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El-Erian Warns Investors “Stop Worrying About Return On Capital, Start Worrying About Return Of Capital”

El-Erian Warns Investors "Stop Worrying About Return On Capital, Start Worrying About Return Of Capital"

Mohamed A. El-Erian, President of Queens’ College, Cambridge University, and Chief Economic Advisor at Allianz, the corporate parent…

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El-Erian Warns Investors "Stop Worrying About Return On Capital, Start Worrying About Return Of Capital"

Mohamed A. El-Erian, President of Queens’ College, Cambridge University, and Chief Economic Advisor at Allianz, the corporate parent of PIMCO, where he previously served as CEO and co-CIO, argues in the following interview with Goldman Sachs' Allison Nathan that the Fed could be heading towards an historic monetary policy mistake by reacting too slowly to rising inflationary pressures.

Allison Nathan: At its latest meeting, the Fed watered down concerns about inflation, citing its transitory nature. Are you concerned Fed officials are too relaxed about the inflation outlook?

Mohamed El-Erian: Yes. While the data has forced the Fed to take a small step away from its narrative of transitory inflation, it continues to downplay the risk to the economy and the need for monetary policy changes. It seems to wish to hold on to a narrative of—take your pick—“extended transitory”, “persistently transitory” or “rolling transitory” inflation. I take issue with these characterizations because the whole point of transitory inflation is that it wouldn't last long enough to change behaviors on the ground. Yet wage-setting and price-setting behavior is already changing.

Allison Nathan: But aren't most of the underlying inflationary pressures, such as supply chain bottlenecks due to pandemic disruptions and labor shortages owing to extended unemployment benefits, likely to recede soon?

Mohamed El-Erian: The underlying cause of the current surge in inflationary pressure is deficient aggregate supply relative to aggregate demand. Part of that will likely prove transitory as the pandemic continues to recede and factories in Asia ramp up production. But part of it will likely prove more persistent due to longer-term structural changes in the economy. Company after company is rewiring their supply chain to prioritize resilience over efficiency. US labor force participation is stuck at a low 61.6% even as unemployment benefits have expired, suggesting that people’s propensity to work may have changed. So, there are longer-term structural and secular elements to the rise in inflation. And I’m concerned that if the Fed doesn’t do enough to respond to these secular inflation trends, it risks deanchoring inflation expectations and causing unnecessary economic and social damage that would hit the most vulnerable segments of our society particularly hard.

Allison Nathan: Inflation expectations so far seem to be fairly well anchored, so how much of a risk is that really?

Mohamed El-Erian: Survey-based inflation expectations are not well anchored; both short and long-term expectations compiled by the New York Federal Reserve have already risen above 4%. Companies are warning about inflationary pressures well into next year and potentially beyond. Market-based expectations remain better anchored for now, but the information content of fixed income markets has become highly distorted by the presence of a large non-commercial buyer—the Fed—that has incredible willingness to buy regardless of valuation. I think of this in the same way that I think about one of my favorite board games—Risk. When everybody on the board is playing according to the rules of the game, you can assess the probabilities of other players’ actions under certain conditions and fairly accurately predict their behavior. But when one very big player plays according to different rules, you’d adapt your behavior or you’d lose. That’s what’s happening in fixed income markets; market participants understand and respect that they will be steamrolled—as they have been time and time again— by taking the other side of massive Fed asset purchases, even when they’re convinced of a fundamental mispricing. So, I would be careful in relying on the usual market measures to gauge inflation expectations, as we don’t know how much to adjust for the distortions that the Fed has introduced.

Allison Nathan: Given the above, you believe that the Fed could be heading for an historic policy mistake. What should the Fed be doing versus what they are most likely to do?

Mohamed El-Erian: Simply put, the Fed faces a choice between easing off the accelerator now or slamming on the brakes down the road. It should’ve starting easing its foot off the monetary stimulus accelerator months ago. I’ve argued for some time that it had a big window of opportunity to start tapering asset purchases in the spring, when growth was very strong and the collateral damage from maintaining emergency levels of liquidity in a non-emergency world was becoming apparent. But, inertia, inflation miscalculations and a new policy framework that was designed for a world of deficient aggregate demand rather than today’s world of deficient aggregate supply led them to wait until earlier this month to announce the start of tapering. In doing so, the Fed has fallen behind the reality of inflationary pressures on the ground that are being picked up by the regional Feds. While it is now starting to act, it’s moving too slowly, as evidenced by the growing gap between its policy action and the rise in inflation expectations. So the Fed’s delayed and slow reaction to inflationary pressures has unfortunately increased the probability that it will have to slam on the brakes by raising rates very quickly after tapering and at a more aggressive pace than it would have if it had started to tighten policy earlier. Such a scenario would constitute an historic policy mistake because, after a bout of inflation that most hurts the poor, the economy would risk an undue blow to growth from a sharper tightening relative to what the economy can absorb.

