App Stores Direct Revenue to Hit $14 billion in 2012, $37 billion by 2015, says Canalys

Canalys has  announced that app store direct revenue from the sale of apps, in-app purchases and subscriptions across smart phones and pads combined will hit $14.1 billion next year, up 92% from an expected $7.3 billion in 2011, and will reach $36.7 billion by 2015. This equates to a four-year compound annual growth rate for 2011 to 2015 of just under 50%. According to the analyst firm, this projected revenue growth presents an excellent opportunity for mobile network operators (MNOs) to compete with vendor app stores. MNOs have a strong platform on which to offer an improved customer experience, leveraging their detailed subscriber data.

‘The leading stores already have hundreds of thousands of apps, so it’s hard for operators to compete with those numbers,’ said Canalys Analyst Tim Shepherd. ‘On the other hand, too much choice brings serious problems in terms of application discovery for both developers and users, which operators can turn to their advantage.’

With 419.0 million application-addressable smart phones and 43.3 million pads expected to ship worldwide this year alone, the market opportunity for apps is still growing rapidly. But for operators, there are other advantages to having a branded app store offering beyond direct revenue. For example, they can actively build consumer experiences that bolster customer loyalty. A vibrant app ecosystem could lure new customers, while helping operators upsell current customers to higher-end smart phones and larger data contracts, and could even encourage pre-pay customers to consider post-pay contracts.

In conclusion, Canalys estimates that the impact of mobile apps will extend to all aspects of the customer lifecycle, from acquisition and retention to lifetime value and profitability: ‘Mobile apps are a disruptive technology force,’ said Shepherd. ‘Consumers will continue to value mobile device design and functionality, but the quality and availability of certain apps will progressively influence their buying decisions. By building on their strengths, operators can capture more of the market, while delivering a better customer experience.’