Investor Spotlight: Apps & Stocks – More Investment Opportunities Than You Think

In an economy where content is shifting to mobile distribution platforms, the fortunes of public and private companies are increasingly determined by their strategy and success in the app markets. This is the inaugural report for App Annie’s new spotlight series, Investor Spotlight, and extracts insights from our premium market data product App Annie Intelligence, to help investment professionals understand major market opportunities in the app economy.


Mobile apps can serve many purposes for the companies that develop and publish them.  Some are designed to generate revenue directly through paid apps, in-app purchases, and advertising, while others are designed to augment the product experience and build stronger relationships between brands and customers.  As even more companies begin deploying strategies that leverage mobile apps, it is important for investors to measure the success of those strategies so they can incorporate those factors into their investment decision-making process.  Beyond analyzing publicly traded companies, investors can also use App Annie Intelligence data to research app publishers who are rumored to be preparing to IPO like King, the company behind the wildly popular Candy Crush Saga.

For companies that rely primarily on app revenue for their bottom line, extreme growth is a possibility if their apps go viral and are effectively monetized.  The top ranked publisher by iOS App Store and Google Play combined revenue in May 2013,  GungHo Online, experienced this type of growth after the release of their hit app, Puzzle & Dragons, when their stock increased 6,144% in the 52 weeks ending July 8, 2013.  At the end of April, GungHo Online indicated that mobile games contributed 94% of their total Q1 2013 revenue, which demonstrates the potential impact that app revenue can have on a publicly traded app publisher stock.  GungHo Online’s growth is an exceptional case and there are many factors that affect stock price, but App Annie’s Intelligence data can help investors develop a deeper understanding of a company’s revenue streams and mobile strategy performance.


iOS and Google Play Monthly Revenues More Than Double in the Past Year, And Look Set To Grow Even Further


 

Gross revenue for the iOS App Store and Google Play more than doubled between May 2012 and May 2013.  One contributing factor to this growth in revenue is the steady increase in smartphone adoption around the world.  A recent study by eMarketer estimates that the smartphone penetration rate among mobile users rose above 50% in six countries – South Korea, Norway, Sweden, Australia, the United Kingdom and the United States – for the first time ever in 2012.  The same study estimated that the global smartphone penetration rate is currently just under one-third in 2013, but they expect it to increase to nearly 50% by 2017.

This spells opportunities for investors. Not only are businesses figuring out better ways to monetize the mobile app user, but the overall audience base is still nowhere near the ceiling.  Investors can use App Annie Intelligence data to track these trends and distinguish between the companies and app verticals that will drive that growth from the ones that will fall by the wayside.


Not All App Publishers Work Out of Their Garage



Over one-third of the Top 100 publishers by iOS App Store and Google Play combined revenue in May 2013 are publicly traded companies.  There is significant diversity among the 37 publicly traded companies in the Top 100 publishers by combined revenue, but there is no denying that they represent a significant segment of the global economy with a combined market cap valuation of nearly $1 Trillion as of July 2, 2013.

The gaming industry’s impact on app store revenue is significant and emerged in the analysis of the Top 100 publishers by iOS App Store and Google Play combined revenue in May 2013.  Of the 37 publicly traded companies included in this analysis, almost two-thirds operate within the gaming industry.  Many of these gaming companies are headquartered in the United States, Japan, or South Korea, where the gaming category accounted for roughly 75%, 90% and 95% of total iOS App Store and Google Play combined revenue in each of these countries, respectively.

Apps could also affect the sales of physical goods, especially in the gaming industry.  App Annie’s report with IDC on the portable gaming market found that gaming-optimized handhelds experienced significant declines in consumer spending and packaged game shipments between Q4 2012 and Q1 2013, while spending on the iOS App Store and Google Play increased during the same time period.  There are many factors that affect consumer spending behavior, including seasonal fluctuations, but the report found that the iOS App Store is now the leader in consumer spending on portable games and expects Google Play to surpass gaming-optimized handhelds in Q2.

Game publishers are the trailblazers and dominate the top of the rankings for iOS App Store and Google Play combined revenue, but other app verticals are figuring out how to monetize their mobile app user experience. Companies like Pandora and navigation companies Tom Tom and Garmin are learning how to successfully adapt their business models to the mobile platform.

The publicly traded companies in the Top 100 publishers by combined revenue represent only a small fraction of the public companies App Annie tracks and analyzes.  As consumption habits shift to favor digital distribution models, it will be important for investors to track this trend and invest in companies who demonstrate that they can adapt to the evolving marketplace.


App Stores Provide a Global Distribution Platform


Top Ranked Publicly Traded App Publishers by iOS App Store and Google Play Combined Revenue in May 2013

Company Market Cap (MM USD)
as of July 2, 2013
Stock Exchange
& Ticker
App Annie Store Stats
1 GungHo Online $14,128 JASDAQ: 3765 iOS, Google Play
2 Electronic Arts $7,097 NASDAQ: EA iOS, Google Play
3 GREE $1,962 TSE: 3632 iOS, Google Play
4 DeNA $2,884 TSE: 2432 iOS, Google Play
5 CJ E&M $1,203 KOSDAQ: 130960 iOS, Google Play
6 Gameloft $583 EN Paris: GFT iOS, Google Play
7 COLOPL $1,805 TSE: 3668 iOS, Google Play
8 Zynga $2,588 NASDAQ: ZNGA iOS, Google Play
9 WeMade $801 KOSDAQ: 112040 iOS, Google Play
10 Pandora $3,312 NYSE: P iOS, Google Play
SOURCE: App Annie Intelligence, Bloomberg™

 

To see the full list of 37 publicly traded app publishers in the Top 100 Publishers by iOS App Store and Google Play Combined Revenue, click here.

