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App store revenue set to triple this year

by Scott Bicheno on 26 January 2011, 15:00

Tags: Gartner (NYSE:IT)

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There are going to be a lot more stories written this year about what a big deal mobile apps are, but Gartner's four year forecast for the industry neatly encapsulates just how big it's expected to get.

An estimated 8.2 billion mobile apps were downloaded last year, yielding revenue of $5.2 billion from both app purchases and advertising revenue. The forecasted figures for this year are 17.7 billion downloads and $15.1 billion in revenue - roughly double and triple respectively - almost a dollar per download.

The fact that revenue is expected to grow faster than volume, when the trend is increasingly towards free apps, indicates mobile advertising networks are getting better at delivering revenue and developers are getting better at exploiting them.

"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 of 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."

The report note that app stores typically take 30 percent of a paid app sale. Also, while ads represent 16 percent of app revenue right now, that will double to a third by 2014. Revenue is expected to have increased ten-fold to $58 billion by 2014.

"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 of 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."


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