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Apple Inc. (AAPL), Facebook Inc (FB), Yelp Inc (YELP): Keep Your Eyes Peeled

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Source: The Verge.

Apple Inc. (NASDAQ:AAPL)‘s iPhone unit sales were up 142% from the year-ago quarter. iPad sales were up 183%. It was the company’s third quarter of 2011 and Apple Inc. (NASDAQ:AAPL) was the hottest stock on the Street.

Those were the days of the smartphone revolution. Investors who held Apple Inc. (NASDAQ:AAPL) stock between 2005 and 2011 watched shares soar 1,100%. Or, in Peter Lynch lingo — that’s a 12-bagger.

Oh, how times have changed.

In the third quarter of 2013, Apple Inc. (NASDAQ:AAPL)’s revenue was up just 0.8%. EPS was down almost 20%. Sure, iPhone units sold were up 20% from the year-ago quarter. But that’s a far cry from the 142% gain the company boasted back in 2011.

The smartphone boom is slowing down. While IDC’s forecast year-over-year growth rate for smartphone shipments in 2013 is still impressive — 32.7% — it’s decelerating rapidly. IDC predicts a compound annual growth rate in smartphone shipments of just 13.8% between 2013 and 2007.

But with the end of one revolution, a new one begins. In fact, it’s already upon us. I’ll call it the app revolution. It refers to the services benefiting from a massive (and still growing) installed base of constantly improving smartphone technology. Sure, this revolution began its ascent soon after smartphones hit the market — but this baby is still in its prime.

4 numbers that prove the app revolution is kickin’

  • $1 billion: That’s how much Apple Inc. (NASDAQ:AAPL) is now paying developers every quarter (slightly more than that, actually). Of the total $11 billion Apple Inc. (NASDAQ:AAPL) has paid to developers, half of that was in just the last four quarters.
  • 70%: The year-over-year increase in iOS app developers in China — totaling a half-million developers now.
  • 14.2%: Nearly double 2012’s share of total digital ad spending, eMarketer expects mobile Internet ad spending to swell from 8.5% to 14.2% in 2013.
  • 41%: The percent of Facebook Inc (NASDAQ:FB)‘s ad revenue that now comes from mobile, up from zero in the year-ago quarter.

Which companies will benefit?
There is a whole array of companies benefiting from the app revolution. Really, any company providing services that are enhanced through mobile has the opportunity to cash in and ride the wave, including social networks, search, and location-aware services, to name a few.

But where the growth is, competition will surely intensify. That’s why the best practice is to find services in the mobile space that are already the best at what they do. Even more, look for signs of a competitive advantage. Efforts like this may leave fewer choices, but the few left will be potential investments, not risky bets. Then, of course, you have to consider price.

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