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1/19/2010
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Mobile App Store Sales Rising

Games are the top smartphone applications, while mobile shopping, social networking, and productivity tools continue to climb.

Revenue from mobile application stores will increase steadily over the next three years, reaching nearly $29.5 billion, a market research firm said.

By 2013, application downloads will exceed 21.6 billion, compared to 2.5 billion last year, when total revenue topped $4.2 billion, Gartner said Monday. This year, paid applications will generate $6.8 billion worldwide, including $600 million from advertising, and downloads will exceed 4.5 billion.

The number of free applications on the online stores tied to smartphones will increase from 80% this year to 87% in 2013. However, many of those applications will be sponsored by advertising and will generate almost 25% of mobile application store revenue by 2013.

"Games remain the No. 1 application, and mobile shopping, social networking, utilities and productivity tools continue to grow and attract increasing amounts of money," Gartner researcher Stephanie Baghdassarian said in a statement.

High-end smartphone users today are early adopters of new mobile applications and are more trustful of billing mechanisms, Gartner said. Therefore, they are expected to continue to pay for applications they believe will be useful.

As smartphone handsets drop in price, however, they will attract a less tech-savvy mass market, and many of these users will be more reluctant to pay for applications. As a result, advertising will become increasingly important in generating revenue.

"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," Baghdassarian said.

Application stores are expected to be a major focus of the mobile industry this year, Gartner said. Success at attracting consumers through applications is expected to determine the winner among mobile device platforms.

"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," Gartner researcher Carolina Milanesi said. "Developers will have to consider carefully not only which platform to support but also which store to promote their applications in."

Apple has the largest application store, which has driven the success of the iPhone. However, competition is heating up, particularly from Google. The search giant has launched the Android Market for applications that run on smartphones built around Google's Android operating system. This month, Google launched its own smartphone called the Nexus One.

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