Mobile App Biz Soars: $12B By 2015

Tiny Zoo AppHTML5 may be on the way, but native mobile applications will be a burgeoning business for years to come, according to a new forecast. The study by Sweden-based Berg Associates projects mobile app revenue from premium app installs, in-app purchases and subscription services will increase at 40.7% annual rate, climbing from $2.2 billion in 2010 to $11.9 billion by 2015.

Separately, in-app advertising is on track to more than double to $1 billion this year and reach $4.7 billion in 2015, accounting for 29% of total app revenue.

The research firm predicts the number of app downloads worldwide will grow even faster, surging 56.6% annually to hit 98 billion in four years. Apple's iOS will remain the top mobile platform for monetizing apps, with App Store revenue of $1.8 billion in 2010 more than tripling to $5.9 billion in 2015. Google's Android Market is expected to generate $2 billion in app revenue by then, up from just $108 million in 2010.

When it comes to in-app advertising, Android is eventually expected to drive the most ad sales as the world's most pervasive smartphone platform. Berg expects the Google OS to account for $1.6 billion in in-app advertising in four years, up from only $52 million last year. That would put it just ahead of iOS, with estimated in-app ad sales of $1.3 billion in 2015.

Android app downloads could also get a fresh boost from the launch of Amazon's new tablet-the Kindle Fire-and its own Android app storefront. If the device proves as popular as expected, it could encourage developers to create apps tailored to the device.

But the broader force driving up app downloads and usage is the surge of smartphone sales. By 2015, 70% of all handset shipments will be smartphones, creating a large base that will push downloads to almost 100 billion. The firm predicts iOS and Android combined will serve nearly two-thirds of the total downloads in four years, with Microsoft's Windows Phone OS is projected to be the third most popular app platform.

"Even though the download numbers will increase during the forecast period, most apps are free to download and app monetization will be a challenge for developers", said Johan Svanberg, a senior analyst at Berg, in a statement. "Free to download monetization strategies such as in-app advertising and in-app purchasing will be increasingly important."

The report acknowledged that over time, newer technologies, like HTML5, will pose a growing alternative to native apps. Already, many large Web publishers from Yahoo to Time Inc. to The New York Times have embraced HTML5 for developing new mobile properties. The point at which the balance of power on smartphones shifts to the mobile Web from apps, however, isn't yet clear.

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