App sales to surge in next three years

08 July 2010

ZURICH: The demand among consumers for mobile apps will continue to rise in the next three years, during which time the number of smartphones in use will increase to one billion worldwide.

According to Booz & Co, the revenues related to application downloads will reach €17bn ($21bn; £14bn) across the globe by 2013, a figure that is likely to be topped up by advertising spend and the sale of games.

By this date, it is predicted there will be more than a billion web-enabled smartphones in circulation, with the surge in popularity of these handsets driving an annual growth rate of 73% in app purchases.

However, the direct distribution of applications is expected to be worth just €5.4bn by 2013, with the remainder of the total attributable to broader benefits resulting from greater brand loyalty and reduced churn.

"For mobile operators, the economic incentive of apps lies in improving the attractiveness of their own mobile offering ... winning new customers and higher customer retention," Klaus Hölbling, a partner at Booz & Co, said.

Apple is set to generate a turnover of €2.3bn from its App Store in 2010, and Booz & Co suggested it was imperative for its competitors to catch up before it is "too late".

The key factors that must be considered by telcos include making their own rival properties innovative, fun and appealing to developers, alongside providing low-cost data packages.
"There is no doubt that the app economy has become a sustainable trend," said Alex Koster, a telecoms expert at Booz & Co.

"The balance is shifting now to global companies. Telecommunications companies have to redefine their role and play to their strengths."

One recommended strategy adopting co-branded models with firms like Google, which has rolled out its Android operating system through alliances with corporations such as T-Mobile and China Mobile.

Data sourced from Booz & Co; additional content by Warc staff