Profitability goes missing

Life360, the family tracking app, may be growing strongly, but it faces stiff competition

- GRAHAM WITCOMB

A wonder of the modern world that most of us take for granted is how difficult it is to get lost anymore. At almost all times, you can pinpoint your location with your phone's GPS.

Life360 is at the apex of what location data can do. Founded in 2007, the company provides a mobile app designed around the location-sharing needs of families - say, knowing when the kids get home from school or whether your teen was speeding when they borrowed the car.

The app is free and Life360 now has more than 36 million monthly active users, around two-thirds of whom are in the US. The company's share price is down about 60% this year to date.

The opportunity goes like this: Life360 needs almost no capital to operate - it's just a collection of geeky software engineers, laptops and a marketing budget. Salaries make up more than half of total expenses.

This is a company growing quickly. Premium subscription options - with features like disaster response and travel support - generated $US112 million ($158 million) in the year to December, three times what they did in 2018. December's annualised monthly revenue was up 51% compared with the previous year.

Software can scale beautifully: you don't need twice as many software engineers to serve twice as many users, so profits can grow faster than revenue..

So far, Life360 has done a good job of monetising its user base, particularly given various free alternatives. It earned $US86 million of direct subscription revenue last year and it spruced that up with a further $US25 million of indirect revenue from advertising, data sales, and so on. After deducting expenses, the company recorded an underlying operating loss of $US13 million.