Mobile App Revenue Soaring, Although Most Are Free

Worldwide mobile application revenue is expected to reach $6.8 billion in 2010, before soaring to $29.5 billion in 2013, Gartner said in a new report. Advertising profits are also expected to climb, even as eight out of 10 downloaded apps will be free to end users.

Mobile application stores will continue to draw in customers and drive up profits, according to new report from Gartner.

The firm expects that in 2010, consumers will spend $6.2 billion in mobile application stores, while advertising revenue in app stores is expected to generate $0.6 billion worldwide.

"As smartphones grow in popularity and application stores become the focus for several players in the value chain, more consumers will experiment with application downloads," said Stephanie Baghdassarian, a Gartner research director, in a Jan. 18 statement on the report.

"Games remain the [No. 1] application, and mobile shopping, social networking, utilities and productivity tools continue to grow and attract increasing amounts of money," Baghdassarian continued.

Mobile application downloads are expected to grow from 2.5 million in 2009 to more than 4.5 million in 2010 and 21.6 million in 2013.

Worldwide application store revenue, which exceeded $4.24 billion in 2009, is expected to grow to more than $6.78 billion in 2010 and to $29.5 billion in 2013. And still, Gartner expects that eight out of 10 applications downloaded in 2010 will be available free to end users.

Applications can be free to consumers, while charging for other things within the application, Gartner explained. Some free applications may charge for physical goods delivered through the application, while others collect revenue through advertising, such as showing banners or other advertisements between game levels.

"Growth in smartphone sales will not necessarily mean that consumers will spend more money, but it will widen the addressable market for an offering that will be advertising-funded," said Baghdassarian. "The value chain of the application stores will evolve as rules are set and broken in an attempt to find the most profitable business model for all parties involved."

Apple's App Store, which set the precedent for the mobile app phenomenon, leads the app market by far, with well over 100,000 applications.

Google has done quick work of building up its Android Market, which as of December had more than 16,000 applications, according to Tech Crunch, which said it got the figure from Google.

Nokia, Microsoft, Research In Motion, Palm and even Samsung have been furiously working to increase the numbers of applications in their app stores, which have become a major competitive factor driving smartphone sales.

"Application stores will be a core focus throughout 2010 for the mobile industry, and applications themselves will help determine the winner among mobile device platforms," said Gartner's Carolina Milanesi, in the statement.

"Consumers will have a wide choice of stores and will seek the ones that make it easy for them to discover applications they are interested in and make it easy to pay for them when they have to," Milanesi continued. "Developers will have to consider carefully not only which platform to support, but also which store to promote their applications in."