The 5 drivers of $700B mobile internet

August 27, 2014

Digi-Capital forecasts that mCommerce, advertising, in-app purchases, App as a Service and core operational metrics will drive $700B mobile internet revenue by 2017 (see Digi-Capital Mobile Internet Investment Review).

3 core business models

mCommerce will be the dominant business model, with $516B in sales driving >70% of all mobile internet revenue by 2017.

Mobile advertising will deliver $52B revenue in 2017, with $42B mobile web advertising and $10B in-app advertising.

In-app purchases took over 90% of consumer apps revenue last year, and will stay a big part of that $74B market by 2017. As they monetize 4x more effectively in mobile games than all other app types, new business models including App as a Service are emerging in other sectors.

App as a Service emerging

New App as a Service models are using the cloud to move beyond standalone device based apps, with free thin client apps such as Dropbox mixing data and media in cloud and on device. Real-time cloud based content updates are keeping users engaged, with strong “live ops” teams supporting them. App as a Service models using subscriptions and other monetization mechanics are emerging to disrupt non-games consumer apps ($37B in 2017) and enterprise mobility ($53B in 2017).

App as a Service matrix

Metrics from good to great

Top grossing apps look very different to other apps beyond just making a lot more money. Our analysis of core operational metrics shows only a handful of metrics actually matter, although the important metrics vary by sector. We see up to 35x outperformance on core metrics comparing top 1% apps to top 5% apps by sector, with even greater gaps against lower rankings. For investors and entrepreneurs, a detailed understanding of how these numbers work could make the difference between good and great.

App metrics

If you’re looking for Digi-Capital’s quantitative mobile internet research (revenue forecasts, public company/M&A valuation comparables, public market indices, operational metrics, M&A transactions, investment transactions), you can download our Mobile Internet Investment Review.

This is part 4 of a 5 part series:

  1. Mobile internet to grow over 300% to $700B in 4 years (revenue forecasts by sector)
  2. Mobile internet record deals >$47B M&A and $14B invested (M&A and investment analysis)
  3. Mobile internet Investment Quadrant: hidden opportunities (investment and consolidation potential by sector)
  4. The 5 drivers of $700B mobile internet (business models and metrics)
  5. Over 20 “billion dollar” mobile internet companies (competitive advantages and risks)