When I interviewed Julen Verea of AppFreak, an answer he gave to one of my questions took me by surprise. I asked Julen about what he was excited to see in tech in 2015, he replied as follows:
With the amount of high profile acquisitions last year such as WhatsApp or Minecraft, I want to see if this app bubble can keep the momentum.
In an interesting turn of events, two apps were purchased today in acquisitions that one could most certainly deem as high profile.
Shortly thereafter, a pair of even more breathtaking deals were reported. Premier diet-tracking and fitness apps MyFitnessPal and Endomondo were both bought by sports clothing manufacturer Under Armour for enormous figures: $475 million and $85 million, respectively.
Perhaps I shouldn't be surprised. Sunrise has a truly excellent collection of apps across platforms, MyFitnessPal has the largest digital fitness community built around its offerings and Endomondo's 20 million users aren't to be sniffed at, either.
We've also seen huge prices before, some dating way back: Remember when Microsoft paid $8.5 billion for Skype in 2011? In 2012, Zynga spent almost $200 million to buy OMGPOP in order to acquire social game Draw Something, Facebook bought Instagram for $1 billion in the same year with Apple spending around $50 million on Chomp and Twitter acquiring Vine before it even launched for a reported $30 million. In 2013, Dropbox dropped $50-$100 million on the Mailbox email app, Yahoo paid $30 million to get its hands on Summly's news summarization technologies (built by a then-17 year old Nick D'Alosio) and Google spent at least that amount acquiring file-transferring app Bump as well as almost $1 billion on traffic app Waze.
Last year, it continued. Flipboard bought competitor Zite for $60 million, Yahoo shelled out $80 million for Aviate — the smart Android homescreen app launcher — and it took Rakuten $900 million to purchase communications app Viber. The big guns were involved, too — Microsoft acquired Minecraft creator Mojang for $2.5 billion, Apple spent $3 billion to bring Beats under its wing including its cross-platform Beats Music apps and of course, most notably, Facebook proved there was no limit on app spending when it threw down $19 billion for messaging app WhatsApp.
I bring these examples from the last few years together in order to illustrate just how much money is changing hands for apps. When presented with the valuations of some of these companies, it's hard to argue against an "app bubble" apparently inflating prices. And there are many more examples I could have included.
However, at the same time, you could also question whether there is a bubble at all — maybe it's just business and in this increasingly mobile, increasingly valuable market, the stakes are high. In each case, there is a perceived value to the purchaser: be it talent, technology or user base. In each case it was a larger company picking off a smaller one whenever a decent product that fitted their goals or ambitions emerged. And in each case, the larger company made an offer that the smaller company chose to accept.
But the app market is a strange one. For every Sunrise or MyFitnessPal that is widely adopted, highly-rated and eventually bought out by a bigger fish, there are hundreds, thousands, of apps that never make a dime. And while the biggest tech companies continue to get larger, it becomes harder for independent creators to make a living. Consider a smartphone, for example, where the manufacturer or OS maker has pre-installed an app for every purpose. Would you need to head to the app store to download a third-party app? Most would be less inclined to do so.
We've been asking if the app bubble was about to burst since at least 2010. Just as Julen pondered it, I genuinely wonder if we are indeed in an app bubble that is about to burst or a growing market that will continue its momentum. Right now, following today's news, there's no reason to believe it won't be the latter.