Consumer spending galore at mobile application stores in 2010 - Gartner

Gartner's analysts say mobile application will be the rage this year, with stores exceeding upwards of 4.5 billion downloads in 2010, of which eight out of ten of which will be free to end users. It forecasts worldwide downloads in mobile application stores to surpass 21.6 billion by 2013. Free downloads make up 82 per cent of all downloads in 2010, and will account for 87 per cent of downloads in 2013.

Stephanie Baghdassarian, research director at Gartner says that as smart phones become more popular, application stores will undoubtedly become the focus for several players in the value chain. She says more consumers will experiment with application downloads, with games retaining the top slot followed by mobile shopping, social networking, utilities and productivity tools.

Gartner says an application can be free because the developer could offer it at no cost to the consumer while charging for other things within the application. Then there are others which are free to use but charge for the delivery of physical goods ordered through the application. Still more are free to users and derive their revenue from advertising such as banners as well as full page advertising between game levels for instance.

Gartner estimates worldwide mobile application stores’ download revenue to have exceeded $4.2 billion in 2009, and says that this will only grow further to $29.5 billion by the end of 2013. This revenue forecast includes end-user spending on paid-for applications and advertising-sponsored free applications. Advertising-sponsored mobile applications will generate almost 25 per cent of mobile application stores revenue by 2013.

“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 Carolina Milanesi, research director at Gartner. “Consumers will have a wide choice of stores and will seek the ones that make it easy for them to discover applications they are interested in and make it easy to pay for them when they have to. Developers will have to consider carefully not only which platform to support but also which store to promote their applications in.”

High-end smart phone users today tend to be early adopters of new mobile applications and more trustful of billing mechanisms, so they will pay for applications that can meet their needs. Average smart phone users will become less tech-savvy as smart phones come down in price to have a mass market appeal and these users will be more reluctant to pay for applications, says Gartner.

“Growth in smart phone sales will not necessarily mean that consumers will spend more money, but it will widen the addressable market for an offering that will be advertising-funded,” added Baghdassarian. “The value chain of the application stores will evolve as rules are set and broken in an attempt to find the most profitable business model for all parties involved.”