3 Ways to Profit From the Mobile Wave

By Matthew Milner, on Wednesday, February 26, 2014

Last week, Facebook acquired a mobile messaging start-up called WhatsApp.

The price tag? An eye-popping $19 billion.

Not only is that Facebook’s biggest acquisition to date, it’s bigger than any acquisition ever made in the history of Apple, Microsoft or Google.

Some folks say it was a smart move – an efficient way to capture a huge global audience and ride the mobile “mega trend.”

Others say it reeks of desperation, an acknowledgement that youngsters are storming the exits at Facebook.

Whichever camp you’re in, one thing is clear:

As an investor, it’s a wake-up call to focus on the mobile mega-trend.

Let’s take a quick look at WhatsApp… then look at 3 ways to ride this mobile wave for profits.

Why WhatsApp?

WhatsApp is a 4-year-old messaging service for smartphones.

Essentially, it’s a free alternative to texting.

It lets users “chat” one-on-one or in groups. Users can send texts, photos, videos and voice recordings – and since it happens over the Internet, there are no pricey charges if your friends are halfway across the globe.

So why would Facebook spend $19 billion for it?

Because WhatsApp has 450 million mobile users…

Users who are glued to their mobile phones – all day, every day. They’re addicted.

They send 50 billion messages each day.

50 billion messages a day?

As we like to say around here, “There’s gold in them hills…”

You’ve got to invest in mobile.

Three Ways to Play It

1. Go “Short” Legacy Communications

The first way to play this mega-trend is to short public telco stocks.

According to research group Ovum, until recently, the telcos have been sitting on a $120 billion market for text messaging.

Last year, they lost $32 billion in text messaging revenue due to new mobile competitors. And by 2016, they’ll lose $54 billion.


2. Go Long Facebook

Another way to play the mobile mega-trend is to buy shares of Facebook.

Aggressive CEOs like Zuckerberg can make their stocks shine.

Zuckerberg didn’t ignore the warning signs that he was falling behind on a mega-trend, and he didn’t balk at a high price.

He also kept WhatsApp from falling into the hands of Google, a major competitor. (According to CNN, Google offered to buy WhatsApp for $10 billion.)

Google’s mobile operating system, Android, comes pre-installed on 80% of the world’s smartphones. Given that penetration rate, perhaps Facebook was concerned about letting Google control one of the globe’s most popular mobile messaging systems.

Zuckerberg is clearly taking the long view. As Jeff Bezos has proven with Amazon, that can pay off handsomely for shareholders.

3. Invest in Mobile Start-Ups

The last way to play this mega-trend is to invest in early-stage mobile companies.

Mobile is the new battleground, and this is where the biggest acquisitions are happening – not just WhatsApp, but Google’s $1 billion purchase of mobile maps company, Waze, and Facebook’s $1 billion acquisition of mobile photo app, Instagram.

There are a bunch of mobile start-ups raising funds on equity crowdfunding sites. Here are a few to explore:

Ansa is a secure messaging service that lets people send “disappearing” messages to friends – the messages either disappear after seconds, or the sender can “take back” messages once they’ve been read. One of their competitors, SnapChat, recently rejected a $3 billion offer from Facebook.

Medigram is a HIPAA-compliant group messaging platform offering secure communications for healthcare professionals. Their current investors include Andreessen Horowitz (early backers of Facebook, Twitter, Pinterest, etc.) and Yuri Milner (backer of Facebook, Twitter, Spotify, etc.). 

Silverpush is a platform for mobile advertising. They have a proprietary technology that helps advertisers identify and discover their users when they’re on mobile devices. Their investors include super-Angel Dave McClure’s 500 Startups.

The Next Billion Internet Users

The next billion Internet users (actually, the next 5 billion) will come from places like Africa and India – and their first experience with the web will be on MOBILE.

So if you’re an investor, be sure to focus on this mobile mega-trend!

Happy Investing!

Best Regards,
Matthew Milner
Matthew Milner


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