Interview: Pelago

imageLast week, I caught up with Jeff Holden, the CEO of Pelago, which is developing Whrrl, an application for mobile phones that lets people share opinions about events and restaurants and organize meet-ups with friends. Pelago has the distinction of being the first investment of Kleiner Perkins Caufield & Byer’s iFund, which is dedicated to funding iPhone applications. It subsequently also raised funds from T-Mobile’s investment arm, among others. But Holden, who is a former *Amazon* exec, is distinctive in his own right. From his office in downtown Seattle, where he was wearing cargo shorts and a polo shirt on a rainy day, he covers ground quickly, and makes whopping predictions. One is that Amazon (NSDQ: AMZN) will become a hardware company and the second is something he’s banking on — that Apple’s (NSDQ: AAPL) iPhone will evolve from a niche device to one that gains double-digit market share. When it comes to explaining his company’s vision, he references scenes from sci-fi movies and uses made-up words and phrases, like “foot-streaming” and the “digital augmentation of the physical world.” He addressed the challenges they faced with the first iPhone app, the new version; integration into Facebook and Twitter, and the carriers Whrrl will launch with soon. Holden summarizes his excitement by drawing parallels between Pelago and Amazon: “Whrrl makes people’s lives a lot better. Amazon made their lives a lot better, too. I get charged about that.”

Here’s a summary of our conversation:

The iPhone app: The Whrrl application launched In July with the App store, but received hundreds of complaints on its landing page for not using GPS and not being able to zoom to find restaurants. Holden said it still was downloaded more than 100,000 times over the first few days, and that iPhone users have been more active and engaged than users on the Blackberry platforms. A new iPhone version launched in the last week solves the zooming and location issues (the app now updates your location every 90 seconds in the background).

The rest is after the jump

Mobile advertising: The company just announced that it has hired John Kim as VP of advertising products to figure out the company’s plan for how to make money. Kim was most recently vp of product management and marketing for mobile search company Medio Systems, and before that was Yahoo’s (NSDQ: YHOO) senior director of strategic product marketing. Although Whrrl doesn’t have any advertising yet, Holden believes they have a big opportunity. “We have patient investors, who are looking for the long-term return. We’ll make money along the way and it will off-set our burn.”

“Foot-streaming”: “Foot-streaming” is the reason why Holden believes that they can demand high rates for their ads. Foot-streaming is the act of tracking where people go using GPS: “You are able to say people — who go to these places — also go to these places.” Sound familiar? Amazon does that all the time, by showing people what other people buy when they buy a particular book. “This has never been done in the physical world.” With Whrrl, advertisers will be able to target people who go to competitors, and then actually find out if that person walks into their restaurant (using GPS). Holden is targeting the $100 billion local advertising market, which normally places ads in newspapers, yellow pages, etc. Those advertisers are difficult to get on a national scale without a localized sales force, but without providing details, Holden said “We have some interesting thinking going on about de-fragmenting that market.”

Carrier decks: Pelago has deals in the works to get on the carrier decks of Verizon Wireless (NYSE: VZ), Alltel (NYSE: AT) and T-Mobile USA. Right away, the Verizon and Alltel application will be LBS-enabled, with support coming later for T-Mobile.

Social network integration: There’s a ton of social networks, so instead of fighting them, Pelago is embracing them. It launched a Facebook app called “Been Here? Like it or Not,” and also integrated into Twitter, so that status updates in Whrrl are sent to your Twitter followers.

The competition: Whrrl is often compared to Loopt, the friend-finder. Yelp and other restaurant review sites also compete. But Holden says each company is tackling a small piece of the market. Loopt is like candy because you can see where your friends are, and with Yelp, likely only 1 percent of the audience is really engaged, he says.