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July 28, 2014

Mobile Apps Show Us The Way, And The Money!

Posted by Puneet Gupta (View Profile | View All Posts) at 11:12 AM

Need a Lyft? Mobile-based ride sharing program expands [Source: http://www.youtube.com/watch?v=_2iriSELzmY]

I hear anecdotes, now and then, of enterprises that spend an inordinate amount of time and manpower developing apps rather than keeping their websites as technologically up-to-date as possible. Then I hear a snippet in the news about Uber and I know exactly why they're spending so much time on apps.

Uber, you see, is a wonderfully helpful app that does away with the pain and grief of trying to find a taxi in a congested city. Those of us who live in such places know that it used to be dreadful during rush hour to find an open car. But now, because of an app like Uber, you're connected to available cabs in your vicinity. Better still is that their drivers can bid on your trip - a bright spot among my daily frustrations of living in the urban jungle.

It seems that I'm not the only one who values this transportation service. Last week, Uber was valued at a whopping $18.2 billion. That's more than long-established car rental companies like Hertz and Avis. The remarkable valuation was established on a $1.2 billion round of fund-raising from investors. According to The Wall Street Journal, Uber's valuation has quadrupled in the past year and only one other company has raised more money at a higher valuation from private investors - the pre-IPO Facebook, in 2011.

So what is it about an app that is commanding such a level of monetary adoration from the capital markets? Well, Uber is a great app, but it's not alone in connecting available cars to clients. Lyft is coming on strong (to prove a point, no doubt) in Uber's home market of San Francisco. Plus, Uber has had a rocky start in some cities, especially where traditional competitors want it to be subject to the same regulations that conventional taxi services are.

Yet investors are confident that despite some difficult issues, Uber is an app that has a bright future. The reason, I think, is logistics. Most of us look at an app like Uber and see relief from a congested rush hour. But the investors who are validating Uber's impressive valuation see something more: the ability to fill those cars with more than just people but important documents and equipment as well. If it can fit in a car and needs to be transported from Point A to Point B, Uber can take care of it.

Think of what might keep a mega-retailer like Amazon up at night. It's got an amazing inventory, it tracks the wants and desires of an enormous customer base, and it dabbles in just about every consumer-friendly business. What it wants to improve is the rate at which it gets the merchandise to all those people. In that regard, I would imagine that a taxi service like Uber or Lyft would be of interest to a web retailer. It's probably why the China-based Alibaba has invested in such urban transport apps.

Plus, what we're starting to see here is a huge shift in the power and influence wielded by digital enterprises. The reason web retailers don't spend as much time tweaking their websites as they do their related apps is because of the extent to which the latter helps e-commerce. No web homepage is going to facilitate riders and packages in a city-based vehicle better than an app does. Remember how the big race used to be about advertising and page views? It still is, to be sure. But the big race also involves logistics - getting the stuff people want in the digital world into their actual hands. It's where the digital world is hitting the pavement.

That's why apps like Uber are becoming so valuable. Think about what is going to happen when the world's big enterprises want logistics solutions that get their wares into the often-complicated and multi-tiered emerging markets? That's where their next billion customers are going to come from, more or less. So it stands to reason that mobile apps that solve transportation and logistics issues for global corporations are going to be hot for years to come.

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