Firm Predicts App "Gold Rush"

Yankee Mobile app

Has the world gone app happy? Yes, according to an updated forecast from Yankee Group, in which the research firm has nearly tripled its projection for total U.S. app revenue in 2010 from $537 million to $1.6 billion.

By 2014, that figure is forecast to swell to $11 billion. Previously, the research firm predicted the U.S app market would top out at $6.8 billion in 2013. Driving the revised outlook is an increase in the proportion of paid downloads from 18% in 2009 to almost one-third this year. Yankee says app stores are training consumers that they need to pay a few bucks for quality phone apps.

Or more than a few bucks, as in the case of MLB's At Bat 2010 and CBS' March Madness on Demand iPhone apps, which are hot new sellers in the App Store at $15 and $10 each, respectively. Magazine publisher Hearst, meanwhile, has recently released 70 micro-targeted iPhone apps priced at 99 cents and up, with plans to churn out thousands more paid titles.

Among wireless carriers, Verizon Wireless has the highest average of paid apps, at two out of every three downloads. Driving the higher rate are Verizon's BlackBerry phones, which tend to have more than average paid downloads.

Consumption of both paid and free apps has accelerated, with the 1.6 billion apps downloaded this year expected to hit 6 billion by 2014. Not surprisingly, iPhone owners are the most avid app consumers, downloading an average of 60 a year, more than three times the average smartphone users. But Yankee Group predicts the expansion of Google's Android platform will help to grow app usage.

"With 60,000 Android phones being shipped every day and nearly 20,000 apps in the Android Market, we believe that Android will be the next breakout app platform," stated the firm's "Forecasting the U.S. Mobile App Gold Rush" report. And as of today, the Android storefront is offering 30,000 apps, according to TechCrunch.

Games, search and social networking rank as the top app categories overall, underscoring how people view downloads as a form of entertainment first and utility second. Ultimately, Yankee Group expects the app frenzy to subside as the market saturates and developers shift toward Web-based solutions that can work across any platform.

Until then, brands have to consider a promotional strategy to help people find their apps in the growing sea of titles. In a separate interview with eMarketer posted Tuesday, Jeremy Lockhorn, director of emerging media and video innovation at Razorfish, suggests using keyword search, online and mobile display advertising, text links and mobile ad networks.

"One of the mistakes brands make is developing an app, throwing it in the app store and hoping it goes viral," he told eMarketer. "If you're not going to set aside a promotional budget there's little point in building it." And that budget should be three to five times the cost of building the app, he adds.

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