App sales worth $15bn in 2011, say analysts

Last weekend, a woman in Kent downloaded the free mobile phone game, Paper Glider, from Apple's App Store. It was the 10 billionth application downloaded in just two-and-a-half years.

The success of the Calfornia-based company's iPhone handset and iPad tablet, and the growing popularity of rival operating systems, prompted researchers at Gartner to predict that revenues from mobile apps would hit $15bn (£9.5bn) this year. It predicted that users would download 17.7 billion apps in 2011, more than double the estimated 8.2 billion last year. The expected $15.1bn in revenues will come from sales of the apps, as well as an increase of advertising revenues from within those apps. Revenues in 2010 were estimated at $5.2bn.

Stephanie Baghdassarian, the research director at Gartner, said: "Many are wondering if the app frenzy we have been witnessing is just a fashion and, like many others, shall pass. We do not think so."

Apple launched the App Store in July 2008, with 10 million apps downloaded in the first weekend. Gartner analysts predict that by the end of 2014, mobile users will have downloaded 185 billion apps, with revenues totalling $58bn.

"We strongly believe there is a sizeable opportunity for application stores in the future," said Ms Baghdassarian. "However, applications will have to grow up and deliver a superior experience to the one a web-based app will be able to deliver."

Free downloads are expected to make up 81 per cent of total downloads in 2011, but that percentage has been decreasing over the past two years. Gartner predicts that the decline will continue this year before increasing from 2012. Apple is the dominant player in the mobile apps market, offering downloads for the iPhone, the iPod Touch and the iPad. Gartner said close to nine out of 10 applications downloaded last year were from the App Store, adding it "will remain the single best-selling store through our forecast period to the end of 2014".

Rivals have looked to muscle in, and Gartner believes they will gain momentum over the next few years. A significant player is Android Market, which was also launched in 2008 to cater for the increasing number of smartphone and tablet devices running the operating system developed by Google. At an app conference last week, one Android manager said Google was "not happy" with sales of premium apps and said there would be significant improvements this year.

Smartphone competitors have moved to launch rival stores. BlackBerry maker Research in Motion has App World, Microsoft launched Marketplace, Nokia has its Ovi Store, and Samsung has Samsung Apps. Ms Baghdassarian said setting up a successful store was "far from simple" as they had to attract developers, organise content and engage users.

App revenues are split so store owners receive, on average, 30 per cent with the rest going to developers. Gartner said advertising would grow from 16 per cent of revenues in 2010 to almost a third in 2014.