Free Apps Threaten Revenue Streams of Mobile App Stores, Pyramid Finds

CAMBRIDGE, Mass., June 16 /PRNewswire/ -- Free apps will dominate the mobile app market over the next five years, creating a potentially serious problem for network operators hoping to create new revenue by selling apps to mobile users, according to a new report from Pyramid Research (www.pyr.com).

Mobile App Stores: A New Mobile Web? is a new report that provides in-depth, up-to-the-moment analysis of the mobile content marketplace, focusing on the app stores of major market players like Apple, Google, Nokia, Research In Motion (BlackBerry), and Microsoft, as well as operator app stores. In addition, the 94-page report looks at the sea change in mobile advertising that may be coming with the release of Apple's OS 4.0 for the iPhone.

Pyramid estimates that the total download volume (free and paid) will increase by a factor of seven between 2009 and 2014 from 5.7 billion to 41.1 billion, notes Jan ten Sythoff, analyst at large for Pyramid Research and author of the report. "Although paid apps have increased substantially in volume with the emergence of app stores, free apps have really boomed, revolutionizing the mobile advertising market," Sythoff says. Including operator portals, the proportion of free downloads increased from around 30 percent in 2008 to 54 percent in 2009, and it is expected to stabilize at around 80 percent in 2014.

"This is a key trend, and it will drive new revenue streams, namely from advertising," say Sythoff. "We believe, for instance, that Apple's acquisition of mobile advertising network Quattro Wireless in early 2010 demonstrates that the company wants to monetize the billions of free apps being downloaded onto iPhones."

"Attracting developers is perhaps the most difficult challenge for operators given the lead the vendors have established, platform fragmentation and limited adoption of devices with operator stores enabled," Sythoff explains. "In regions where the vendors are already well established, such as the U.S., it will be difficult for operators to establish their own stores. In other regions, vendors have yet to establish themselves, giving operators the opportunity to take the initiative."

SOURCE Pyramid Research

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