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Mobile App Profits to Soar $58 Billion

Mobile App Profits to Soar $58 Billion

Worldwide revenue from mobile applications downloaded from a variety of online stores for smartphones and tablets is expected increase more than tenfold in the next three years, reaching $58 billion, a research firm says.

The projected growth in revenue and number of downloads is an indication that mobile apps found on Apple's App Store, the Android Market and other stores are not a fad.

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

Gartner believes that the number of downloads will reach 17.7 billion this year, which will generate $15.1 billion through people buying the applications and through advertising embedded in the app. The revenue increase will be 190 per cent higher than the $5.2 billion in 2010, while the number of downloads will rise 117 per cent from last year's 8.2 billion. The rapid increase will continue through 2014, when revenue will reach $58 billion.

Apple launched its App Store for the iPhone in 2008. The online store's success has brought plenty of competitors, including the Android Market, Nokia's Ovi Store, Research In Motion's App World, the Microsoft Marketplace, and Samsung Apps.

The rise in app popularity is making it possible for developers to introduce several different business models to make money, including paid downloads, advertising and in-app purchases. Gartner expects users to become more willing over time to pay for more applications, as they see more value in mobile applications and become more trustful of billing mechanisms.

Application stores today typically take 30 per cent of revenue from applications, with developers keeping the remaining 70 per cent. Advertising accounted for 16 per cent of total revenue last year and is expected to rise to just under a third by the end of 2014, Gartner says.

Apple has ruled the market since launching the App Store and accounted for nine in 10 downloads last year. Gartner expects Apple's store to remain the market leader through 2014, although it will lose some share to competitors.

Apple's iOS operating system found in the iPhone and iPad is the most popular platform for developers building mobile applications. Closing in quickly is Google Android OS. A developer survey conducted this month showed that 92 per cent were "very interested" in building apps for the iPhone versus 87 per cent for Android smartphones, researcher IDC says. When it came to tablets the numbers were 87 per cent for the iPad and 74 per cent for Android tablets, which had risen in popularity by 12 points since a similar survey last year.


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