In comparison, the report states that mobile advertising revenue is expected to generate $0.6 billion worldwide.
Analysts expect that 4.5 billion app downloads will occur in 2010, with eighty percent of these apps being free to consumers. This number is expected to rise to more than 21.6B by 2013; with the percentage of free downloads increasing to 87 percent in the same time.
According to Gartner, an application can be offered free of charge because the developer is charging for other things within the application; some offer physical goods that can be ordered through the application, while others derive their revenue from advertising, such as banners or full page advertising between game levels, for example.
"As smartphones grow in popularity and application stores become the focus for several players in the value chain, more consumers will experiment with application downloads," Gartner research director Stephanie Baghdassarian, said. "Games remain the No. 1 application, and mobile shopping, social networking, utilities and productivity tools continue to grow and attract increasing amounts of money."
Because high-end smartphone users tend to be early adopters of new mobile applications and more trustful of billing mechanisms, Gartner finds, they will pay for applications that can meet their needs. It should also be noted that as the average smartphone user becomes less tech-savvy as smartphones come down in price to gain mass market appeal, these users will be more reluctant to pay for applications.
"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," Baghdassarian added. "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."
"Application stores will be a core focus throughout 2010 for the mobile industry and the applications themselves will help determine the winner among mobile device platforms," said Gartner research director Carolina Milanesi. "Consumers will have a wide choice of stores and will seek the ones that make it easy for them to discover applications they are interested in and make it easy to pay for them when they have to. Developers will have to consider carefully not only which platform to support but also which store to promote their applications in."