Allison Nathan: But isn’t the Fed right to wait to act given that demand is expected to slow significantly next year as fiscal stimulus winds down? Wouldn’t it be harmful to put  contractionary monetary policy in place at the same time as contractionary fiscal policy?

Mohamed El-Erian: That’s exactly the wrong policy framing, especially given that we're starting from emergency-level loose monetary policy. By waiting to act, the Fed will end up tightening at the same time as fiscal policy is tightening and household savings are drawing down. Financial conditions could also tighten and business investment decline simultaneously too. That’s precisely why the Fed should have moved earlier, so that relatively tighter monetary policy doesn’t run headlong into multiple other sources of tightening, which risks pushing the economy into a recession. While I don’t expect a recession in my baseline scenario, the Fed’s slow pace of policy normalization could mean that growth will be lower than it would’ve otherwise been had the Fed started tightening earlier.

Allison Nathan: But won’t the significant contraction in fiscal policy slow inflation even without monetary policy normalization?

Mohamed El-Erian: If initial conditions were near an equilibrium, I would say yes. But they’re not—monetary policy is still being run in emergency mode even as the emergency has passed. Even though the Fed is beginning to taper, it’s still buying tens of billions of dollars of securities every month, about a third of which are mortgage-backed securities. I don’t know a single person who believes the US housing market needs such broad-based policy stimulus. On the contrary, the housing market is so hot that an increasing number of Americans are being priced out of it. And the longer the emergency policy stance continues without an actual emergency, the greater the risk that the Fed does end up having to slam on the brakes and, in doing so, create unnecessary damage—i.e., a new recession.

Allison Nathan: How effective would rate hikes even be in dampening the current inflationary pressures, which stem in part from supply shortages?

Mohamed El-Erian: I am sorry, but the framing of the question is misleading. Instead, we should be asking, “is the current mix of large monthly asset purchases, floored at zero interest rates, and monetary policy in emergency mode going to resolve the supply-side issues?” The answer is, no. We should then ask, “so why should the Fed still be running policy in emergency mode?” The answer is, it shouldn’t be. And, finally, we should ask “what’s the cost of continuing to do so?” The answer is:

One, there’s very little evidence that the current stance of monetary policy is helping on the demand side, and even if it were, demand is not the problem.

So, by trying to help, the Fed is actually hurting, while also worsening wealth inequality.

Two, the significant amount of liquidity the Fed has pumped into the system is increasing the probability of a market accident by forcing investors to take more risk in search of returns.

Near accidents have occurred already this year—think of GameStop/hedge funds and Archegos—which we’re lucky didn’t have systemic effects.

And three, the Fed's unnecessarily accommodative policy is encouraging massive resource misallocation.

Just think of all the zombie companies that are surviving only because they’ve been able to refinance themselves at very low rates. The longer this continues, the  greater the drag on longer-term productivity and the more damage there will be when rates eventually rise.

Allison Nathan: What do you make of the recent sharp moves in G10 front-end rates, and how would you advise fixed income investors to navigate these moves?

Mohamed El-Erian: I’m really glad I’m no longer managing fixed income bond funds because technicals rather than macro fundamentals are ruling the fixed income markets right now, leading to these outsized moves. And, unless you are a trader that actually sees these flows, the environment is extremely difficult to navigate. I will say that the violent repricing following the Bank of England’s (BoE) recent decision to keep rates on hold was an instance of the market getting ahead of itself on pricing in rate hikes. It’s true that the BoE had signaled an intention to raise rates in coming months. But in the context of hawkish commentary and moves from central banks in Canada, Australia, and New Zealand, markets mistakenly lumped the UK together with these small, open economies that have no choice but to move ahead of the much larger, less open economies of the US and EU in raising rates. And, in fact, the UK has some very peculiar characteristics that have to be taken into account, like the furlough scheme and Brexit-related labor issues, which clearly distinguish it from these other cases.

Allison Nathan: In the midst of the current inflationary pressures and associated policy actions, equity markets, especially in the US, have been hitting new highs. What’s behind that, and do you see a risk of a correction given your concerns about the economic outlook?

