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Investors hot for mobile apps

25 января 2011

The economy may still be struggling but that's not stopping investment dollars from flowing into the wireless industry. And in 2010 those dollars seemed to be flowing stronger than they have been for some time.

According to research from Rutberg & Co., in 2010 private mobile companies announced $6.1 billion in 416 financings--that compares to $2.1 billion in 269 financings in 2009. In fact, 2010 was such a strong year in venture capital it nearly surpassed the 10-year high that occurred in 2006 when venture capitalists poured $6.4 billion into the industry.

Interestingly, a large part of that $6.1 billion was sunk into mobile app developers. According to Rajeev Chand, managing director and head of research at Rutberg & Co., consumer mobile app developers attracted more investment dollars than semiconductors, devices or any other segment of the wireless industry.

While the appeal of mobile apps may not be surprising, the investment focus is--at least to me. Why? Although some mobile app developers have experienced tremendous success in a short period of time, many have had difficulty sustaining their success. They may come up with one app that temporarily draws customers but very few have found a model that makes money for the long term. In fact, Chand said the hardest part of investing in mobile apps is that there is no clear path to monetization, which is something that tends to make investors leery.

But since this area is so new and untried, instead of focusing on monetization, many investors are looking at the number of users and downloads apps are generating. "A lot of companies are doing a land grab to get users," Chand said. "Eyeballs equal equity value."

What is the magic number of users for an app that equates to success? Chand said it's not that clear. Some app developers can get 4 million or 5 million downloads; a few can draw 20 million or more. But downloads certainly don't equate to long-term users. In fact, the number of subscribers that download apps and then abandon them is as high as 50 percent within 30 days of purchasing. "Downloads are quickly going to become less important," Chand said. "It's about active users."

How does one measure active users? That may be the biggest win for a mobile developer. If you can attract users, keep them engaged and measure them, then you will likely be able to figure out a path to monetization--and that's ultimately what investors are going to want.

By Sue Marek


Источник: FierceMobileContent

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