The Disruptive Power of Smartphones

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The nature of the smartphone revolution is going to change everything about how we handle media, living and investing.

My guess is that very few of you had heard of Nick D'Aloisio before this week. D'Aloisio is the teenager that Yahoo (NASDAQ: YHOO) just made very wealthy by purchasing his Summly app for $30 million. Honestly, good for him.

Still, it makes me wonder about the next step in smartphones. Summly is designed to summarize content so that users, mostly on smartphones but also on tablet devices, can get a boiled down summary of anything a news organization publishes. It's designed to appeal to the people each of us sees (and likely is) fiddling with their smartphones as we wait in lines. It's one more blow to the advertising dollars of content providers and likely one more step toward quality providers going paywall.

Still, it's the next disruptive event in a technological society that is evolving faster than companies, societies and governments can adapt to it. By the time smartphones achieve total penetration and the world is adapted there'll be something else out there changing things up. As an investor, your job is to try to get ahead of the game and pre-position your investments to take advantage of it before it becomes expensive.

Yahoo

Yahoo is certainly playing a catch up game here. The search engine, once so dominant, grew complacent and the world changed under it. Good for CEO Marissa Mayer for being aware of that and making moves that are trying to be ahead of the game. If the Summly acquisition works even a little, the $30 million price tag will be dirt cheap. Still, the fact is that Yahoo has not yet turned itself around and remains a risky investment – even with the huge run-up in share prices over the last six months.

Facebook (NASDAQ: FB)

A classic case of a company still struggling to find out how to handle the smartphone world. Facebook was, by its very nature, developed for the desktop and laptop world. That meant that – as people switched to mobile devices – it was left trying to justify a business model that wasn't making money in the first place. Now, the company is clearly trying to adapt to a mobile world with more and greater ads being forced on users, but the jury is still out on whether it can weather the storm in a fickle online world. I still consider Facebook to be far more risky than justifies any investment.

Google (NASDAQ: GOOG)

Google, by its very nature, is well positioned to take advantage of the disruption caused by smartphones. The company got its start making money on small, very targeted advertising and extending that to mobile devices is very straightforward. Of all the big firms, Google is the one least likely to be hammered by a shift away from desktops and laptops. The firm's stock has always represented that fact. Above $800 per share for the entire month, I wouldn't be surprised if $900 per share was that far away.

Amazon (NASDAQ: AMZN)

I am, by my very nature as a fairly conservative investor, not enthralled by Amazon. Any firm this far into its development as a tech company should be making money, and Amazon doesn't really do that. Still, on the subject of smartphone disruption, Amazon is well ahead of the curve. The company has positioned itself well with its mobile apps and turned each smartphone into an impulse purchase machine. With just a few clicks – and possibly with the benefit of same-day delivery in some markets – just about anything that Amazon sells can be bought by users as the thought occurs to them. That's a good move by a firm that I think is overvalued. Good for them.

The important thing to take away here is that the smartphone revolution is one of shrinking attention spans and technology. How those two things come together – and how some firms adapt to them – will show you which should get your investment dollars. There are other complications, such as how content summary services will work after they force all the quality content behind paywalls or just out of business, but that's a development still to come. Your job is to position yourself ahead of the game with investments designed to take advantage of the coming thing.

Good luck!

Follow Nate on Twitter: @natewooley

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Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, and Google. The Motley Fool owns shares of Amazon.com, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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