No doubt, this sale is lower than anticipated. Most are pointing to the fact that, despite loads of VC funding, Flurry recently took $10 million in debt financing, which would imply that its balance sheet is in bad shape. Maybe Flurry has the tech and install base figured out, but there’s something wrong in the business model.

Then what’s Yahoo want with Flurry, if Flurry can’t make money?
Mobile is only growing. Mobile ads are projected to be a $42 billion industry by 2017. Right now, mobile engagement is ruled by Facebook—Flurry told us that!—as Facebook owns about 20% of all the time you spend on your phone. Facebook also owns an app development and analytics company of its own called Parse. Inside 260,000 apps on the market, it boasts about half the app install base of Flurry.

Unlike Facebook, Yahoo doesn’t have a hit social network. But with Flurry, it can still attack that market in 500,000 other ways. (And by "ways" I mean "apps with Flurry installed." I was trying to sound clever, okay?)

This is so fascinating! It’s like a game of Risk, playing out in my apps!
I sense the sarcasm. Seriously though, it is! So Facebook is currently kicking butt in general. And it's announced a protocol called App Links, which allows apps to link to other apps super easily.

Khalaf calls this impending future, in which we surf from app to app, the "Internet of Apps." He couldn’t be more excited about the prospect, as Flurry stands to make a lot of money off such an infrastructure, tailoring just the right ads to appear as you leave one app and arrive at the next, even if it’s built by Facebook.

If App Links took off, Facebook could be a sort of Google of the mobile era. But Google is supporting its own app linking protocol while indexing app-to-app linking, too. Of course, Apple may be shaping a whole other future in iOS. Yes, it supports yet another standard of app links, but it seems to prefer a world in which apps wrap around other apps, rather than link to other apps. I call this potential future the rise of Alpha Apps.

Does China have anything to do with all this? People always talk about China these days.
Yes, of course. It’s worth noting that Facebook’s presence in China is essentially nonexistent because the government has blocked the service. But you know whose largest install base is in China? Flurry’s. It's got around 300 million users there. That’s almost as many as China’s mega social network, Tencent, which boasts 355 million users.

With the Flurry acquisition, Yahoo isn’t just making a run at the mobile market. It's making a run at China’s mobile market.

Admit it. This is almost as much fun as Risk.

[Images courtesy of Flurry]

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