Strategy Analytics says the app market growth will be driven by more targeted advertising, growing consumer interest in virtual goods and the adoption of subscription-based business models.
Paid downloads accounted for almost 70% of revenue in 2009, but Strategy Analytics says revenue for paid downloads will peak in 2014 and account for less than 36% of total revenue in 2017.
Advertising will grow to generate the most revenue by 2013 as companies invest more in in-app advertising, improved targeting helps maintain CPMs, and more developers rely on advertising to drive revenue.
“The battle for developers is on and supporting recurring revenue streams is essential to gaining developer support,” said Josh Martin, Director of Apps Research at Strategy Analytics.
It is for this reason that Microsoft and Research in Motion are ensuring their new platforms support in-app purchase and subscription in addition to paid downloads and advertising at launch,” added Martin. “They continue to battle for third place as the forecast shows Apple’s and Google’s app stores dominating revenue generation for developers throughout the forecast period."
By 2018, Strategy Analytics predicts there will have been over 350 billion smartphone and tablet app downloads.