Apple Maintains Dominance of Mobile Application Store Market in 2010

Despite the flood of so-called “iPhone killers” entering the market in 2010, Apple Inc. largely maintained its dominance of the global mobile application store market for the year, IHS Screen Digest research shows.

The Apple App Store in 2010 generated $1.8 billion in revenue, giving it 82.7% share of the total market, down from 92.8% in 2009. Revenue for the Apple App Store rose 131.9% from $768.7 billion in 2009.

Global revenue for the total mobile industry store market in 2010 increased by 160.2% to $2.2 billion, up from $828 million in 2009.

“In 2010, competitors managed to close the gap with Apple’s iPhone in terms of providing smart phone products with compelling user interfaces,” said Jack Kent, analyst, mobile media, for iSuppli. “However, in terms of mobile application stores, Apple remains far ahead of the competition, with the other stores so far unable to replicate Apple’s success in generating revenue from users. Apple, in contrast, has been able to maintain advantage by leveraging its tightly controlled ecosystem combining hardware and content with the capability to offer consumers a trusted, integrated and simple billing service via iTunes.”

The Apple App Store in 2010 also benefitted from the introduction of the iPad. While the iPad’s installed base in 2010 was small compared to the iPhone teardown. iPad apps cost more than iPhone apps, giving them a disproportionate impact on Apple’s revenue. By 2014, about 50% of Apple App Store revenues in the United States will be generated by iPad users, up from less than 20% in 2010.

Apple’s competitors, despite their struggles, managed to make some market share inroads in 2010.

Google’s Android Market made the most dramatic advance, with revenue soaring 861.5% for the year. This allowed Android Market to take 4.7% share of global mobile application store revenue in 2010, up from 1.3% in 2009. The company came within a hair’s breadth of displacing the Nokia’s Ovi Store to take the No. 3 rank in the market.

As competitors refine their stores, they will continue to eat into Apple’s dominant share. However, Apple is expected to retain more than half of market revenue at least through 2014.

Nokia’s OVI Store posted the second strongest growth in 2010, with revenue rising by 719.4%, giving it 4.9% share of the application market business, up from 1.5% in 2009. Research In Motion’s BlackBerry App World retained its No. 2 rank with 360.3% growth. The company’s share increased to 7.7% in 2010.

Following massive growth in 2010, the global mobile applications market will continue to expand in 2011. Revenue is expected to rise by another 81.5% in 2011 to hit $3.9 billion.

A key driver of growth is the “freemium” business model, wherein a basic application is offered free of charge but fees are charged for premium features.

“As application stores become more and more crowded, with hundreds of thousands of apps available on the leading stores, developers increasingly are opting to release their content for free. They do this in the hope that they can monetize their apps by offering additional content or functionality via in-app purchases and advertising,” opines Jack Kent, Analyst, Mobile Media for Screen Digest, now owned by iSuppli, IHS.