Here’s another chart with hockey stick-like projections for the global mobile applications space: The market is set to grow to $17.5 billion by 2012, which will be greater than the value of all CDs estimated to be sold that year. The report was commissioned by GetJar, which distributes free applications on the behalf of developers worldwide, and was conducted by Consultant Chetan Sharma.
—Mobile app downloads across all types of handsets are expected to increase from more than 7 billion downloads in 2009 to almost 50 billion in 2010 – an annual growth rate of 92 percent.
—The sale of apps will shift from carriers to off-deck sources over the next two years. In 2009, mobile operators accounted for more than 60 percent of all apps revenue, but in 2010, this will fall to under 23 percent.
—In 2009, the number of app stores grew from eight to 38 – an increase of 375 percent.
GetJar only distributes free applications today, and makes money through an auction-like process in which developers bid to have higher placement in the app store. GetJar also provides its library of applications on a white label basis to handset makers and carriers, including Sprint (NYSE: S), Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) and even Carphone Warehouse in the UK. GetJar VP Patrick Mork said they conducted the survey to get a bigger picture of what was going on in the market today: “With regards to downloads and where it’s going, there’s no earth-shattering surprises,” he said. “The global market will be worth $17.5 billion by 2012, which effectively means that it will outsell more established mediums.”
The big question is whether apps will continue to largely be free and subsidized with advertising, or whether consumers will buy them. The overall revenue from both paid and ad-supported downloads and virtual goods is expected to increase from $4.1 billion in 2009 to $17.5 billion by 2012. But the mix will change over the next two years: The report found that advertising-based revenue accounted for about 12 percent in 2009, but by 2012, advertising is expected to generate 28 percent of revenues.
Because advertising will be relatively slow to take off, Mork said GetJar has decided to start offering paid apps, and has been trialing a number of payment solutions over the past year. Paid apps will be rolled out on a limited basis by the end of the year. The revenue split is expected to be as favorable as Apple’s, which shares 70 percent of revenues with developers, but it could be even greater, Mork added. “We’ve never made money off the sale of content. Developers bid for visibility, so in theory we could give 90 percent or even more back to developers. If it works for them, then why would they not invest more money in bidding for more downloads?
Still, Mork believes a majority of apps should be free. “Some consumers will never pay for content, but the business models haven’t matured yet, so the paid model is the only thing they know and works to a certain extent. But selling content in emerging markets will never be a big market. Somehow we’ll have to monetize off the back-end. I think it will happen, but it will take a few years.”