Berg Insight: Mobile App Downloads To Reach 108 Billion By 2017

As the number of tablets, smartphones, touch and connected devices are snapped up by consumers worldwide, the market for mobile applications is also expected to grow.

Industry distribution of mobile applications is growing faster than the rate of sales of digital music, which used to be the undisputed leader in online sales. According to new research from Berg Insight, the number of mobile application downloads will reach 108 billion by 2017. The number will grow at a compound annual growth rate (CAGR) of 17% between 2012 and 2017, the analyst firm reports.

The number of mobile application downloads worldwide doubled during 2012 and reached 60.1 billion, up from 29.5 billion in 2011. Last year, revenues from paid apps, in-app purchases and subscription services including direct revenue and in-app ad revenue reached $8.4 billion.

The report added that by 2017, over 80 percent of all handset shipments will be smartphones, building a large user base that will spur the number of app downloads.

Not surprisingly, Apple App Store, Google Play and third-party app stores were mainly responsible for the explosive growth of mobile app downloads. Apple’s iOS will be the leader in direct monetization of mobile applications, with Google Play and Windows Phone Store grabbing the number two and three positions respectively in 2017.

Third-party app stores are especially popular in China and other markets where Google Play hasn’t become the default on-device app store. Monetization is, however, particularly challenging in these markets, even though free-to-download strategies, such as in-app advertising and in-app payments, are promising and have been moderately successful.

More difficult will be how that revenue will be generated. Even though download numbers are increasing, most apps are free. That means free-to-download monetization strategies like in-app advertising and in-app purchasing, for example, will be increasingly important.

The market is very competitive, but the economic advantage may be important for publishers who manage to hit the right app. Every app can find its own way to success, but common strategies today among many of the top revenue-generating app developers are to publish apps featuring a social layer on more than one platform using free-to-download monetization, so as to expand the user base and increase user engagement. Top mobile application developers such as Rovio Entertainment, Electronic Arts, Zynga and DeNA all are working with multiple platforms and free to download strategies.

The mobile app market is highly competitive, but the economical upside can be great for the successful publishers. Like almost no other digital product, mobile apps represent a global opportunity with more or less instant worldwide distribution, the report added.