Gartner notes that free apps will make up up 91 percent of the total app downloads this year, and it estimates that the percentage will increase to 94.5 percent in 2017. This does not mean a decline in total revenue though — Gartner projects that total revenue this year will reach $26 billion, up from $18 billion last year.
This comes as in-app purchases (IAPs) rake in the money, as many consumers shy away from paying upfront to access an app. Gartner forecasts that IAPs will drive 17 percent of the store revenue in 2013, up from 11 percent in 2012, and gradually increase to account for 48 percent of app store revenue by 2017.
IAPs will become a major monetization method for app stores and developers, even as research shows that such purchases already contribute to a “significant amount of Apple’s App Store revenue from iPhones worldwide”.
Brian Blau, research director at Gartner, says:
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… 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.
With smartphones being dominated by the iOS and Android platforms, it also comes as no surprise that their app stores make up a huge part of the app ecosystem. Blau says:
iOS and Android app stores combined are forecast to account for 90 percent of global downloads in 2017. These app stores are still increasingly active due to richer ecosystems and large and very active developer communities.
In the meantime, iOS consumers are more willing to pay for their apps. Blau notes that free apps currently make up about 60 percent and 80 percent of the total available apps on App Store and Google Play, respectively.
Gartner warns though that growth in app store downloads will likely slow down after 2014, as users stick to the apps they like and download fewer new apps.
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