Global mobile app downloads business to pass US$15bn

26 Jan 2011

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Worldwide mobile application store downloads are forecast to reach 17.7bn downloads this year – up 117pc on the 8.2bn downloads last year, according to Gartner.

The analyst firm predicts that revenues from the sale of apps, as well as advertising, will reach US$15bn by the end of 2011.

By the end of 2014, Gartner forecast that more than 185bn applications will have been downloaded from mobile app stores, since the launch of the first one in July 2008.

Worldwide mobile application store revenue is projected to surpass $15.1bn in 2011, both from end users buying applications and applications themselves generating advertising revenue for their developers.

This is a 190pc increase from 2010 revenue of $5.2bn.

“Many are wondering if the app frenzy we have been witnessing is just a fashion, and, like many others, it shall pass. We do not think so," said Stephanie Baghdassarian, research director at Gartner.

“We strongly believe there is a sizable opportunity for application stores in the future. However, applications will have to grow up and deliver a superior experience to the one that a web-based app will be able to deliver.

“Native apps will survive the web enhancements only when they will provide a more personal and richer experience to the ‘vanilla’ experience that a web-based app will deliver,” Baghdassarian said.

The new app market players

Gartner analysts said the hype around application stores in 2009 continued through 2010 with alternative offerings to the Apple App Store gaining some traction.

Android Market, Nokia’s Ovi Store, Research In Motion’s (RIM’s) App World, Microsoft Marketplace and Samsung Apps are the key competitors that saw the number of application downloads grow in 2010.

Free downloads are forecast to account for 81pc of total mobile application store downloads in 2011.

This percentage has been decreasing since the first launches in 2008, and Gartner estimates free downloads will continue to decrease in 2011, but it will increase again from 2012 through 2014.

Users will begin paying for more applications as they perceive values in the concept of mobile applications, and they become more trustful of billing mechanisms.

In 2010, application stores’ revenue is estimated to have reached $5.2bn, both from end users buying applications and applications generating advertising revenue for their developers. The growth between 2010 and 2014 is forecast be more than 1,000pc.

Application stores’ revenue is split between the store owners (such as Apple, in the case of the App Store, or RIM, in the case of App World) and the application’s developer. The average revenue share is based on a 70/30 split, with 70pc going to the developer.

By the end of 2014, advertising will be generating a little less than a third of the revenue generated by application stores, up from 16pc in 2010.

“While the average number of downloads per device onto a smartphone will remain stable as the market grows, it must be assumed that media tablets will drive more downloads from consumers, boosting the overall average downloads per device,” said Carolina Milanesi, research vice-president at Gartner.

“We estimate that Apple’s App Store drove close to nine application downloads out of 10 in 2010 and will remain the single best-selling store across our forecast period (through 2014), although to a lesser extent, as other stores manage to gain momentum."

“Application stores have become a highly visible and potentially lucrative part of the smartphone ecosystem, largely due to Apple’s App Store. As well as promising revenue, application stores allow store owners to leverage innovation from a community outside their own R&D department,” Baghdassarian said.

“However, setting up a successful application store is far from simple. Application store owners need to rise to the challenges of attracting developers, organising content and engaging users throughout the life of the store in order to remain profitable,” she said.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com