Revenue from mobile applications will increase more than 50% this year to $6.8 billion from $4.2 billion worldwide as smartphones proliferate. Of that total, only $600 million is expected to come from in-app advertising, with the bulk derived from transactions, according to a new Gartner forecast.
By 2013, however, advertising will generate a quarter of mobile app revenues, projected to swell to $29.5 billion by then on 21.6 billion downloads. This year alone, downloads will nearly double to 4.5 billion, from 2.5 billion in 2009.
While paid apps will continue to drive the majority of sales in the next few years, Gartner actually expects the proportion of free, ad-supported apps to increase -- from 82% of downloads this year to 87% in 2013. As smartphones come down in price and expand to a broader customer base, fewer of these new users will be willing to pay for apps.
In terms of content, games will remain the top app category, while mobile shopping, social networking, utilities and productivity tools will also continue to gain ground.
While the report didn't break out app revenues by company, Carolina Milanesi, a research director at Gartner, said its app storefronts launched by the likes of Google, Microsoft and Nokia to compete with Apple's App Store are likely to increasingly play a role. Google appears to be the best-positioned challenger, with about 20,000 apps available in its Android Market and 20 Android-based devices released to date, and more to come this year.
"Application stores will be a core focus throughout 2010 for the mobile industry and applications themselves will help determine the winner among mobile devices platforms," said Milanesi. Apple is winning that battle so far, with more than 3 billion downloads in the last 18 months and more than 125,000 apps on offer.
Among the latest is the $1,000 BarMax Ca iPhone app, a test prep program for the California bar exam, that's now the highest-priced title in the App Store. Selling a few of those would certainly help boost app revenues this year.