Start-up Watch: Pinch Media
by Andy Freiburghouse
On March 6, 2008, after a good six months of promises, Apple finally awarded to third-party developers the technical ability to build software for the iPhone. Excited coders have been busy ever since, devising upwards of 2,000 applications so far, with more coming every day, from poker games to mortgage calculators. Great for Apple, no doubt. But can those third party developers make any money at it?
NYC startup Pinch Media is betting yes. And so are two venture capital firms Union Square Ventures and First Round Capital, which provided the company’s first round of funding. I sat down with Founder/CEO Greg Yardley last week at café “Tarallucci e Vino” to discuss the progress so far.
Tarallucci is a common meeting spot for NYC venture capitalists and the people who want money from them. It’s one of those places where a random guy walks up to other random guy and ask, “Jim?” And then if you’re not Jim, he just asks the next random guy who walks in, “Jim?” And so on.
When Yardley arrived, I didn’t have to wonder, though, because he’d told me he’d be wearing a Google T-shirt and jeans — and indeed he was, looking every bit the Internet startup CEO. I asked if he admired Google. Not necessarily, he said, but I love a free T-shirt. I could definitely relate to that.
A first-time CEO whose iPhone kept ringing, Yardley was eager to talk turkey, and gave me a pithy summation of his business: “We try to get developers out of their cubes and into making money off their creations.” Or, if the excited coders prefer, they can stay in their cubes and make money off their creations, provided they “integrate” into their applications two software tools from Pinch Media.
Pinch Media’s first tool analyzes an application’s interaction with the iPhone user – that is: When did the user download it, how often is it used, for how long is it used per day?
Pinch Media’s second tool, intimately related to the first, allows developers to include advertisements in their applications, and get paid for doing so. Ideally, the process works like this:
Pinch Media works with a third party developer to determine if and how it makes sense to include ads in its particular iPhone application. ‘Makes sense’ means, in this case, satisfying two other third parties; one being the advertiser, who wants to know if this “property” (the application) has real value, the other being the iPhone user, who will quickly delete any app with annoying ads all over it.
In this (ideal) case, ads inside the application makes sense; an unobtrusive ad for, say, Lending Tree could be placed under the aforementioned mortgage calculator, and thereby reach a consumer while they’re in the act. Envisioning just such a scenario, Pinch Media alerts its partner Jump Tap, a leader in the fast-growing field of mobile phone ad sales. Jump Tap then calls Lending Tree.
When Lending Tree buys, Pinch Media takes a cut of the action, similar to a sales commission. Repeat that process a couple million times per month, and you’ve got a valuable business. At least that’s the idea.
Though he wouldn’t comment on the record about hard numbers, Yardley reports that a majority of developers are open to the Pinch Media pitch. Though, of course, he would say that. Still, Yardley argues, “Generally speaking, developers aren’t opposed to ads if the application itself is not affected.”
Similar to what Google did on the regular Internet, Pinch Media is seeking to establish a standard platform by which content creators can give their work away for free, but then sell the value of people’s attention on the back end. So what’s to prevent Google from stepping in and doing the same thing, only better? Indeed, they’re likely already at work at it, as the deal with Verizon indicates.
“I thought we’d be one of the only players in mobile advertising for at least a few months,” Yardley says, noting that the market is tiny as of now. “But people are flooding in everywhere.”
Also potentially troublesome is the historical fact that, when it comes to dealing with Apple, third parties typically only profit when Steve Jobs lets them profit. Power Computing Founder/CEO Steve Kahng learned that the hard way when Jobs shut down his booming Macintosh clone business in 1997.
These days, Jobs is using words like “nurture” and “enable” and “partner with.” And certainly the simplicity of Apple’s developer page is striking: “1) Develop. 2) Test. 3) Distribute.” Easy as one, two, three and you can do all three through Apple . . . and only with Apple’s explicit permission.
Meanwhile, much has been made of the so-called “back door” Apple incorporated into the iPhone that permits the company to remove programs that do not conform to certain standards set by Apple. It’s all very vague, because it’s very vaguely worded, but a cynic might predict that a too-popular third party application might be worth removing if Jobs determined that Apple was losing control of the iPhone.
This suggests that the success or failure of Pinch Media may ultimately have less to do with the intrinsic value of its product, and more to do with the answer to a single question:
Does Steve Jobs really want to be partners with anyone other than APPL shareholders?