Twitter Buys Seattle’s Cloudhopper to Expand SMS Service Globally: The Story Behind the Deal

4/23/10Follow @gthuang

It’s an exciting day for Joe Lauer. The Seattle entrepreneur and founder of Cloudhopper, a mobile messaging service, just told me his startup has been acquired by Twitter, the micro-messaging giant based in San Francisco. Financial terms of the cash-and-stock deal weren’t released, but Lauer and fellow employee Kristin Kanaar have joined Twitter full-time. Lauer says he will stay in Seattle and commute to San Francisco regularly.

Lauer couldn’t give any specifics about the purchase price, but he says, “I’m super happy with it. It’s a great early exit. It was good enough to get me to exit early, let’s put it that way.” The deal is Twitter’s fourth acquisition overall, after Surmise, Myxer, and the Tweetie iPhone app. It is Twitter’s first Seattle-based purchase.

Lauer founded Cloudhopper in late 2008. Previously he had co-founded Simplewire, an SMS text-message aggregator, in 2001. That company was bought by Seattle-based Qpass in 2006. Lauer stayed there for two and a half years before using the money he made from the acquisition to start Cloudhopper.

Cloudhopper makes software and infrastructure to help optimize how text messages flow, so that companies can make SMS programs that work at huge volumes and across different geographies. “As Twitter grows around the world, if we want to service Indonesia really well [for example], we want to keep SMS and tweets localized in a data center in Asia,” Lauer says.

In other words, Cloudhopper handles the routing through data centers in an efficient way, with a focus on international mobile operators. “We’re going to really aggressively expand and keep adding on carrier partnerships overseas,” he says. “It’s going to become more and more important as we add more countries around the world.” Currently people can tweet via SMS in about 30 countries. Lauer says that “about 100 operators are coming up over the next year.”

Lauer’s connection to Twitter actually dates all the way back to his days at Simplewire. “We were Twitter’s first SMS aggregator years ago,” Lauer says. At that time, Twitter founders Biz Stone and Evan Williams were running Odeo, and that’s how Lauer knew them.

Twitter has been using the Cloudhopper service for the past eight months. “I had no plans of selling now,” Lauer says. “It was kind of a coup when I won the Twitter business.” The bulk of his business before that was in wireless consulting for companies including Seattle-based Ground Truth (another “Qpass mafia” connection, as Ground Truth is led by former Qpass president Sterling Wilson).

Lauer says Cloudhopper was handling a billion SMS messages per month on behalf of Twitter. “With those numbers, they’re the single largest mobile program in the world,” he says—much bigger than, say, “American Idol” SMS voting. (Which is interesting, because until recently nobody really knew how big Twitter was.)

Cloudhopper had seven employees before it was acquired, some of whom will be joining Twitter full-time. Lauer now works in Twitter’s mobile group, which has a dozen people. He reports to Twitter’s head of mobile, Kevin Thau, who also used to work at Qpass, out of Atlanta.

Conan O'Brien with Joe Lauer (right) and Kristin Kanaar (left)

Lauer says there are now a handful of Twitter employees based in Seattle, but no local office space as of yet. “Twitter’s hiring like crazy,” he says. “There’s a lot of good momentum in the area.”

Meanwhile, at San Francisco headquarters, where Lauer was today, late-night TV personality Conan O’Brien stopped by to meet and greet the staff (see photo; Lauer is on the right, Kanaar on the left). “It’s more like a media company these days,” Lauer says.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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