The Mobile Bubble is Here

First and foremost, I'm not a naysayer or doomsayer. Also, I'm fully and painfully aware that another bubble burst is the last thing the U.S. economy needs. But it seems obvious to me that we are amidst a "Mobile" bubble.

For those of us with decent mid-term memory, it's pretty straight forward to draw parallels about the .com bubble of the late 1990's and the real estate bubble of the mid 2000's. For instance, circa 1998 any company or start-up with a .com in its name could easily secure funding, and a few months later an IPO would follow sending company valuation to the stratosphere, regardless of merit, intrinsic value, or business plan. A similar thing happened to the real estate market in the mid-2000's: any property (regardless of location, size, taxes, etc.) was a "hot commodity." People would make a business of buying overpriced homes and then turning around and "flipping" them for even more money. In the days of the .com bubble not only the Internet companies enjoyed this apparent largess of easy paper money, but also the infrastructure companies, streaming companies, fiber-optic companies, ISPs, etc. partook in the action. Same parallel can be drawn with the real estate bubble: not only the properties themselves became outrageously overpriced, but all the goods and services around it (landscaping, furniture, home builders, remodeling, etc.) went up and down with the whole sector.

Fast forward to 2010. With both iOS and Android platforms spearheading the mobile market, a new generation of entrepreneurs jumped on the mobile 'gold rush' bandwagon. Since then there have been rising stars of their own right (read: Angry Birds), "traditional" platform developers have migrated some of their apps to mobile platforms (e.g.: Adobe, EA, Autodesk, etc.) and there have been shooting stars and lots and lots of apps that have are in the abyss of obscurity -- even though some of these "forgotten" apps are quite good. Enter 2012. The explosive growth of mobile adoption continues: iOS and Android devices selling like hot cakes. Well established apps grow substantially in terms of users and (in some cases) revenue. The sector is running on all cylinders, the sky is the limit and all that jazz. Then, a pivotal event last month rattled the ground the mobile arena stands on: Facebook bought mobile vintage-photo app/service Instagram for a reported $1 billion. This acquisition immediately set alarms off in my head of over-valuation and the .com era where, as explained above, companies with no merit, revenue or business plan would fetch ridiculous amounts of money or market valuations and insane IPOs. So, I was already wary and a bit apprehensive that the mobile sector was, in fact, either heading towards or already inside a bubble. Then today I read the news that note-keeping mobile app/service Evernote has been price-tagged at a nifty $1 billion. If this is not a clear sign that the mobile sector is in a proverbial bubble, I'm not sure what is.

So, if you have money in the market (more specifically in the mobile sector) or where thinking about it, please be cautious and bear the information above in mind. Set some cash aside, move some capital to the bond market or precious metals, and so forth. Often, in a bubble market, the best investment is the one you avoid.