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Consumers will spend $6.2 billion this year on mobile apps, downloading 4.5 billion times from app stores. Yet eight out of 10 app downloads won't be sold at all, but rather be free to end users. Advertising and marketing will close the revenue gap.
These findings come from Gartner, which forecasts worldwide mobile app downloads will exceed 21.6 billion by 2013. Free downloads will account for 82 per cent of all downloads this year, 87 per cent three years hence.
Stephanie Baghdassarian, research director at the firm, said in a statement, "Games remain the No. 1 application, and mobile shopping, social networking, utilities and productivity tools continue to grow and attract increasing amounts of money. Growth in smartphone 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. 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."
So where's the money? A plethora of online merchants are launching fully functional ecommerce apps. Just this week, Overstock.com and Alice.com joined the fray. Gartner says early-adaptor smartphone users are more trustful of mobile billing mechanisms. Plenty of apps that are free to download dispaly ads ranging from banners to interstitials that appear between levels of game play, for example. Still others bill users for virtual goods, such as customized postcards, that can be sent to friends and family.
Ad-sponsored mobile applications will generate almost 25 per cent revenue for mobile application stores by 2013.