Pyramid: Mobile Apps on the Upswing

The mobile apps market is about to undergo a big growth spurt, according to a new Pyramid Research report. Revenues from mobile application store downloads are set to surge from $8.4 billion in 2009 to $23.6 billion in 2014, while app download volumes will increase by of a factor of seven.

That means the average mobile subscriber will download 6.5 apps each year, spending $4.02.

That figure might not seem notable on a per subscriber basis, but in the aggregate, the numbers are staggering. The report, " Mobile App Stores: A New Mobile Web?" finds that the total number of apps will skyrocket from 5.7 billion in 2009 to 40.6 billion by 2014.

The impact this app growth will have on operators, handset makers, and developers depends on the market dynamics of particular geographic regions, as well as your point of view. In other words, if developers win a larger share of mobile app revenues, then operators or smartphone vendors could end up making less money.

The big winners: developers
For developers, the projections are great news. The more competitive the market gets, the more support developers get, along with better payment terms and more transparency. That will hopefully also mean more revenues for developers -- either through paid app downloads or advertising.

Pyramid says that this year 36 percent of paid apps and 86 percent of free apps will be downloaded through app stores.

"These factors will be crucial in enabling developers to decrease their costs and focus on creating innovative and entertaining apps," writes Jan ten Sythoff, analyst-at-large at Pyramid and the report's author.

Wireless operators muscle in
For wireless operators, the projections are promising, albeit slightly less exciting. Especially in the US where vendor app stores are the norm, 70 percent of all mobile downloads will take place here this year, Pyramid says, cutting carriers out of the revenue equation. This will also be the case in Africa and the Middle East, but not Asia-Pacific where carrier stores are actually already more common today.

Sythoff notes that operators have a number of strengths in the app store business that will make them viable competitors, but also no shortage of challenges: namely, that vendors' stores are already well established, a variety of devices leads to fragmentation, and to date there's been limited adoption of devices with their stores front and center. (See Operators Need Developers for Apps Ambitions .)

"They must therefore exploit their strengths, which include the established billing relationship, control over device distribution and subscriber information," Sythoff writes. "We also believe that timing is important: In regions where the vendors are already well established, such as the US, it will be difficult for operators to establish their own stores. In other regions, vendors have yet to establish themselves, giving operators the opportunity to take the initiative."

Pyramid expects many operator store launches to come online in 2010 alone.

Independent? Not for long.
The independent third-party app store owners that remain could be hurt the most as the app store market evolves. Sythoff says that they will lose out more and more to both vendor and operator stores. With the exception of GetJar Networks Inc. , whose size and focus on free apps bodes well for it, he recommends they look toward partnering to stay alive, something that PocketGear has realized with its recent acquisition of Handango Inc. . (See PocketGear Buys Handango and GetJar: Can One App Store Please Everyone?)

Other highlights from the report include:
  • In 2013, there will be more than 1 billion smartphone users, making up almost 20 percent of all subscriptions.
  • Total app downloads will exceed 10 billion in 2010 and 33 billion by 2013. At that time, Apple app downloads will have grown fourfold to 10 billion. All the other vendors combined will barely overtake Apple in 2014, but carriers will actually have the largest combined downloads at 12 billion.
  • From 2010 to 2014, Java and Brew app downloads will remain stable at around 2 billion.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

shygye75 12/5/2012 | 4:32:12 PM
re: Pyramid: Mobile Apps on the Upswing

The aggregate numbers for mobile app downloads projected by Pyramid are very impressive, but the revenues associated with that volume are far less so. What's intriguing is the idea that mobile apps may be gravitating toward an advertising-based revenue stream. Is there really enough money there to sustain the interest of developers?

shygye75 12/5/2012 | 4:32:11 PM
re: Pyramid: Mobile Apps on the Upswing

"Everyone's doing it" -- you have to love the decision-making being driven by that premise. Re operators and app stores, is it possible to be disintermediated before you are actually, um, intermediated?

Gabriel Brown 12/5/2012 | 4:32:11 PM
re: Pyramid: Mobile Apps on the Upswing

I think it's questionable. Developers and Forums I follow say that the Apple App Store is okay for paid downloads, but that Android Market stinks and is nearly all about advertising.

The revenues from advertising for most individual Android apps, as you could imagine for a still niche platform, are generally abysmal, I hear.

Developers I know make money by developing for brands, and such like, which want an app to extent their presence onto iPhone. The app itself isn't a money-maker at this stage, but everyone's doing it and you have to have something in the game, so pay a developer.


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