Mohamed El-Erian: What’s happening in the equity market was recently captured perfectly by the legendary investor Leon Cooperman, who, when asked how he was positioned, responded that he's a “fully invested bear”. He's bearish on the fundamentals—with the view that valuations are too high—but he's fully invested in terms of technicals, and liquidity technicals in particular. The equity market is in a rational bubble; investors are fully aware asset prices are quite high, but they’re in a relative valuation paradigm in which it makes sense to be invested in equities rather than in other assets. The fixed income market is distorted and one-sided in terms of risk-return, dominated by technicals, and an unreliable diversifier in the current environment where its long-standing correlation with other financial assets has broken down. Many investors can’t invest in private credit, venture capital, or private equity, and are hesitant to delve into crypto. That leaves the equity market as the “cleanest dirty shirt” for investors. That works very well as long as the paradigm is a relative valuation one rather than an absolute valuation one, and markets will likely remain in this paradigm for a while. But investors need to respect that they’re riding a huge liquidity wave thanks to the Fed, and that wave will eventually break as monetary stimulus winds down. So investors should keep an eye on the risk of an abrupt shift from a relative valuation market mindset to an absolute valuation one, or an environment in which you stop worrying about the return on your capital and start worrying about the return of your capital. That’s a risk to watch because not only would it mean higher volatility, but also, and most critically, an undue hit to the real economy.

Tyler Durden Thu, 11/18/2021 - 14:45

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What Are the Advantages of Wind Energy and Solar Energy?

Wind power and solar power are considered the two primary choices for clean energy.As clean technologies, both solar energy and wind power significantly decrease pollution and have minimal operational costs. These are attractive reasons to make the switch

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Wind power and solar power are considered the two primary choices for clean energy.

As clean technologies, both solar energy and wind power significantly decrease pollution and have minimal operational costs. These are attractive reasons to make the switch to clean energy solutions — but there's certainly more to wind and solar energy than that.

Here the Investing News Network provides a brief introduction to wind energy and solar energy, from the advantages of renewable energy to the future outlook for these clean energy technologies.


What are wind energy and solar energy?


Putting it simply, wind energy is the process of using the air flowing through wind turbines to automatically generate power by converting the kinetic energy in wind into mechanical power.

Wind energy can provide electricity for utility grids and homes, and can be used to charge batteries and pump water. The three main kinds of wind power are broken down as follows by the American Wind Energy Association:

  • Utility-scale wind: Wind turbines bigger than 100 kilowatts that deliver electricity to power grids and end users via electric utilities or power system operators.
  • Distributed wind: Wind turbines smaller than 100 kilowatts that are used to directly provide power to homes, farms or small businesses.
  • Offshore wind: Wind turbines placed in large bodies of water, generally on the continental shelf.

Interestingly, wind energy can also be considered an indirect form of solar energy. That's because winds are widely described as being caused by the uneven heating of the atmosphere by the sun, the irregularities of the Earth's surface and rotation of the Earth.

Solar power is energy derived from the sun's rays and then converted into thermal or electrical energy.

According to the Solar Energy Industries Association, solar energy can be created in the following three ways: photovoltaics, solar heating and cooling and concentrating solar power.

  • Photovoltaics: Generates electricity directly from sunlight via an electronic process to power small electronics, road signs, homes and large commercial businesses.
  • Solar heating and cooling: Uses the heat generated by the sun to provide water heating or space heating and cooling.
  • Concentrating solar power: Uses the heat generated by the sun to run traditional electricity-generating turbines.

What are the advantages of wind energy and solar energy?


With the basics of wind and solar energy in mind, let's look at the advantages of these two clean energy sources.

As carbon-free, renewable energy sources, wind and solar can help reduce the world's dependence on oil and gas. These carbon fuels are responsible for harmful greenhouse gas emissions that affect air, water and soil quality, and contribute to environmental degradation and climate change.

Aside from that, wind and solar energy can give homeowners and businesses the ability to generate and store electricity onsite, giving them backup power when their needs cannot be filled by the traditional utilities grid.

For example, during California's most recent wildfire season, large-scale utilities companies such as PG&E (NYSE:PCG) shut off power to tens of thousands of people in an effort to prevent fires like those linked to downed power lines. In cases like this, solar energy generated onsite could not only help fight climate change, but also act as a reliable backup source of energy.

Solar panel installations are easy to do and can also create energy bill savings. In some regions, users may qualify for tax breaks or energy rebates if they produce excess energy that can be delivered to the utility grid. In Canada, there are at least 78 clean energy incentive programs available that offer a combined total of 285 energy-efficiency rebates and 27 renewable energy rebates.

