'Freemium' model to dominate mobile apps market

Annual revenues from value-added services up-sold through downloaded applications are expected to exceed USD14bn (GBP9.2bn) by 2014, according to a report from Juniper Research.

The mobile applications report found that storefronts are increasingly likely to offer the facility to up-sell premium content from within the application itself (including the App Store, starting later this year).

The result is that the freemium business model - whereby applications are offered on a free-to-download basis but subsequently offer incremental revenues from subscription-based services and additional content options - will become increasingly prevalent over the next five years.

However, the report also observed that widespread deployment of the freemium applications model would pose a significant challenge to network operators, given that it offers the opportunity for much existing (and potential) content revenues to be directed through application stores (and the applications themselves), rather than through traditional distribution channels.

Nevertheless, as Dr Windsor Holden, author of the report, said: 'Although consumers are likely to shift from purchasing content on-portal to applications stores offered by vendors and OS providers, those stores in turn represent an opportunity for operators to realise far greater revenues from consumer data usage.

The report argues that applications delivered on a freemium basis present a substantial opportunity for content providers to derive additional revenues from advertising.

The levels of repeat usage from applications downloaded via the App Store suggests that there is far more opportunity for brand exposure on a per-download basis than with any previous content.

The report also found that the low retail prices offered by Apple's App Store have already resulted in significant price erosion on other established storefronts.

In addition, short-term revenue growth from consumer-oriented applications is likely to be constrained by the global recession.

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