Over the last six years, companies like Facebook (FB) and Twitter (TWTR) have risen to the forefront of the social media revolution, along with their stock prices. These companies are praised for their seemingly limitless pools of innovation and young talent; yet, what most investors and analysts fail to recognize is that these companies would be seemingly irrelevant if not for the rise of mobile applications.
2008 marked the release of the Apple App Store, Google Android Market, and ultimately, the key turning point in the social media revolution. In less than a year, the Apple App Store surpassed one billion downloads and, in August 2010, the Google Android Market accomplished the same milestone. In reaching this record, these app markets exemplified a significant shift in the way people would come to live their daily lives. With the rise of mobile applications, people now work, play, shop, and communicate solely via their mobile device(s). In turn, companies like Facebook and Twitter find themselves literally in the hands of their desired users.
Much to the delight of social media companies, app markets have continued to grow at an incredible rate. In September 2010, total Apple App Store downloads surpassed 10 billion and just months later, in January 2011, the Android Market followed suit. By March 2011, there were over a million cross-platform mobile applications available for download. A year later, in March 2012, the Apple App Store exceeded 25 billion downloads, marking yet another Apple victory over Google (the Android Market, now Google Play, would hit 15 billion downloads). Although app download statistics are impressive, this growth is also reflected in a more important area: usage.
In terms of web usage versus mobile application usage, consumers use mobile applications far more. This is especially important to note when you consider the fact that Facebook, Twitter, and LinkedIn (LNKD) began as websites, not mobile applications. However, the mobile versions of these social networks are clearly more popular than their traditional Internet counterparts. In August 2013, Facebook announced that 78% of its 128 million daily users were mobile. In October of the same year, Twitter announced that 75% of its 218 million monthly active users were mobile, calling mobile the “primary driver of our business.”
Mobile applications allow dynamic, targeted, and engaging advertising, that is far more effective than traditional marketing techniques. Social media companies simply connect with pre-existing features, within mobile devices, in order to create effective marketing channels. For example, push notifications allow companies to remind mobile users of items sitting in their online shopping cart, recommend related products, and send promotional offers. Location services provide a way for companies to further localize and monetize their advertising. These mobile features have allowed social media companies to become advertising gold mines. As a result, Facebook, Twitter, and LinkedIn have grown into Wall Street darlings.
For those who believe that the social media revolution is just a “phase,” they should note that these companies remain part of a growing market. By 2017, analysts estimate that over 200 billion mobile applications will have been downloaded and that mobile app revenues, which were estimated to be $25 billion in 2013, will triple within three years (to $75 billion).