The Mobile Internet sector is proving to be one of the hottest sectors of growth in the tech industry. Whilst the exit of WhatsApp to Facebook is the most obvious manifestation of this upwards trend, new data from Digi Capital shows that this is merely the (impressively large) tip of the iceberg. The data released in Digi Capital’s report shows an astonishing leap from $9.3B in exit returns 2 years ago, to $13.7B the next year, to $93.7B in the last 12 months. This last jump represents a leap of almost 7x growth from the previous year, helping to show the enormous potential in this sector.
The hottest sectors within mobile internet were Messaging, Games and Social Networking. The Messaging sector saw the highest exit returns, with $25.8B, although Facebook’s acquisition of WhatsApp was responsible for $21.8B of that. The Games sector saw the next highest, with $18B in exit returns, and without the outlier of the WhatsApp acquisition, that makes it the strongest sector, closely followed by Social Networking which saw $17.7B in returns. As the below graph shows, 2 other sectors, Food & Drink and Lifestyle also made over $5B in exit returns, as well as another 9 sectors returning over $1B, showing that the current growth is spread between different sectors, and not just focussed on a few.
Multi-Billion dollar exits are obviously good headlines, but the VC and growth equity investors are more interested in the exit returns. Rather than purely looking at how many dollars are received, the important figures are the amount of dollars returned for every dollar invested. As the report states, early stage investors typically hold on to their investments for at least 3 years, and the 3 year average return on investment for mobile internet up to q3 2014 was 3.5x. As the below growth shows, however, in a number of sectors, including the aforementioned Messaging, social networking and Games areas, growth far exceeded this average.
Digi-Capital’s report ends with a quote from the Managing director of Digi-Capital, Tim Merel, which forecasts further good news for those investing in, or creating Mobile Internet companies. According to Merel, Digi-Capital’s analysis indicates that “the next 12 months could be even more rewarding”.