Two things matter in mobile: audience and data. SnapChat has audience.

  1. Audience matters because consumers are using fewer and fewer applications on their mobile devices. Brands can no longer pursue a “destination” strategy and expect consumers will come to them. They need to go engage consumers where they are. Facebook’s acquisition of WhatsApp for $19B gave us a sense of just how valuable audience depth, reach and usage is.

  2. Data matters because it helps us simplify or improve mobile experiences by anticipating the needs of customers or to improve the value of advertising – if you are monetizing your app that way. Under Armour just paid $475M for MyFitnessPal for the audience, food database and personal data.

Consumers have a decreasing attention span for new apps, but they will download and use individual apps that offer them something unique. SnapChat has proven with their audience growth and usage, that they do that. What they offer is more akin to a conversation than most digital communication that boasts cloud storage. I say something or share a photo. It’s there in the ether for those I trust to consume. Then it is gone.

What most people tend to focus on is the valuations. Why so high? In the past, valuations have been based on projected free cash flows. More dynamics are in play here.

Despite millions of apps and billions of phones, territory or space on a mobile phone is more like an island than outer space. Space within consumers’ attention span or bandwidth and home screens is more limited. Scarcity of property drives up valuations. There isn’t unlimited territory in which to expand. Properties are being bought up and established quickly. They range from maps, email and IM to wallets, home and health or wellness. The race is on to own the audiences … and the data.

Companies that invest or buy large audiences are buying scarce property and options on future value. How these audiences will be monetized is still somewhat unknown. Advertising alone won’t justify it. Scarcity of IPO’s is also in play.

These large property holders on the mobile island are counting on the fact that hundreds or thousands of enterprises will rely upon them to reach their customers. The future value is still really unknown.