It’s official! We’re in a dotcom ‘mobile’ bubble!

I’ve been watching the signs for a while now.

The crazy attitude to iPhone whilst understandable has morphed from enthusiasm to bubble.

I actually think we — the marketplace — is in pre-bubble mode. But I’ll deal with that in this week’s newsletter (sign-up for free, here).

To the bubble.

Why are we in a mobile industry bubble? Because everyone and their dog is developing and obsessing over mobile applications.

Certainly — or, as the Americans would say — for sure, there are people making good cash from their iPhone applications. Good cash. Pizza Hut’s $1m in 3-months represents a super example. There are plenty of independent developers who have joined the application-developer-elite with a million quid’s worth of revenue from the iTunes app store.

For every super-successful developer, there are — I guestimate — about 800 hopefuls.

And THIS is the danger sign.

Where there’s blind hope, there’s a ton of money to be made out of selling shovels. But not necessarily out of investing your own personal time and effort on a wing and a prayer.

When I sit down with a lot of developers, the hope is that their application will become The Next Big Thing.

Invariably this doesn’t happen. You have to work very, very hard for success — and indeed, it’s almost nigh on impossible to be successful in the application store without some kind of support (financial or otherwise).

There are occasional exceptions — a one-man-band developer who can create an application and, bish-bash-bosh, get it up into the app store and start making a comfortable 5k month in revenue… for a few months. Enough to buy a new mac. Enough to upgrade to premium economy once or twice.

That revenue tails off though, unless you’ve come up with a super-hot idea that *has legs*. And without big brand support, it’s very easy to be eclipsed by The Next Big Thing.

Consumers are happily forking out cash for their application experience as the marketplace continues to go through rapid evolution and as the platform owners (Apple, for example) continue to innovate different payment methods and so on.

There’s a highly unnatural investment curve at the moment though. The majority are obsessing over the 50m iPhone users — for reasons that we’ve gone over time and time again here on Mobile Industry Review. If you assume that each of those 50m iPhone/iPod Touch users has disposable income of $5 per month to spend on their platform (and we’re being kind in this assumption), that’s a monthly economy of $250 million or $3 billion a year.

Even though I’m using a possibly inaccurate monthly budget, you and I both know that right now, investors are being shown similar figures.

Entrepreneur: “Now, if you could just give us that $500,000, we confidently assert we can deliver 0.5% of this marketplace within 12 months.”

Investor: “Round figures?”

Entrepreneur: “We’ll make $15 million by Dec 2010”

Now you and I know that this is *conceivably* possible. Come up with a good application — a really good one — get the right marketing mix and boom, you could certainly do this.

It’s not out of the realms of possibility, is it? There are quite a few applications that have done a million downloads at $1 each, right? So 15m of them should be easy. Especially when Apple is predicted to flog another 5-10m devices over X months.

That’s the problem.

The issue is that it’s NOT inconceivable.

So investors are beginning to get stuck in.

And entrepreneurs are beginning to dust off their dotcom pitches. All it seems to take is a quick replace-all (replacing ‘web’ with ‘mobile’) and you’re done.

It’s fascinating to see the signs beginning to emerge, especially as investors who’ve kept their heads down during the recent crisis are beginning to look for rich pickings and better returns than the small percentage points offered by the market’s generally depressed banks.

There are certainly opportunities, significant and substantial opportunities for growth. But we’re in a bubble.

So invest carefully, invest wisely.. and if in doubt, hire the biggest mobile cynic (me) and my team here at Mobile Industry Review and we’ll see you right.

Meantime, game on everyone. Game on!

33 replies on “It’s official! We’re in a dotcom ‘mobile’ bubble!”

It may seem like an odd time to be walking out of the mobile industry. From the outside it looks like mobile is finally hitting its strides. But the truth of the matter is the industry is not the same as it once was. It is morphing each year into a new industry with new technologies and new revenue streams. It is hard to build a business knowing that if you are not one year ahead of the game you might not get more than two years of life out of the business. It is a bubble and some will fly high (AdMob is an example) but right now is not a bad time to take what you can get and bail out either.

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