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When it comes to investing, it can be difficult to distinguish between legitimate money making and fads. In an age of increasingly crowded smartphones and social media, some may wonder what investment opportunities are available, if any.
Mobile apps are used every day by consumers from all walks of life, but one area may be quietly emerging as a lucrative investment opportunity. Below is a breakdown of the mobile app market and an assessment of the areas worth paying attention to and the areas you should avoid.
How popular are mobile apps?
The smartphone industry is dominated by two players. alphabet and apple. The former owns Android, which boasts nearly 70% of the mobile OS market share. The remaining 30% is owned by Apple, the iPhone maker.
One of the biggest reasons why smartphones have skyrocketed in popularity is their mobile apps, which cover a variety of categories such as gaming, streaming, education, dating, and more. According to Statista, there were 257 billion mobile app downloads in 2023. Furthermore, consumer spending on these apps is expected to exceed $600 billion by 2025.
It’s clear that mobile apps have great monetization potential. But which areas are seeing the most consumer engagement? And which companies represent the most attractive investment opportunities within mobile apps?
Image source: Getty Images
Consumers may be breaking up with some apps
For years, one of the most popular areas among mobile app users has been online dating. Dating apps like Tinder, Hinge, etc. bumble (BMBL 1.12%)provides a convenient way for people to find romance through a matching algorithm.
In online dating, the 800-pound gorilla is match group (MTCH -0.62%) — The company owns regional platforms including Tinder, Hinge, The League and Plenty of Fish. Considering the number of properties in the company’s portfolio, it’s no surprise to learn that Match has 15.2 million users.
The real downside comes when you consider Match’s dwindling user base. The number of users of the company is 15.2 million, a decrease of 5% compared to the end of 2022. To make matters worse, day-to-day user engagement seems to be taking a toll.
Match Group isn’t the only company experiencing disruption. Rival platform Bumble is experiencing its own challenges. As part of its fourth quarter and full-year 2023 earnings report, the company announced that it will be reducing its workforce.
Bumble’s revenue is growing steadily and it’s generating positive free cash flow, but it’s lagging in one key area. Bumble’s average revenue per user (ARPU) was flat in 2023, which could indicate that users are generally less willing to pay for dating apps.
There’s a lot of speculation as to why dating apps are declining in popularity. Whether it’s high prices along with persistent inflation or mixed engagement from tech-savvy Gen Z users, dating apps may not be the best source of growth for investors.
This foreign language platform is becoming more popular
One of the most popular areas for mobile apps is foreign language learning.a platform called Duolingo (Duol 0.78%) It is increasingly becoming a major force in mobile learning. In January, the company had more than 16.2 million downloads worldwide, more than the other nine major platforms combined.
Duolingo boasts 26.9 million daily active users and 88.4 million monthly active users, according to company filings. The company increased its paid subscriber base to 6.6 million in 2023, a 57% increase over the previous year.
The company has demonstrated that its platform is attractive. The challenge now is to maintain the stickiness of paying users while attracting new subscribers.
Multiple media outlets are reporting that some people are leaving the world of dating apps and finding connections on Duolingo. True, this is probably a small number of people. But at least Duolingo could see a natural influx of new users looking to hone their foreign language skills while connecting with like-minded people.
Nevertheless, when it comes to investing in mobile apps, the themes reviewed above support the idea that dating apps may not be the most lucrative investment option at the moment. Alternatively, the education platform seems to be growing in popularity, with Duolingo’s growing user base and impressive download volumes overwhelming the competition.
Investors may want to take a look at Duolingo, given its rapidly expanding language learning target market, combined with the company’s modest paid subscriber base (relative to total users). The company’s growth trajectory may have just begun.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Adam Spatacco is with Alphabet, Apple and Match Group. The Motley Fool has positions in and recommends Alphabet, Apple, Duolingo, and Match Group. The Motley Fool recommends Bumble. The Motley Fool has a disclosure policy.
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