Emerging Technology

Mobile Investing

2016 looks set to be the year of mobile app investing. Here’s what investors need to know now.

Apps have been gaining traction as a medium for online gaming, shopping and communicating, and in 2016 market participants can expect some exciting new trends to emerge. 
In particular, next year investors should watch for increased revenue from app subscriptions, more apps centered on scarce, real-life gaming events and heightened interest in productivity apps. Those interested in the space may want to get ahead on looking at these areas for new investment opportunities.

1. New financing model

Historically, mobile apps have gained much of their revenue from advertising. However, according to a 2016 outlook from App Annie, revenue from subscriptions is taking hold as another viable business model for app companies. The popularity of music and video streaming apps such as Time Warner’s (NYSE:TWX) HBO NOW, as well as subscription dating apps like Tinder Plus, has led this trend in 2015. 

2. App investing beyond the virtual world

Remember the cultural shift to digital music in the early 2000s? One of its upsides for the music industry was increased interest in scarce live events, such as concerts. Indeed, App Annie estimates that concert ticket sales in the US multiplied by three between 1999 and 2009.
This case study helps shed light on what is occurring in the gaming world today. As free-to-play mobile games reach an increasing audience and begin to outshine console and PC games, demand is also spiking for competitive mobile gaming events. While these events occur outside of the virtual world of mobile apps, things always come full circle — event sponsorships and broadcast rights are poised to become a growing form of revenue in 2016 for mobile game companies.

3. Growth in productivity apps

Mobile games are the primary source of revenue in the app market, while productivity apps lag far behind. However, there might be a slight shift in this balance in 2016, with productivity apps commanding a greater share of the market. This potential increase in market share can be directly linked to advances in tablet technology.
The CPU performance of tablets has seen a substantial improvement in the past five years. However, interest in productivity apps hasn’t followed suit. App Annie states that the number of productivity app downloads as a percentage of total app downloads on the iPad has hardly changed since 2010. In 2010, productivity app downloads constituted around 5.5 percent of total downloads, while in 2015 they came to barely more than 6 percent.
The lack of increase may be attributed to the fact that tablet technology advances, while significant, still weren’t adequate to fully convert people from laptops to iPads. This might change in 2016 with Apple’s (NASDAQ:AAPL) iPad Pro. This device will help users do more work faster, and productivity app companies are taking note. For example, Microsoft (NASDAQ:MSFT) is improving its Office suite and mobile productivity apps like Office Sway. Small mobile app companies may also look to break into this growing market segment. 

Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.

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