Much like Instanbul was once Constanstinople, Tapjoy was once Offerpal but the similarity ends there. Tapjoy is now a leading distribution and monetization channel for the iOS (e.g., iPhone) platform and the recipient of $21 million in new funding. Everyone loves a comeback games business story, or at least Gamezebo does. Which is why I sat down with Shannon Jessup, VP of Global Sales and Marketing at Tapjoy, to learn how they turned their business around, why they betted big on iPhone and won, and what’s the next big thing in their future. We also learned about … cost per action? Sounds groovy.

Last we heard from Tapjoy, your name was Offerpal, you were embroidered in a bit of controversy, and there was fear that Facebook Credits would eat into your business. Fast-forward to today, you have a new name, are fast growing, and have just raised $21 million. What is the story behind this comeback story?

True, we’ve changed quite a bit over the last 18 months. Mostly what it comes down to is that we’ve hired some really smart people who have made many sound decisions and put in a lot of hard work. Isn’t that the recipe for any successful startup?

Specifically, we got into the mobile arena early and built a commanding lead there. We also diversified our product and service offerings, so that whereas we were once all about monetization on the Web, today we offer monetization, distribution, publishing and other complementary services for app developers and game makers across a variety of platforms and media channels.

Speaking of this latest funding round of $21 million, what do you plan to do with this new infusion of money?

We plan to use the funds to continue our growth internationally, especially throughout Asia and EMEA. We’re also on a hiring spree right now, looking for talented people in sales, product development, finance, engineering and other departments. But mostly, we’re going to use the funds to invest in our cutting-edge products and technology, making sure we keep the lead we’ve worked so hard to attain.

You just expanded from a distribution strategy of pay-per-install to pay-per-action, which lets app developers and brand advertisers pay whenever a new user does something more than just install an app. How does that work?

While the Pay-Per-Install had proven extremely successful and cost-effective in driving new user acquisition for any kind of app maker – whether a game developer or a big brand with an app – there was still this dropoff where a certain percentage of users would install the app in order to earn their virtual currency but never actually play the game or engage with the app. So we decided to let advertisers pay for deeper engagements within their app instead of just the install. For instance, you might pay a user to come and complete Level 1, or watch your tutorial, or if you’re a dating app you could incentivize them to setup a profile, or a movie app could ask new users to add a movie to their queue. Basically, whatever action the advertiser thinks will get a user to give their app an honest try and likely get them to keep using it.

We’d been testing the service on one of our own apps, TapDefense, and the results were remarkable. We found that by offering a user the virtual currency “Buoys” in TapOut in exchange for completing Level 3 in TapDefense, they became 3 times more likely to keep playing all the way to Level 10 than if they were given “Buoys” for simply installing TapDefense. In other words, TapDefense is a great app that people love to play, and once we motivated them properly to engage with the app and give it a try, they kept coming back. That’s the power of this new service.

You recently acquired Appstrip, a popular cross-promotion bar for social games on Facebook. With so many cross-promotion social game bars on Facebook, what plans do you have with AppStrip to compete and expand the product?

True, the cross-promotion idea on Facebook has really taken off. It’s brilliant because it kind of levels the playing field for mid-tier apps to compete against some of the larger developers who have their own cross-promotion capabilities. The AppStrip acquisition was very strategic for us because it gives us yet another way to provide very cost-effective distribution for our app partners.

The product was already doing well in the market and feature rich when we bought it, but we plan to keep improving it and pushing the envelope. For instance, we’re in the process of drastically improving the management console, adding strong click fraud control, and applying our proprietary optimization technology to make sure the targeting is best of class. We feel that applying our depth of expertise and experience from advertising and distribution will allow AppStrip to outperform the other cross promo providers.

Tapjoy was one of the first companies to look beyond Facebook and expand its products to Apple’s iOS platforms. Why did you make this move? What do you like about the iPhone and iPad for game companies?

We felt, like many of our partners did, that the future of gaming and applications would be on mobile devices, and given the strong growth of the sector that certainly seems to be the case. Not that people will ever stop playing games on the Web or their consoles, but as the technology improves and smartphones become an even more integral part of people’s lives, platforms like iOS and Android represent the next frontier for our industry. And so we invested there very early, and quite frankly we feel this is just the beginning. If you look at the early sales numbers from the iPad, I think we can all expect that tablets are going to be extremely popular, and obviously with their larger form factors compared to mobile phones, tablets represent a huge opportunity for the games industry. So we’re still in the early stages of mobile gaming.

Looking into your crystal ball, what other platforms and devices offer the best opportunity for game companies beyond Facebook and Apple this year? What is the next new thing in games in the upcoming year?

Well, you can’t forget Android, which has been coming on strong, and like I mentioned above we feel that tablets will be huge; so far the iPad has the early lead but surely there will be other tablets that come along. Then, there’s still the open Web, with companies like Google and Yahoo and MSN and others all making a play to attract game developers, so really the race is still in its very early stages. It will be interesting to see how it all plays out. Our job is to make sure we’re there wherever and whenever game developers want to launch on a new platform.

Any final words for your fans out there?

Just keep on making great games, and we’ll keep coming up with ways to help you turn those games into profitable businesses.