Gartner: App Sales To Top $15 Billion In 2011

• by Mark Walsh  @markfwal, January 26, 2011

Mobile apps are here to stay, according to a new forecast from Gartner. The technology research firm projects app store downloads worldwide will more than double this year to 17.7 billion. App revenue in 2011 will hit $15.1 billion, up from $5.2 billion in 2010. By 2014, app downloads will jump to 185 billion.

"Many are wondering if the app frenzy we have been witnessing is just a fashion, and, like many others, it shall pass. We do not think so," said Stephanie Baghdassarian, research director at Gartner, in a statement. While Apple's App Store gave rise to the app explosion of the last two years -- and last Saturday announced its 10 billionth download -- alternatives are gaining traction.

Gartner points to competitors like the Android Market, Nokia's Ovi Store, Research In Motion's (RIM's) App World, Microsoft Marketplace and Samsung Apps, which saw the number of downloads grow in 2010. But the firm warns that native apps will have to deliver a more personal, richer experience than "vanilla" Web-based apps.

When it comes to monetization, Gartner predicts that 81% of app downloads will be free -- a percentage that has decreased since 2008 and will continue to drop in 2011. By the end of 2014, advertising will be generating just under a third of the revenue generated by application stores, up from 16% in 2010.

Gartner notes that app stores and developers typically split revenue on a 70/30 basis. However, that model is starting to come under pressure. Eric Chu, Android Developer Ecosystem manager at Google, said yesterday that Google would introduce in-app payments and carrier billing options to the Android Market as a way to help boost premium app sales. He said Google isn't happy with sales in its mobile storefront to date.

Rovio, creator of the wildly popular "Angry Birds" game, in December created its own payment gateway dubbed "Bad Piggy Bank" that it plans to extend to other developers and is said to be more favorable to developers than the current 70/30 standard split.

In a separate report this week, Forrester predicts the mobile apps market will see new business models based on subscriptions, micro-transactions and in-app billing expand from games to other content categories including news and music.

Regardless of any changes, Gartner expects the App Store to maintain its dominance in the segment. "We estimate that Apple's App Store drove close to nine application downloads out of 10 in 2010 and will remain the single best-selling store across our forecast period (through 2014), although to a lesser extent, as other stores manage to gain momentum," noted Carolina Milanesi, research vice president at Gartner.

Privacy could be a growing issue for all mobile app vendors and developers. A Wall Street Journal report last month -- part of its ongoing series on digital privacy -- found that of the 101 popular smartphone apps it tested, more than half sent the phone's unique device ID to other companies with users' awareness or consent.