Learn financial spread betting online with this short introductory video.
The imperious rise of mobile technology in our lives has been undisputable, as smartphones and apps gain ever increasing influence over how we interact, manage our finances, shop, play and much more.
But so far, the ubiquitous nature of apps has not translated onto financial markets. Whilst the success of handset and operating system makers like Apple and Google over the years has resulted in massive gains for investors, talk of an ‘app bubble’ has not yet materialised. Successful apps do not tend to float directly on the stock market, and those that do have seen some notable failures.
If investors are wary of new apps trading on the markets – after all, any new technology brings volatility – does a successful move into mobile translate onto a company’s stock price?
Facebook has been the source of much scrutiny since it floated on the stock market a little over two years ago, initially viewed as a problematic stock before rising impressively after July 2013. It currently sits at around the $65-70 mark, well over double what it was a year ago.
The initial leap in Facebook’s share price came as a result of an announcement from the company that mobile advertising revenue had grown to an impressive 41% of its $1.6 billion total. In spring of this year, Facebook stock reached new highs after the company’s January announcement that mobile ad revenue had increased again, to 53% of $2.34 billion.
Facebook’s clear ability to turn dominance of the mobile market into revenue was something that investors had been hoping to see, and the markets reacted accordingly.
That announcement in January caused an impressive 9% leap in Facebook’s market cap.
Three weeks after releasing their most impressive earnings to date, Facebook announced the purchase of WhatsApp – an online instant messaging application – which saw Facebook’s share price leap another 6%, breaking the $70 barrier for the first time.
Facebook’s ability to generate profit from mobile has led to a large amount of demand from investors, who clearly believe in the company’s business strategy. That the share price of the company increased as the intriguing – but not necessarily profitable – acquisition of an app was played out only underlines this further.
Netflix
As Facebook has been realising the potential of app technology to drive ad revenue, Netflix has used it to extend subscriptions with a more flexible service, appealing to more users. It released an iPad app over a year and a half before now-defunct rival LoveFilm (incorporated into Amazon’s Instant Video service), and was available on Android and iOS well before Sky Go (BSkyB’s competitive offering).
Netflix’s sole focus on ‘On Demand’ and rental media makes a direct comparison to those other companies difficult. But in the time since its iPad app was first released, the company’s market cap has grown almost 600%: compared to a more modest 59% growth for BskyB. And much of that growth came in the period as Netflix released its key apps – for Android, iPad and iPhone during 2010 and early 2011 – before a price hike saw subscribers and share price fall. Since then, Netflix’s dominance of the mobile market has helped them recover and reach new peaks, over 50% higher than previously achieved.
IG
But it’s not only in the world of TV, film and social media that apps are taking over. Investors are also able to track progress, make trades and analyse the markets on the move with apps pioneered by IG, who like Netflix released software for iOS and Android during 2010 and 2011. Now they see over a million deals per month through mobile devices.
Like Netflix, that early adoption of mobile has led to some good stock performance from IG, who began 2014 worth 58% more than they were at the beginning of 2010. Once again, here we have a company who chose mobile as a way to offer their users more instead of driving ad revenue, driving client uptake and engagement.
Of course, alongside these success stories are several companies that mismanaged a move to mobile and have paid the price accordingly. But, as people and businesses become more familiar with the technology, and new methods of utilising it arise, new opportunities for mobile investment will arrive. Learning from those companies who have made a success out of apps already can be a great way to spot which ones will achieve it in the future.
Always remember that spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.
