There aren’t too many sure things...especially in 2016.
One sure thing, however, has been increasing in value over the last 20 years with far better consistency than any other asset class.
It’s been less volatile than stocks, gold, real estate, and even bonds.
Yet it has far surpassed them in value growth too.
Looking at the long-term historical trend and some new innovations, it’s valuation is set to rise even faster in the months and years ahead.
The Big Winner of 2016
The asset I’m referring to is you.
That’s right -- you.
I’m not talking in self-help terms. Invest in yourself and all that.
I’m talking about the value of you as a customer.
Tech companies are focused on almost exclusively on your value to them and how to increase it.
As you’ll see, they’ve done a great job so far. But the real growth (and profits for investors) is just starting to come.
Let me explain.
Today’s top tech companies have grown their user base as much as they can.
Facebook has 1.5 billion users. Google’s over 1 billion.
There just isn’t much growth left in getting more users.
For them to grow significantly from here, they have to focus on “monetizing” their users better.
Consider these examples of how increasingly valuable you have become and then look at how much growth potential is still to come.
We’ll start with Google. It’s entire business has been built on turning users into money.
It’s primary business is still search.
In exchange for providing free web searches, it shows you ads.
It sells ads based on cost-per-click (CPC).
If you click on an ad, Google gets paid.
As a result, they and the marketers buying those ads are driven to make sure they are both valuable and targeted.
Improving the effectiveness and targeting of the ads is where Google has been successfully growing its business over the years.
The aggregate price paid per click by advertisers was 40 cents back in 2006.
Over the next decade the aggregate click tripled to $1.20 by 2015.
The user base has grown over that time. But the real increase has come from making more money from it’s user base.
From an investor’s perspective, a quick comparison shows how important this is.
Google IPO’d for a split-adjusted $45 per share a decade ago. Today it’s more than than $700.
Yahoo, the former search and Internet giant, hasn’t been able to do nearly as well. And it’s why Yahoo was $20 a share 15 years ago and (after subtracting its $30 billion stake in Alibaba) is trading for $7 a share today.
That example right there is why top tech companies are focusing on you. Well, technically getting more ad revenue from you. But still you.
They know there’s so much room to increase this value.
Now, take Facebook.
It had 1.2 billion monthly average users in 2013. It generated $7.8 billion in revenue that year. It’s average revenue per user was $6.50.
Last year it averaged 1.55 billion monthly average users. It generated $17.9 billion in revenues. It’s average revenue per user $11.55.
That’s a big jump in revenue from $7.8 billion to $17.9 billion -- 129% total growth.
But here’s the thing. The user base only grew 29% over that period. The revenue value per user was where the real growth was at 77%.
Basically, three quarters of Facebook’s growth came from making more money per user.
Facebook isn’t alone here either.
LinkedIn is another example.
It’s user base has been flat over the past few years. It’s monthly average unique users was at 106 million in 2012 and it’s about 100 million last year.
However, the revenue it has been able to generate per user has exploded.
In 2012 it was less than $7. Last year it passed $28.
Pretty much all of LinkedIn’s growth came from making it’s users more valuable.
It’s a simple concept. But it’s also wildly important to the next stage of the tech industry’s growth and an indicator of where you should be putting some investment dollars.
Tech Trends 2016: More Evolution, Less Revolution
This uptrend in user value is one that’s been growing for years.
It’s growth will continue and could probably accelerate faster than most investors believe right now.
The use of Big Data, machine learning, and additional services will propel the annual revenue per user higher in the years ahead.
And there’s a lot of room to grow too.
Google is the early leader in making its users more valuable. Last year it generated an average of $59 of revenue from each of its 1.3 billion users. That will increase next year and the year after.
Facebook, LinkedIn, and many others are still at a fraction of that level.
They and many like them could catch up quickly to Google.
If you’re a user, you will benefit from your increased value as a customer in the years ahead.
If you’re an investor looking for sizeable and predictable growth, the companies which can increase the value of their user bases fastest will provide it.