Mobile’s next frontier: Measurement, on the move

Weeks before Steve Jobs announced the iPad, a group of data wonks in San Francisco knew it was coming. The app analytics firm Flurry began to pick up suspicious activity in the vicinity of Cupertino’s 1 Infinity Loop, home to Apple’s (AAPL) corporate headquarters. About 50 devices were ravenously downloading applications that held a small snippet of Flurry software. Flurry could even say what the most popular apps were on the new device: games, entertainment, and news.

This type of data is the currency that drives both advertising and commerce on the Internet, and outfits like Comscore (COMSCORE) and Adobe’s Omniture (ADBE) have built billion-dollar businesses out of helping companies figure out what their customers are doing online. But as the Internet migrates to smartphones, tablets, and other devices, it becomes much more challenging to measure. Thus a new group of startups have sprung up to follow web users as they download and use applications on these devices. With a window into what 80% of the consumers using mobile applications are doing, Flurry is the reigning king.

Flurry offers developers a free tool that gathers data about how people user their applications. Before Flurry, most had to rely on carriers for this type of data if they could get it at all. More than 20,000 developers have embedded a small piece of Flurry software into their applications. When a user downloads the app, Flurry keeps tabs on things like how frequently the app is used, where it’s called up geographically down to the city level, and even details like how long it takes a player to move from one level of a game to the next. Just like Google (GOOG) Analytics, Flurry doesn’t collect personally identifiable information and provides developers information in aggregate to protect users’ privacy. Hot Potato founder Justin Shaffer relies on Flurry to track how members of his real time social network are navigating the Hot Potato iPhone application. Says Shaffer, “We looked at a lot of the analytics startups, but Flurry was the only one that did flow analysis, which is essentially tracking people’s movements through the applications.” He uses the information to make design changes.

Originally founded in 2005 to make email applications for feature phones (remember those?), Flurry got into the analytics business in 2008. That’s when founding engineer Sean Byrnes hired ceo Simon Khalaf, a serial entrepreneur with a background in network security. With funding from Draper Fisher Jurvetson, the company launched its first tool for developers in January 2009. Then in December, Flurry merged with the industry’s other major player, New York-based Pinch Media. Taken together, Khalaf says the companies’ software is embedded on four out of five iPhones and iTouches and two out of three Android phones.

Flurry has yet to turn a profit, but it plans to make money by offering services for developers. The company recently launched the AppCircle platform, which helps applications get discovered by recommending relevant applications for users based on their tastes. It’s an important service for developers, whose applications can get lost easily among the more than 140,000 apps available on the iPhone alone. If a user purchases an app, Flurry gets half the revenues. “We’ll keep building these types of services, but our analytics will always be free,” says Khalaf.

The company will have to innovate fast to stay ahead. Forrester analyst Joe Stanhope calls the emerging industry a “wild west,” explaining that the next six months will see an explosion of analytics efforts as companies try to keep up with the proliferation of devices. Plenty of powerful tech companies are launching measurement offerings of their own. Others, like ComScore, have partnered with Flurry to add real-time mobile metric data to the products it offers clients. Khalaf says similar deals are in the works as business tries to follow consumers from their laptops to their Blackberries, and soon enough, their iPads.