2909483129_fc38488202_bAppGratis probably shouldn’t work. The service, which raised a $13.5 million Series A in January, offers daily deals on applications and games in the App Store. Some paid apps are available to users for free and others are offered at a discount, with AppGratis and the app’s developer splitting the revenue driven by the service. AppGratis combines the daily deals of Groupon (which isn’t working out so well for them) with free apps (which consumers and developers are struggling with) yet the company is profitable. Why? Scale.

Started in 2008 by Simon Dawlat as an email newsletter containing his favorite apps of the week, AppGratis now has more than 10 million users, 3 million of which use the app every day. The service is available in some 120 countries and 12 languages, and reports that it has amassed 2 million US users since it launched in the states last December, with 500,000 more signing up each week. AppGratis says that it “regularly” drives downloads of its featured apps by between 500,000 and 1 million downloads every day. Not bad for a bootstrapped (until January, naturally) startup that sprouted from an app enthusiast’s newsletter.

Dawlat says that AppGratis’ growth has been “exponential,” with app developers offering $200 to get their app in front of potential users. That $200 became $2,000, which became $20,000, which eventually led to deals with companies like Disney, Zynga, and Nike. “The growth and the number on the budget has been staggering, and this app market took a long time to get in place,” says Dawlat, but he believes that “There’s been, and there’s still, a huge market with exponential acceleration.” It took AppGratis four years to get to this point, and despite its rapid growth, the company still has a lot of room to grow.

AppGratis is currently human-curated, which allows the company to keep the quality of its offerings up and build a relationship with its users. Dawlat calls this AppGratis “pretty simple mission statement,” and he says that the company is working on ways to custom-tailor its offerings to specific users via a combination of a smart recommendation engine and that human curation. The team has been working on the recommendation engine for the last year and a half, and Dawlat says that as the company catches up to its growth — “I always think of us as a dramatically understaffed company,” he says — it will continue tweaking and improving its offering.

Building a good recommendation like that requires the kind of scale AppGratis has accrued. The company’s data is largely binary — a user either downloaded Tuesday’s featured app or they didn’t. Having users who launch the app every day (and simply having so many users) could turn this seemingly simple data into a nuanced source of information that molds AppGratis to fit each user. That’s the future of AppGratis.

The present is a bit simpler. AppGratis will continue to grow, and it will do so with the knowledge that it’s already profitable and has $13.5 million in the bank, which Dawlat says the company hasn’t touched. With so many new users signing up each week, the company will also become a genuine tour de force in the App Store that not-so-quietly influences which apps become popular, making or breaking one app or another.

[Image Source: Cristiano Betta]