Boom Times Ahead for Mobile App Market

Consumers will spend US$6.2 billion in 2010 at mobile application stores, while related advertising revenue is expected to generate $0.6 billion worldwide, according to new statistics from Gartner.

Those numbers are expected to rapidly grow within the next few years, the analyst firm predicted: By 2013, worldwide downloads will surpass $21.6 billion. By that point, advertising-sponsored mobile applications will generate almost 25 percent of mobile application stores’ revenue.

No. 1 Inquiry

There have been furious investments recently in both apps and the infrastructure to support ads on mobile devices. Google, for instance, has made a $750 million bid for AdMob; more recently, Apple said it would acquire Quattro Wireless, another mobile ad platform.

As for the apps themselves, their numbers have simply exploded in a few short years. There are more than 100,000 apps for the iPhone, which came to market in 2007. There are more than 12,000 apps for Google’s Android OS system, a later entrant.

“Mobile system apps and apps that move from the enterprise to the customer are the No. 1 inquiry we get from customers,” Gartner analyst Michael King told the E-Commerce Times.

The proliferation of smartphones is the fundamental driver of this trend. Smartphone penetration is expected to reach well over 60 percent in the mobile market within the next few years, and “at the same time,” said King, “there is growing pent-up demand from end-users to be able to interact with service providers through their mobile devices.”

Surprising Formats

What may surprise the industry, though, is the form of ads that King believes will take shape as these dual trends manifest. Rather than display ads that have been optimized for the mobile environment, King envisions value-add, context based apps that are thinly disguised bids for service. For example, say two people on Facebook are chatting about a particular concert. A ticket seller might contact them when that particular group is in town, suggesting they attend — and by the way, here is a good price for the tickets.

“Those will be very valuable and very popular” types of ads, King predicted.

Apps will likely be a dominant model for the foreseeable future, Azita Arvani of the Arvani Group suggested.

“Every major brand and company wants to have their own mobile app,” she told the E-Commerce Times. “Sometimes they don’t even know why they are doing it, but they don’t want to get left behind.”

Growth of Android

The only question appears to be which platform developers — and consumers — will support.

All major device and platform vendors are working to lure developers into their communities, Arvani noted. Apple has set up a $100 million fund in collaboration with KPCB, while RIM has created a $110 million fund.

Meanwhile, Google is offering cash incentives along with Nokia and others, she said.

For now, Apple is the dominant app provider, but Android is showing signs of making headway, Patrick Gilbert, president and CEO of 4SmartPhone, told the E-Commerce Times.

“In fact, there are signs that the app model is moving towards [becoming] device-agnostic, which would mean that developers could build apps for all sorts of devices, including, presumably the iSlate,” he said.

Indeed, the challenge to app growth — at least outside of the Apple ecoystem — has been fragmentation, Jonathan Stark of Jonathan Stark Consulting, told the E-Commerce Times.

“Developers want their apps to run everywhere, but the wide range of mobile devices and OS versions make this very expensive,” he said.

Web-based mobile apps — the best answer to the problem for the moment — is not the perfect solution, according to Stark, “but makes a lot of sense for folks who want to reach the broadest possible market.”