While an estimated eight out of ten applications will be offered to consumers for free in 2010, more than 6.2 billion dollars will be spent on application store purchases during the year.
Market researcher Gartner believes application downloads will reach and exceed more than 21.6 billion downloads by the year 2013. The number of free downloads will grow too, with around 87 percent all mobile applications expected to be available to mobile customers for free.
"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, research director at Gartner on January 18.
As the number of applications grow, so too will in-app advertising (which is online to generate approximately 0.6 billion dollars worldwide in 2010), perhaps making consumers think twice about opting for a free application over one that is paid.
Increasing numbers of developers have started to offer a wide range of free applications, realizing they can capitalize on revenues generated through in-app advertising, the sale of "virtual" in-app features and services (such as buying new recipes within a cooking app) and, in the case of applications such as Amazon and eBay, the sale of physical goods ordered and purchased via the free mobile application.
In 2013 almost 25 percent of the $29.5 billion revenue made by mobile application stores will be generated by advertising-sponsored mobile applications.
"Games remain the No. 1 application, and mobile shopping, social networking, utilities and productivity tools continue to grow and attract increasing amounts of money," said Baghdassarian.
Smartphone user demographics are expected to change in the next three years as device prices drop and enter into a "more affordable" category. The average smartphone-wielding consumer will be "less tech-savvy" and more reluctant to pay for mobile applications.
"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," Ms Baghdassarian added.
The good news for consumers is that with a wider audience base, developers and app stores will fight to offer consumers the best service possible. Both application developers and the app stores that host the programs will have to vie for their customers, essentially needing to offer better products to gain and maintain customer loyalty.
"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. Developers will have to consider carefully not only which platform to support but also which store to promote their applications in," said Carolina Milanesi, research director at Gartner.
The information formed part of Gartner's "Dataquest Insight: Application Stores; The Revenue Opportunity Beyond the Hype" report.Reuse content