Both solar energy and wind energy are on the path to becoming the world's most affordable sources of energy.

"Land-based utility-scale wind is one of the lowest-priced energy sources available today, costing 1-2 cents per kilowatt-hour (kWh) after the production tax credit," according to the US Department of Energy. "Because the electricity from wind farms is sold at a fixed price over a long period of time (e.g. 20+ years) and its fuel is free, wind energy mitigates the price uncertainty that fuel costs add to traditional sources of energy."

The price of harnessing the sun's power is dropping each year due to technology advancements. In fact, the cost of residential photovoltaic solar power has slid from US$0.50 per kWh in 2010 to US$0.128 per kWh in 2020, according to US Department of Energy figures. The US agency estimates that solar costs will fall further to US$0.05 by 2030. On a grander scale, utility photovoltaic costs already sat at only US$0.045 as of 2020.

Future outlook for wind energy and solar energy


Looking ahead for wind energy, the Global Wind Energy Council estimates that 435 gigawatts (GW) of new capacity will be added from 2021 to 2025. Government support will be a key driver, giving way to market-based growth.

"The world needs to be installing an average of 180 GW of new wind energy every year to limit global warming to well below 2°C above pre-industrial levels," state the report's authors, "and will need to install up to 280 GW annually from 2030 onwards to maintain a pathway compliant with meeting net zero by 2050."

As for solar energy, the International Energy Association's (IEA) World Energy Outlook 2021 report pegs solar as now cheaper than coal. Along with wind energy, solar energy is expected to make up 80 percent of the global electric energy market by 2030. "Since 2016, global investment in the power sector has consistently been higher than in oil and gas supply," explains the IEA report. "The faster that clean energy transitions proceed, the wider this gap becomes, and as a result electricity becomes the central arena for energy-related financial transactions."

Lux Research predicts that the transition from fossil fuels to renewable energy sources will be accelerated by several years due to the impact COVID-19 is having on energy markets all over the world.

The firm notes that economic relief packages contain trillions of dollars for renewable energy technology research and development, and for the deployment of low- and zero-carbon infrastructure. By 2025, Lux sees COVID-19 resulting in accelerated investment in energy storage and power-generation projects.

Ways to invest in wind and solar energy


There are many investment opportunities in the renewable energy markets.

For investors interested in wind energy, there is the First Trust ISE Global Wind Energy Index Fund (ARCA:FAN), which was created on June 16, 2008. It tracks 50 holdings, including wind energy giants Vestas Wind Systems (OTC Pink:VWSYF), Boralex (TSX:BLX) and Siemens Gamesa Renewable Energy (OTC Pink:GCTAF), to name a few.

Our list of renewable energy stocks on the TSX may also be worth considering.

This is an updated version of an article first published by the Investing News Network in 2018.

Don't forget to follow us @INN_Technology for real-time news updates!

Securities Disclosure: I, Melissa Pistlli, hold no direct investment interest in any company mentioned in this article.

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TechCrunch+ roundup: Credit Karma post-exit, recruiting developers, re:Invent recap

The very day in Feb. 2020 that Credit Karma planned to announce that it had been acquired by Intuit for over $7 billion, the stock market tanked, spooked by news that a virus could start a pandemic.

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The same day in February 2020 that Credit Karma planned to announce that it had been acquired by Intuit for more than $7 billion, the stock market tanked, spooked by news that a novel virus had the potential to start a pandemic.

“I’m up at 5 o’clock in the morning, the Dow is flashing red … and we’re all like, ‘Are we going to do this?’” said Credit Karma CEO Ken Lin.

That deal eventually closed in December 2020, but in the intervening months, the U.S. Department of Justice forced the company to divest its tax business, and credit markets tightened considerably.


Full TechCrunch+ articles are only available to members
Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription


Fintech reporter Ryan Lawler interviewed Lin, Intuit CEO Sasan Goodarzi, Credit Karma’s chief people officer Colleen McCreary and other executives to learn about how they weathered COVID-19 and divestment while simultaneously crafting a new management structure.

“What had been a very profitable business for a very long time is all of a sudden very unprofitable, because you can’t pivot on a dime,” said Lin. “We had a lot of decisions to make.”

Thanks very much for reading,

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

Samsara could become a decacorn in upcoming IoT-themed IPO

Initially founded to create wireless sensors, IoT platform company Samsara reached a $3.6 billion valuation in 2018, but its latest S-1/A filing could boost that “from $10.1 billion to $11.6 billion,” reports Alex Wilhelm in today’s edition of The Exchange.

