It's not just the smart phones hot in the market, smartphone apps are also growing both by downloads and revenue. Gartner finds mobile app downloads reach 102 billion in 2013, up from 64 billion in 2012 and the total revenue in 2013 will reach $26 billion, up from $18 billion in 2012. Free apps will account for 91 percent of total downloads in 2013 (see Table 1). Gartner said that in-app purchases (IAPs) will account for 48 percent of app store revenue by 2017, up from 11 percent in 2012.
"We expect strong growth in downloads through 2014, but growth is forecast to slow down a bit in later years," said Sandy Shen, research director at Gartner. "The average downloads per device should be high in early years as users get new devices and discover the apps they like. Over time they accumulate a portfolio of apps they like and stick to, so there will be moderate numbers of downloads in the later years."
"Free apps currently account for about 60 percent and 80 percent of the total available apps in Apple's App Store and Google Play, respectively," said Brian Blau, research director at Gartner. "iOS and Android app stores combined are forecast to account for 90 percent of global downloads in 2017. These app stores are still increasingly active due to richer ecosystems and large and very active developer communities. However, we expect average monthly downloads per iOS device to decline from 4.9 in 2013 to 3.9 in 2017, while average monthly downloads per Android device will decline from 6.2 in 2013 to 5.8 in 2017. This relates back to the overall trend of users using the same apps more often rather than downloading new ones."
Source: Gartner (September 2013)
Further findings disclosed by Gartner on mobile application software market includes:
IAP purchases will drive 17 percent of the store revenue in 2013 and increase to 48 percent in 2017. However, as with downloads, IAP is expected to have strong growth in 2013 and 2014 and slow in later years. This is due to smart devices reaching more mass-market consumers whose willingness and/or affordability to spend on IAPs is lower than early adopters. Nevertheless, IAP will become a major monetization method for apps stores and developers.
Research shows that IAP contributes to a significant amount of Apple's App Store revenue from iPhones worldwide. Other platforms have not reached such high levels as the iPhone, but analysts expect they will also see IAP contributions increase in the future.
"We see that users are not put off by the fact that they have already paid for an app, and are willing to spend more if they are happy with the experience, said Mr. Blau. "As a result, we believe that IAP is a promising and sustainable monetization method because it encourages performance-based purchasing; that is, users only pay when they are happy with the experience, and developers have to work hard to earn the revenue through good design and performance."
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