Gartner: 102B App Store Downloads Globally In 2013, $26B In Sales, 17% From In-App Purchases

Ongoing trends in smartphone adoption — which this year finally outnumbered the amount of non-smartphones getting purchased — will drive 102 billion app store downloads this year, 90% of which will be on Apple’s App Store and Google Play, according to new research from Gartner. This will lead to global app revenues of $26 billion in 2013.

With free downloads continuing to dominate the scene — this year, nearly 83 billion downloaded apps will be free, or 91% of all downloads — in-app purchases and advertising will continue to grow in importance for developers’ business models. This year, IAP will account for 17% of revenues — $4.42 billion — but that will rise sharply in the next four years, accounting for 48% of all revenues by 2017. As a point of reference, in 2011, IAP was 11% of revenues.

Gartner adds that IAPs are in fact popular enough that they are even used effectively in paid apps. “We see that users are not put off by the fact that they have already paid for an app, and are willing to spend more if they are happy with the experience,” writes Brian Blau, a research director with the analyst group. “As a result, we believe that IAP is a promising and sustainable monetization method because it encourages performance-based purchasing; that is, users only pay when they are happy with the experience, and developers have to work hard to earn the revenue through good design and performance.”

As for the rest of that revenue in 2013 — $21.58 billion — Gartner doesn’t break out how much revenue is coming from paid apps versus advertising, or even if it’s calculating advertising into the mix (we’re reaching out to ask). If advertising is not being factored in, the average price of paid apps in 2013 works out to $2.08.

In any case, the trend away from apps that users need to pay just to download is very clear. It’s already having an effect of how developers are pricing on stores: Blau writes that free apps account for 60% of apps on Apple’s App Store, and 80% on Google Play.

Gartner doesn’t break out which of these two oversized app stores are bringing in the most revenue at the moment, but research from Distimo in August indicated that despite Android’s worldwide domination in handset sales right now, Apple’s iOS platform still drives more app revenues.

While a lot of people put this down to iPhone (and iPad) users being a more acquisitive and engaged lot, Gartner points to something else: consumers buy more apps when they are new users, and less when they have had their devices for a while. This would partly explain why Distimo, for example, notes that Android app revenues are up 67% in the last several months, while Apple’s are up by only 15%: collectively, Android has been pouncing on iPhone sales in that period.

That will also have a converse effect. “We expect average monthly downloads per iOS device to decline from 4.9 in 2013 to 3.9 in 2017, while average monthly downloads per Android device will decline from 6.2 in 2013 to 5.8 in 2017,” Blau writes. “This relates back to the overall trend of users using the same apps more often rather than downloading new ones.”

And although Blau did not add this, the other “switchover” to watch is the one that Apple is currently undergoing to iOS 7. More than an upgrade to iOS 6, it’s a complete visual and feature overhaul that has produced a rush of new versions of apps we all know and already use.

With developers talking of the massive hustle they’ve had to do to get their new versions up and running, it’s definitely brought a lot of leading developers back into line with Apple. Now, depending on how successful Apple is with its new range of iPhone 5s and 5c devices, and how many users of older devices decide it’s worth the risk trying to upgrade older models to the new OS, it could have a strong knock-on effect on iOS downloads and purchases — and on the bigger apps picture, too.

And while that picture is indeed dominated by iOS and Google Play (with no notable mention of Windows Phone — we’re asking about this, too), it’s not without lingering fragmentation by way of app stores based on forked Android implementations. That includes stores like the one run by Amazon for the Kindle Fire, but also app stores in China. Gartner notes that Google Play will take 47% of app store downloads by 2017, a decline from today because of the rise of “domestic” app stores from the likes of 91 Wireless and 360 Market in China.

Table 1. Mobile App Store Downloads, Worldwide, 2010-2016 (Millions of Downloads)

Source: Gartner (September 2013)