Two weeks ago, he delved into the company’s inner workings, but “today, we’re more interested in the resulting numbers, not how they were achieved.”

AWS re:Invent 2021 was more incremental than innovative

AWS re:Invent 2021

Image Credits: Amazon

We’re used to Amazon making news: it’s the world’s third-largest company, and its founder is planning to build his own private space station.

But at last week’s re:Invent, the annual conference for AWS customers, “it felt more like Amazon was checking boxes and filling in holes in the product road map,” writes enterprise reporter Ron Miller.

After going virtual in 2020, this year’s in-person return to Las Vegas saw updates from incoming CEO Adam Selipsky, CTO Werner Vogels and others, but “nothing came out of the 2021 re:Invent that felt really cool.”

A few highlights: AWS unveiled the Gravitron 3, its latest Arm-based processor, along with re:Post, a managed Q&A service that replaces AWS forums, and Amplify Study, a no-code/low-code service for devs building cloud-connected applications.

But notably, “this is the first re:Invent in a long time where AWS did not announce a new database,” said Holger Mueller, an analyst at Constellation Research.

Ron’s recap of the week’s announcements — and the lack thereof — points to a company in transition: “Perhaps Amazon is becoming a bit more like Apple.”

Essential steps to thriving and surviving while fundraising

Close-Up Of Eyeglasses Against Grassy Field

Image Credits: Nilou Van Soest/EyeEm (opens in a new window) / Getty Images

For a founder, raising seed money can be the hardest part of the puzzle, and depending on the sector, can take dozens of weeks to accomplish.

A data-driven approach to the process, however, can help founders tackle fundraising efficiently while minimizing headaches, writes Russ Heddleston, CEO of DocSend.

“Having very clear data on where VCs focus their time on pitch decks or in meetings will guide you to deliver a finely tuned pitch to the right investor.”

3 ways to recruit engineers who fly under LinkedIn’s radar

Close-up of binoculars on table by the sea during sunset, the sunset is reflected in the glass of the binoculars (Close-up of binoculars on table by the sea during sunset, the sunset is reflected in the glass of the binoculars, ASCII, 113 components,

Image Credits: the_burtons (opens in a new window) / Getty Images

Last week’s announcement by LinkedIn that it would start offering its services in Hindi highlights a problem facing startups trying to recruit software developers — many of them don’t use the platform.

Potential hires who live in emerging markets are less likely to use LinkedIn, but a lot of devs just don’t take a strong interest in building their brands on social media.

Making an effort to meet developers where they are will help your company as an attractive place to work, writes Sergiu Matei, founder of Index.

In a TechCrunch+ post, he shares three tips you can use to attract engineers in an increasingly competitive market:

  • Open up your content, chats and code
  • Make EQ, not IQ, your hiring criteria
  • Say “yes” to more candidates

SenseTime’s IPO to test market demand for high-growth, high-loss shares in Hong Kong

The market is ripe for AI companies to go public, but for SenseTime’s Hong Kong IPO, demand may be less than that of the wider market, writes Alex Wilhelm.

The company’s new IPO target of up to HK$5.99 billion (US$768 million) is a far cry from its previous $2 billion IPO, possibly reflecting the fact that investors aren’t excited about its steadily increasing losses, Alex writes.

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App stores to see record consumer spend of $133 billion in 2021, 143.6 billion new app installs

The app economy will again set new records in 2021. According to a review of the global app ecosystem in 2021 by Sensor Tower, released today, first-time app installs grew to 143.6 billion during the year, a half percentage point higher than 2020, but…

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The app economy will again set new records in 2021. According to a review of the global app ecosystem in 2021 by Sensor Tower, released today, first-time app installs grew to 143.6 billion during the year, a half percentage point higher than 2020, but consumer spending in apps is up a much larger 19.7% year over year to reach $133 billion. This includes spending on in-app purchases, premium apps and subscriptions across both the Apple App Store and Google Play, but excludes third-party app stores, like those in China.

Image Credits: Sensor Tower

This growth is nearly in line with the growth seen in 2020 when consumer spending jumped 21% to reach $111.1 billion, Sensor Tower noted.

That the growth continued along the same lines this year is notable because, of course, 2020 had seen the world grappling with the immediate impacts of the COVID-19 pandemic that forced consumers to work from home, shop online, virtually connect with friends, stream more entertainment content and attend classes online, amid other behavioral shifts. These changes had played out in terms of consumer app usage and spending in 2020. Global app revenue had rocketed to $50 billion during the first half of 2020, in part due to how the pandemic was impacting the world of mobile apps, TechCrunch had reported at the time.

