Report: Mobile apps will outsell CDs by 2012

Wed, 03/17/2010 - 8:05am
Monica Alleven and Maisie Ramsay, Wireless Week

How popular are mobile apps? If some recent research is any indication, the market will be worth $17.5 billion in two years’ time.

GetJar, which bills itself as the world’s second-largest app store, commissioned a report by Chetan Sharma Consulting that estimates mobile app downloads across all types of handsets will increase from more than 7 billion downloads in 2009 to almost 50 billion in 2012 – a year-over-year growth rate of 92 percent. That means the value of apps sold would be greater than the value of CDs sold in 2012, estimated at $13.83 billion.

That’s a pretty big market value, points out GetJar CEO and founder Ilja Laurs, and part of the impetus behind commissioning the research was to get a better idea of the market size. GetJar executives felt that prior research didn’t disclose the complete picture and tended to focus on developed markets.

Chetan Sharma, president of Chetan Sharma Consulting, says he took a more holistic view of the global mobile apps market and built a ground-up model that took into account how the overall apps consumption is evolving across various dimensions.

Clearly, the direction for apps is going from on-deck to off-deck. By 2012, off-deck paid-for apps will be the biggest revenue generator, accounting for almost 50 percent of all apps revenue. By comparison, in 2009, on-deck apps available from mobile operators accounted for more than 60 percent of all apps revenue, but this will fall significantly to just under 23 percent by 2012, according to the research.

While there’s a lot of attention on free apps, an advertising-based revenue model may be the way to go for more and more developers. In 2009, advertising contributed almost 12 percent of the overall apps revenue, but that share is expected to more than double to more than 28 percent by 2012.

The study also outlines opportunities for both high-end smartphones (such as BlackBerry and Android-powered handsets) and feature phones (such as the Samsung Instinct/Jet and Nokia X6). In 2009, 90 percent of handsets in use worldwide were so-called feature phones, while smartphones and data cards accounted for the remaining 10 percent of the market.

Sharma says the middle category – between smartphone and feature phone – is getting more difficult to separate out. Devices like the Instinct, which is a 3G device with capabilities for video, applications, e-mail and up to 8 GB, can’t be confused for a feature phone, but because it’s a Java phone, some might categorize it as such. The first phone by INQ Mobile was a social mobile device based on Brew, which is hardly considered a smartphone platform, yet its mobile data usage is higher than even the iPhone, he says.

Meanwhile, the Yankee Group has nearly doubled its revenue estimates for the U.S. mobile apps market after increased smartphone penetration, more highly priced apps and the proliferation of app stores caused the research firm to reconsider its previous forecast.

Yankee Group now expects sales from mobile applications to reach $1.6 billion in 2010, up from its previous estimate of $537 million. The company expects app sales to reach a “whopping” $11 billion by 2014.

Analysts say the iPhone continues to be the most lucrative platform for developers because iPhone users download 60 apps per year, three times more than average users. However, the research firm found Google’s Android platform has a good deal of growth potential.

“Apple’s innovative one-click technology and AT&T’s exclusive deal for the iPhone put them ahead for now,” said Yankee Group Director Carl Howe. “But strong results from T-Mobile suggest that Android will be the next breakout smartphone app platform.”

Howe found that paid applications are becoming increasingly popular; nearly one-third of all apps downloaded today are purchased, compared with just 18 percent a year ago. The average price of applications is also on the rise, with the average paid app costing $2.85 compared with $1.99 last year at this time.

Howe also reports that AT&T subscribers download 42 percent more apps, or 27 per year, than subscribers at other carriers. T-Mobile USA subscribers download about 18 apps per year.

Yankee Group said Verizon has the most paid apps, with nearly two-thirds of the apps downloaded by Verizon users paid.

More Broadband Direct 3/17/10:
•  Time Warner Cable pumps D3 into central New York
•  Verizon files patent-infringement case against Cablevision
•  Cox Business deploys online backup service to all markets
•  Jones/NCTI debuts broadband tech degree program
•  Latens updates IPTV middleware platform
•  In the media: Will 4G = tiering?
•  Google phone now works on iPhone's wireless system
•  Report: Mobile apps will outsell CDs by 2012
•  Broadband Briefs for 03/17/10



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