With mobile rising in prominence, several noteworthy metrics have emerged for investors looking to profit from the app economy. Stock market watchers can now focus on mobile app data to read the financial tea leaves of the world's top global companies. Much is at stake here: Gartner estimates that global app store revenue will hit $76 billion by 2017.
According to the November App Annie Index for Apps, seven of the top 10 combined Google Play and iOS App Store apps by download are published by publicly traded companies. Investors behind these companies as well as the M&A teams eyeing privately held app boomers like Snapchat are closely watching these top metrics to make their moves:
Downloads: Tracking downloads across the major app stores provides the No. 1 indicator of an app's success. This is especially true as the freemium and in-app advertising models continue to rise in prominence, as both are ultimately dependent on downloads. Another example of downloads being the key success indicator comes from the rapidly growing wearables market. Apps accompanying wearables drive little (if any) revenue themselves, but serve as a direct proxy for wearable sales. If you want to know what wearable technology company to invest in, you would be well served to compare app download numbers.
Revenues: Tracking revenues is more difficult than tracking downloads as revenue can come from numerous sources -- upfront purchase fees, in-app purchases and advertising. As alluded to above, unlike downloads, app revenue can be a deceptive success indicator. Many, such as retail apps, are meant more for brand awareness and engagement. This is why downloads and user engagement are critical to determining the potential value of an investment.
User Engagement: The amount of time users spend on an app has emerged as a key metric due to the rise in revenue derived from in-app advertising. This is because advertisers prefer to spend their money on "sticky" apps that drive consumers who regularly visit the app. This is one reason why Facebook and Twitter are so ripe for advertising -- 65% of time spent on social networks is on mobile apps.
Investors can now look beyond traditional market information such as analyst reports, SEC filings and earnings statements for clues about stocks. The current business landscape that encompasses real-time metrics such as downloads, revenues and user engagement is leveling the investor playing field. This is what I call the democratization of investor data, and it is playing out across the app spectrum -- from hot games to social networks to blue chip stocks.
Hot Games
Freely available mobile app data, not to mention paid analytics services, promise a new era in benchmarking company performance. For example, had investors tuned to Glu Mobile's app store data ahead of its fourth-quarter earnings results announced in February, they might have seen its hot game title Deer Hunter 2014 burning up the charts. Glu surprised analysts and investors, blowing past revenue expectations and sending shares soaring 28% in after-hours trading. That revenue upside came on the strength of Deer Hunter 2014, according to Glu's earnings report. Investors are embracing this type of pre-earnings information as well as subscription-based data that can help mine for meaningful market insights.
Facebook Apps
Facebook's mobile business will only grow and so will the data it amasses as it pursues a multi-app strategy. Mobile was pivotal in reversing its post-IPO stock decline as a newly minted company, boosting investor sentiment. Facebook now has over a billion active mobile users a month with mobile accounting for 66% of total ad revenue. Facebook's multi-app strategy promises even more data to watch for market insights. Watching download and engagement metrics will be key to gauging its success.
Blue Chips
Microsoft's release of its Office suite of apps for iPads is worth watching. The software giant saw 12 million downloads in the first week of the launch of its Office apps in March, and it has since seen tens of million more. Microsoft took a big shift in position to embrace Apple's iOS, and it raises questions about how its Office franchise will exist down the road. Tracking Microsoft's progress in mobile development via its Office apps' progress provides yet another window into its business. And mobile is key to the success of Microsoft's future if it's to evolve beyond its traditional PC business, a critical focus in 2014 and beyond.
As mobile continues to play a major role in nearly every company's success, Wall Street will be keeping a close eye on the metrics that correlate to how well a company's mobile strategy is working. As a result, the mobile revolution has not only changed the business landscape, but also the landscape for public market investors, venture capital and private equity.
I strongly believe that the health of the app ecosystem and the markets it is creating are dependent on the availability of accurate, real-time data and insights. I am happy to report that we have a healthy future in our sights.