According to Gartner, mobile apps downloads will exceed 4.5B in 2010. By their estimates that is about a 100% increase from 2009. However, the revenues earned by all of these downloads will be less than $7B for 2010. The reason is that 82% of the downloads will be for free applications that must be either subsidized by mobile advertising or used to promote other revenue streams for the companies that publish them.
http://www.thestandard.com/news/2010/01/21/gartner-mobile-app-stores-will-exceed-4-5b-downloads-2010
I joined UIE over 9 years ago, and we have been waiting for this mobile market to become a reality for consumers. The challenge that the industry faces as it grows will be to build long-term and viable business models so that developers, content owners, operators, and device manufacturers can invest in R&D as well as provide a reasonable return for their investors. Sadly after 9 years of work, I still believe that we have some journey left.
In the grand scheme of things, mobile may not be too bad when put in context with the Internet. I was reading an article this morning in the Seattle Times about Hulu and online video.
http://seattletimes.nwsource.com/html/businesstechnology/2010867869_bthulu25.html
Even though online is old in comparison to mobile, this article highlights that the Internet is still struggling with these same issues as more and more content consumption moves from traditional distribution channels to new digital/online channels. The reality is that if the industry is not careful, billions of dollars of revenues could be lost in the transition to new online and mobile media. The consumer may benefit in the short-term, but they won’t in the end if investment in content and infrastructure disappear.
Mobile or online advertising is not the only answer to this problem. I have read recent estimates from JP Morgan that online advertising is forecast to grow by about 11% in 2010 which will be good news for the industry after a down year in 2009 but still below the growth rates that have been previously achieved.
The US mobile advertising market is growing as mentioned in this post by Tricia Duryee from Moconews below.
I will argue that though it is about a $.5B industry in the US, it is not large enough on its own to pay back all of the investments that need to be made to make content and services available to users. Certainly the growth rate shows positive trends, but I still believe that advertising alone will not be enough. So I need to ask the question. Why does online need to be free or virtually free for the consumer?
The industry needs to continue to think about dual income streams. In music, this means royalties and concert revenues. For media companies this means subscriber fees and advertising. For network operators this means transport fees and premium services. And finally for news papers this means subscriptions and advertising. To that end, I applaud the New York Times and the Wall Street Journal for trying to build online and mobile businesses that promote the dual revenue stream models.
As an industry we need to fight against the notion that content and services need to be free which is being promoted by advertising providers like Google. There is a large black hole of value that is going to be sucked from the industry for media companies and telecos if we do not work to find long-term sustainable dual stream business models that we provide to consumers.
