Mobile apps and music thrive in downturn

Many iPhone users spending over £70 a year on apps
Many iPhone users spending over £70 a year on apps

Smartphone users went application crazy last year, according to a survey by tech analysts ABI Research.

It found that a surprising 16.5 per cent of US smartphone owners spent $100-499 (£70-345) on mobile applications during 2008.

That level of spending is high given the low cost of most mobile applications, ranging from as little as a a pound or two at Apple's iPhone App Store, to at most about £20.

"Apple is seen by some developers as hurting the market with its iPhone App Store," says ABI analyst Jeff Orr, "It drives the price of content down to $1-2, using a model similar to iTunes. If you exclude Apple from the mix, applications for other platforms cost about $7-25."

Apple driving prices down?

Developers now have to choose whether to sell many copies of their software for the iPhone at a very low price (of which the developer receives 70 per cent), or sell fewer via one of the other application storefronts, but charge a higher price and earn more per transaction.

However, Orr also notes that: "Apple did a lot for the market with its massive marketing effort telling the public how great mobile content is. That created a 'halo' effect for the rest of the industry: other device manufacturers and content developers working on non-Apple platforms all saw a bump in sales and downloads because there's more awareness of the smartphone category."

Another hot area for mobile is music sales, says Juniper Research. It predicts that a sharp fall in ringtone revenues will be more than offset by growth in full-track downloads, streamed music services and ringback tones.

Juniper reckons that key hurdles to the adoption of full-track downloads (namely, handset form factor, memory constraints and data costs) have been overcome, and that the global mobile music market will be worth over £10bn by 2013.

Mark Harris is Senior Research Director at Gartner.