The Next Mobile Revolution
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the 60’s the future was flying cars, moon cities and space travel to other planets. Though the pace of innovation has continued to grow exponentially since then, we still don’t have cities on the moon, travel to planets outside of our solar system and flying cars are still not commercially available. The question really becomes now what is the future that we envision?
Unlike the 60’s we are now in a period of exponential innovation where we improve upon previous technologies at speeds that were once unthinkable. Though we are continuing to rapidly improve upon technology instead of looking to the stars as we have for much of recorded human history, it seems the greatest innovations will happen first in tech destined for use on this planet (At least the tech we will know about, for those into conspiracies). The internet has grown since its inception at such a fast rate that it is now accessible from almost every country in the world. It has spawned some of the biggest business ever and as Apple demonstrated for a short time was the single biggest corporation on the planet eclipsing the mighty oil giant Exxon. The real question for the internet and technology is obviously what’s next?
Much has been made about the future in cloud computing, smartphones sales have outpaced all other mobile phones sales and with them the rise of the mobile internet. This is where I see many people in the short term, especially analysts, are missing the point when it comes to valuing companies moving forward. It would have been unthinkable 5 years ago, but it is very possible in the next 5 years that almost the entire population of the planet will be able to access the internet from their mobile phones.
Imagine the ability to reach an audience of 5 billion people? The ability to translate that into a dollar figure still isn’t really possible but one can imagine it would be a lot of potential money for companies that can capitalize on this growing movement. Unlike in the past when an innovation of this size and magnitude would take a generation to implement the mobile internet will be here and in full swing while I still have hair on my head, hopefully. Looking at a company like Facebook (NASDAQ: FB) who almost everyone knows has gotten killed since its IPO, has a user base of over 900 million users and many of them are logging on over their smart phones using the mobile internet. Facebook has struggled at monetizing this new market as most other companies have since it has come about so quickly.
The future for Facebook in its potential revenue streams though is monetizing its mobile traffic. Pandora (NYSE: P) the steaming online radio service had a similar issue during its last earning report. Though it’s growing its user base, it has also struggled in monetizing its mobile user base at the speed it has its desktop user base. At the surface this could seem like a larger problem, but when you look at it online advertising has been around now for a decade and has grown yearly since then. It’s an established market that created a cash generating machine in Google. One could argue Google perfected the online advertising model as well. A couple of years ago, mobile internet advertising was non-existent. These companies need time to adjust to the changing marketplace, but the catch is those that don’t in the near future will be left behind. Google (NASDAQ: GOOG) has already sharpened up its mobile search browser in obvious hope of remaining the starting point for users when accessing the mobile internet. They have created a mobile OS and purchased a hardware maker in Motorola to one could assume best potion itself to continue to profit from the burgeoning mobile net.
As innovation continues to speed up, the idea that someone will be able to come up with good ways of monetizing the mobile internet is a no brainer to me. The question is which companies will be left behind and which will be able to profit for the shift. Though Apple (NASDAQ: AAPL)is predominately a hardware maker it has invested heavily in creating a cloud for its mobile apps and online products while providing users with devices that are fast and easy to use when accessing the mobile net. Apple is generally recognized as creating the app revolution and combined with a growing user base even with new entrants they are positioned to continue to profit from the shift to mobile. I see Apple reaching 1000$ in the short term (5 years). Google is another company that through its own innovation, acquisitions and improvements on its existing products positioned to continue to grow and profit from mobile. With an OS, a hardware maker, mobile optimized search engine and a continued line of products in research and development, they will continue to grow in the long term. Facebook, which I strongly believe will monetize its engaged user base through its mobile platform, will actually be able to reach the lofty predictions that were set prior to its IPO. Pandora has a phenomenal product that can continue to grow and improve upon its mobile revenue, the main block for them is North American carriers and the mobile data plans providers will provide. If they continue to reduce customers plans to sizes which expire after a handful of songs, Pandora could be in trouble. Again though going back to the innovation argument the idea that this will also be surmounted is highly likely. Overall the mobile revolution which has already begun will be in full swing worldwide before many people even realize it.
I own shares of Apple and Goolge