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What’s With the App Arms Race?

Facebook’s $2B purchase of Oculus VR last week made huge waves in the media, but that acquisition pales in comparison to their whopping $19B purchase of WhatsApp in February. By contrast, Instagram’s $1B pricetag seems like pocket change. App and app-creator shopping sprees have been making headlines lately, since Facebook  is by no means the only one waving plastic at the mobile industry. Google just gobbled up Bitspin (the startup behind Timely, a popular clock alarm app), after acquiring Bump Technologies (responsible for Bump, a phone info-sharing service) last September and smart home app-maker Nest for $3.2B in January. Along with this year’s buyout of Snappylabs, Apple bought 10 companies in 2013, including app makers Embark (public transportation), Cue (productivity) and Catch (note-taking).

So, what’s with the apps arms race?

By now everyone knows that mobile is the new desktop and then some. People sleep with their smartphones, pee with their smartphones and date with their smartphones. Smart marketers know to go where the people are, and so do the tech giants. Tools that assist with navigation, recommendations, organization, and news reading are ripe for everyday adoption, and once users make them a habit (this is where engagement and loyalty-building marketing tactics matter), that’s when advertising is the most effective. Facebook waited over a year before introducing advertising into the Instagram mix, and even now remains cautious about allowing full-on access, keeping its advertising partners to a small list (most notably, adidas, General Electric, Macy’s, PayPal and Michael Kors).

Instagram Ad

There are a few parallels between startup acquisition and mobile advertising, namely:

  • Culture fit. Startups are all about dynamic personality and intense drive. When a large company eats a small one, there are often clashes of philosophy.

Correlation: When you advertise to a new social media channel, you have to take your audience into account. Are you interrupting their day with content that doesn’t fit their lives and interests, or adding value to their mobile experience?

  • Brand integrity. When Facebook acquired Oculus VR, the Internet freaked out, fearing the company would lose its identity.

Correlation: Mobile advertising isn’t just about how your brand appears on the surface; it’s about communicating your company’s values — not only what you do, but why you do it. Consumers, especially millennials, have been shown to respond more positively to products with a social purpose.

  • Targeting. Major media companies acquire apps to gain and market to audiences they might not have been able to reach on their own.

Correlation: Instagram’s addition of sponsored content means brands can use parent company Facebook’s information on user interests and behavior to inform and optimize ad campaigns. Targeting users with relevant ads = happier users, happier users = higher ROI, and higher ROI = happier advertisers.

 

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