 

 

While the iOS App Store and Google Play were created by two famous American companies, the market they serve is truly global in its reach.  App stores level the playing field for distributing products because publishers can translate their apps into different languages and scale quickly in those markets.   The publicly traded app publishers included in this analysis are headquartered in a number of countries, including the United States, Japan, South Korea, France, the Netherlands and Switzerland, but many publishers have offices and partners in other countries to help them launch their products globally.  The 37 publicly traded companies in this analysis also come from a diverse set of exchanges, including the NYSE, NASDAQ, NASDAQ GS, TSE, JASDAQ, KRX, KOSDAQ, Euronext Amsterdam, and Euronext Paris.


Viral Apps Can Drive Publisher Stock Price

Once an app goes viral, the revenue it generates also has the potential to harness that momentum, which can lead to extreme changes in stock price.  The three stocks featured below that saw explosive growth over the last year are all app publishers that rely primarily on their apps’ revenue for growth.


GungHo Online’s stock experienced a 6,144% increase during the 52-week period ending on July 8, 2013, largely on the back of the release of its hit app, Puzzle & Dragons. (SOURCE: Bloomberg)

GungHo Online was the top ranked app publisher by iOS App Store and Google Play combined revenue in May 2013.  Based out of Japan and traded on the JASDAQ, GungHo Online’s revenue is driven by the success of their app, Puzzle & Dragons.  App Annie featured GungHo Online in our December 2012 App Annie Index as the biggest mover in the iOS Top Publishers by Monthly Revenue rankings when Puzzle & Dragons propelled them to the #5 iOS App Store publisher by monthly revenue in December.


KLab’s stock growth began in April 2013 with the success of their Love Live app and really took off after Microsoft announced a partnership with KLab to release Age of Empires in Japan.  (SOURCE:  Bloomberg)

Among the publicly traded app publishers, KLab was ranked 17th by iOS App Store and Google Play combined revenue in May 2013.  Their revenue is primarily driven by the popularity of three gaming apps in Japan: Love Live, Lord of the Dragons and Shin Sengoku Buster.  Revenue expectations have recently increased for KLab after Microsoft announced that they are partnering with them to release the mobile app for their Age of Empires franchise in Japan.


Ateam’s stock nearly tripled between September and November 2012, driven by the successful Google Play release of Dark Summoner.  (SOURCE: Bloomberg)

Ateam is the 26th ranked publicly traded app publisher by total iOS App Store and Google Play combined revenue in May 2013, and has also tapped into the momentum that the Japanese gaming market is driving in app store revenue.  Like GungHo Online, Ateam’s app revenue is also primarily driven by one game, Dark Summoner, which is popular in both Japan and the United States.  Dark Summoner was featured in the App Annie report on Top Gaining Apps in the USA in November 2012 as the #2 top gainer for iOS gross revenue when it climbed forty spots in the ranking.

 

Key Takeaways

As global business gets remodeled in the shape of an app store, it’s important for any investor to be fully informed of key app economy trends. A few takeaways from this article should get you started:

  • Over one-third of the Top 100 app publishers by gross iOS App Store and Google Play revenue in May 2013 are publicly traded companies with a combined market cap of nearly $1 Trillion.

  • The global app economy is growing rapidly.  Gross revenue for the iOS App Store and Google Play has more than doubled over the past year and increasing smartphone adoption rates suggest this revenue should continue to grow.

  • App stores are a global marketplace, which is reflected by the diversity of publicly traded company headquarters in the Top 100 app publishers by gross revenue.

  • It’s important to monitor app revenue estimates for publicly traded companies that primarily rely on apps for revenue because the viral success of one of their apps could precede a significant increase in their stock price.

  • The app economy is still evolving and there are a number of emerging trends that investors can take advantage of as consumption habits shift.  App Annie Intelligence can help investors identify those trends and evaluate opportunities in the market.

As we develop this series for investors, we’d love to hear from all kinds of investors as to what insights they are looking for, whether you’re a venture capital firm, hedge fund, investment bank or private investor.  Tell us what insights you’d like to hear about by commenting below or on Facebook, Twitter or Weibo.  If you’d like to talk to us privately about analyzing the app market data behind this article, fill out a request form here. And of course, make sure you subscribe to the App Annie Blog so that you don’t miss an insight.

 

Notes:

 

  • The publisher rankings reported in this report are based on the revenue estimates available through App Annie Intelligence.  Daily rank history charts is available to all users through App Annie Store Stats.
  • All app publishers have been combined together under their parent publishers, where available.  For example, the app publisher Mobage is included under the parent publisher DeNA.
  • Any non-App Annie trademarks or images used in this report are the property of their respective owners.  App Annie claims no rights in those trademarks.

 

 

 

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  • Adilson

    great text.
    nice info here :)

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