如何在下一个“无线时尚”时代淘金

How to Invest In the Next Mobile Fad? Buy the Marketplace Itself

12:25 PM ET 4/19/12 | TREFIS

Many investors feel a natural affinity toward investing in companies with one product, idea, or solution. They relate to a single-offering business because it is as easy to understand to as a corner deli: one offering (food) and one way increase the bottom line (sell more food). There is no fault with this mindset, and many great stocks were founded on a single offering: McDonald’s, Avon, Coca-Cola, FedEx, and so forth.

Investors, however, are understandably wary of smaller single-offering companies. Although they acknowledge the strength of the single-offering titans on Wall Street, they have difficulty investing in “the next big thing.” Sure, they might admit that Coca-Cola rules the soft drink industry (followed somewhat by Pepsi), but what is “the next big thing” in soft drinks? It’s very hard to say. Likewise, McDonald’s might rule the fast food industry (with a scattering of other competitors), but which of the thousands of drive-thru models will be “the next big thing” in fast food? It’s very hard to say.

Hard to say, indeed. If an investor were to examine any industry at all, in fact, they will inevitably find plenty of exciting possibilities. In the mobile sector, it might be an amazing antenna, battery, or social networking tool. Who is discerning enough to predict “the next big thing” among all of the possibilities, and how much of that prediction would be sheer luck, anyway?

All of this begs a larger question: Is there a way to invest that does not rely on predicting the elusive “next big thing”? How can an investor gain exposure to the obvious growth of the mobile sector without too much weighting toward any particular product, service, or idea? Is there a way to bet on the house — the day-to-day operation of the entire marketplace — when it comes to investing in mobile?

Bet on the Marketplace, Not the Product

As an example, let us consider the marketplace for mobile applications (“apps”). For background, Apple’s iPhone obviously made “app” a household name, although apps have also become common across Android and tablet computers (and the upcoming Windows 8, but shh, that’s a secret). Apps are small utilities for any mobile device that allow you to do almost anything: play games, check the weather, reserve a dinner table, etc. Apps are an important part of the $10+ billion mobile industry, and apps’ revenues from downloads and premium features are expected to grow ten-fold within a decade.

Of course, we also know that mobile is the undeniable future of computing, the fastest-growing way of accessing the internet, and the highest-growth sector of the stock market (any questions, check the valuation of Facebook or Instagram, enough said). The question for most investors is not whetherto invest in mobile but how to invest in mobile. Just buy Google or AT&T and hope for the best? Or is there a better way?

Buy the Next Fad, Guaranteed

One benefit of owning Apple stock is that you own Apple’s mobile platform (“iOS”) through your investment. Because iOS is a marketplace and not a single offering, iOS will increase the valuation of Apple when people transact across that marketplace, regardless of the specific product or service. Fads will come and go, but Apple will make money no matter what apps people buy.

In this sense, an Apple shareholder is placing a bet with the house: investing in the marketplace for mobile transactions and not caring what customers buy (so long as they buy it on an iOS device, such as the iPhone or iPad). Instead of investing in a single offering (e.g. a navigation plug-in), Apple shareholders invest in the marketplace itself (e.g. the App Store).

This is a powerful concept, and worth repeating. The mobile market is expected to grow by 1,000% in the next decade. Before we know it, we will have lived through a dozen fads (e.g. Farmville and Angry Birds, just to name two). How can we possibly predict what fad will be hot in five years, given the rapid transformations in the mobile market? Perhaps Angry Birds Version #57? Well, perhaps not. So then, if we cannot predict the next fad (despite how cool Version #57 might be!), then what should we do as investors?

Let’s take a quick look at a parallel example for investing in the marketplace itself, or betting on the house, as it were, for the mobile app market. A company called MEDL Mobile (OTC: MEDL) has built technology that monitors the in-app behavior of users, stores and analyzes this data, and makes relevant recommendations to users based on their behavior. Suppose that you have downloaded 90 game apps to your iPhone but only regularly use three: poker, keno, and roulette. Suppose you play these apps for six hours per day and make a consistent $500 per week in gambling profits. MEDL would build a profile based on your usage and guess that you might be a serious gambler. (This sounds simple enough, but remember that this occurred in the background, without ever asking you to select your preferences or answer profile questions.) So based on this profile, MEDL might push a suggestion to you saying that you might enjoy a premium blackjack app. MEDL would then earn an affiliate commission if you decided to buy that app with a one-click confirmation.

MEDL differs from an investment in Apple, because Apple does not analyze the in-app behavior of its users, nor does Apple save in-app behavior for use in advertising recommendations. Apple knows that you downloaded 90 game apps, yes, but it knows nothing of your actual usage of those apps, nor that you prefer only three of them, nor that you earn an impressive $500 per week as a hopeful professional gambler. While Apple will know which app is the most-downloaded, MEDL will know how its apps are actually utilized. This allows MEDL to know more about you, as an app user, and help you find other apps or features that might truly be valuable to you, rather than basic recommendations based on only your purchases.

Conclusion

So, can you invest in the next fad, guaranteed? Well, with an app universe as big as Apple’s and behavioral analysis like MEDL’s, there is little doubt that you will indeed be participating in the next mobile app fad. Currently there is no comparison to Apple’s app revenues, as it designed the purchase experience from the ground-up to be as intuitive as possible. The uncontested champion, Apple commands the highest profit margins from both its devices and its apps, continuing the success of its flagship iTunes app with the thousands of apps it controls today. MEDL’s universe of apps is limited to 75,000, and it cannot track behavior outside of those apps, but the onboarding process of its behavioral monitoring technology is speeding up and will soon be entirely automated. There are around 3 million people currently using MEDL apps and the number is expected to rise above 50 million by the end of the year. There are also third-party app recommendation engines, but all of these MEDL competitors require a separate app for preliminary survey for indicating your preferences, whereas MEDL technology works entirely in the background from the start. Regardless of where you choose to invest, however, betting on the marketplaces and technologies that benefit from fads — rather than trying to predict which fad will be “the next big thing” — is a more conservative way to expose your portfolio to the growth of the mobile market.