The market is flooded with addictive mobile apps that generate millions of downloads but not millions (or even thousands) of dollars.
Where does this leave mobile-focused investors?
Skeptical, to say the least. “Millions of users does not translate into millions of dollars in revenue,” said Jenn Wei, an investor at Silicon Valley-based Blumberg Capital. In New York, FirstMark Capital’s Matt Turck shares similar concerns. He refers to mobile apps and games as a “trickier group” to fund because they have traditionally been so focused on user acquisition.
According to Sidecar cofounder Jahan Khanna, that tech entrepreneurs build apps that people think are cool — but not worth paying for — compounds the problem. “While these seem aligned, they often are not,” he said, and as a result, mobile startups often hemorrhage cash.
He continued, “The original Harlem Shake video has over 40 million views on YouTube. What does that make that dance worth?”
However, the language is starting to change. In Silicon Valley, we are starting to see a shift from observing user acquisition metrics to a more comprehensive view on engagement and retention.
One million people signing up for a service might not make it valuable, but investors are more confident to hear that 250,000 people use an app three times a week for six months.
Likewise MoPub’s CEO John Payne is confident that today’s mobile startups are currently investing in “resources in building and generating revenue from those users” will see success in the next two or three years.
“Many times, experts from desktop are taking their playbooks and tailoring them to the smaller screen with a lot of success,” said Payne, whose company specializes in mobile monetization.