Image Credits: Sensor Tower

There were some early signals that these pandemic-driven shifts in consumer spending would outlast the COVID-19 government lockdowns seen in 2020 to continue to impact 2021 mobile trends. In the U.S., for example, consumer spending on iPhone apps was on track to reach an average of $180 in 2021, up from $136 last year, the firm had also said. It ended up at $165, we’re told, however. And consumer spending during the first half of 2021 was already hitting new records, with a global total of $64.9 billion.

Today, Sensor Tower reports the record $133 billion in global spend includes $85.1 billion in App Store spending, up 17.7% year over year from the $72.3 billion spent in 2020. It also includes $47.9 billion in Google Play consumer spend, up 23.5% from the $38.8 billion spent in 2020. The App Store continues to outpace Google Play with around 1.8 times the revenue, which is in line with previous years.

Outside of games, the app to pull in the most global revenue in 2021 was TikTok, including its Chinese counterpart, Douyin. Combined, the different iterations of ByteDance’s short-form video app passed $2 billion in revenue during the first 11 months of 2021 and is on track to reach $2.3 billion by year-end. That will bring its lifetime total to $3.8 billion.

The app also topped App Store’s charts in terms of global spending, but on Google Play, TikTok was only the No. 4 app by consumer spending. Google’s own Google One subscription was No. 1. By the end of this year, Google One will reach $1 billion in consumer spending, up 123% from $448.5 million in 2020.

Image Credits: Sensor Tower

Meanwhile, global app downloads are beginning to plateau. While overall, the figures inched up 0.5% year over year from 142.9 billion in 2020 to 143.6 billion, this was mainly due to growth in Android app downloads on Google Play. Installs there grew 2.6% year over year to reach 111.3 billion, up from 108.5 billion in 2020.

But Apple’s App Store saw new app installs drop. This year, downloads will have declined 6.1% from 34.4 billion in 2020 to 32.3 billion, Sensor Tower estimates.

TikTok remained the most-downloaded app with 745.9 million global installs, despite a drop from the 980.7 million installs it saw in 2020. (Apple had also recently confirmed TikTok was the top U.S. download of the year on its Free iPhone Apps chart, for what it’s worth.) On Google Play, Facebook topped the charts with 500.9 million installs, demonstrating the social networking app’s ability to gain traction in a number of emerging markets where Android is more popular. But across both app stores, Facebook will see 624.9 million installs in 2021, down 12% year over year from 707.8 million in 2020.

Image Credits: Sensor Tower

Mobile games continue to pull in the lions’ share of global app revenue, as in previous years. In 2021, mobile game spending will reach $89.6 billion across the App Store and Google Play, up 12.6% year over year from the $79.6 billion spent in 2020.

But in an ongoing trend, gaming’s slice of the overall pie is shrinking. In 2019, games accounted for 74.1% of all app spending, which dropped to 71.7% in 2020. This year, they’ve fallen again, representing just 67.4% of all in-app spending. This shift is due to the rise of subscription-based apps outside of games, and this year, particularly the growth in streaming and Entertainment apps, which have financially benefitted from the pandemic.

Image Credits: Sensor Tower

On the App Store, games will account for $52.3 billion in consumer spending this year, up 9.9% from 2020. The gaming market on iOS is led by Tencent’s Honor of Kings, which generated $2.9 billion on iOS, up 16% from the $2.5 billion it saw last year.

On Google Play, the highest-grossing title is again Moon Active’s Coin Master, up 13% year over year to reach nearly $912 million. Overall, games on Google Play will generate $37.3 billion in global spending, up 16.6% year over year from $32 billion in 2020.

Image Credits: Sensor Tower

Game installs, like the rest of mobile app installs, declined year over year on the App Store, going from 10.1 billion in 2020 to 8.6 billion this year. PUBG Mobile, including the Chinese version Game of Peace, grabbed the most downloads (47.5 million). On Google Play, game installs grew 1.3% from 46.1 billion last year to 46.7 billion this year, with Garena Free Fire pulling in the most downloads (218.8 million).

To some extent, this year’s trends saw a bit of normalization after an unusual burst of activity in 2020. But other trends have remained the same — like the shrinking slice of consumer spend attributed to games, for instance, or how Android continually beats iOS on downloads but not on revenue.

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