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iPhone app sales growing at twice the rate of iTunes music

The notion that Apple's iTunes revenues hinge on music may soon be called into question, as Apple's recent metrics reveal that the App Store may be quickly outpacing its musical counterpart with growth twice as quick.

Apple's boast that users have downloaded over 100 million apps for the iPhone and iPod touch in two months is more than just a good start among software — it's a good start for a new iTunes feature in general, according to a new report.

If the iPhone maker sustains the download rate of 70 million apps per month achieved in August and the estimated $70 million in revenue that would accompany it from paid apps, the company would reach the one billion app mark and a corresponding $1 billion in sales sometime during 2009. By contrast, the iTunes Store's music section took over two years to reach one billion songs, cresting at the symbolic figure by early 2006.

This also assumes that Apple doesn't increase its download rate over time, which is seen as likely: the company's emphasis on the App Store as a vehicle for iPhone and iPod sales, rather than a profit engine of its own, may encourage more customers and developers to use the store. Sales of iPhone 3G also have yet to see the holiday shopping surge or deployments to other major countries, such as Russia.

For comparison, iTunes' music sales rate has also increased rapidly over time. After the first billion songs, it took just one year to double that figure.

Competitors may also face a struggle uphill to attract their own audiences, the report mentions. As neither Google's Android Market nor Microsoft's upcoming Skymarket for Windows Mobile will have the luxury of using self-made device sales to offset any costs, either of the phone operating system designers will have to dip into other resources. Those that do operate both the hardware and stores, such as Nokia and its Music Store, may also have to accept Apple's business model even if they would like their services to be independently profitable.

And while Nokia and a handful of other rivals either already run stores or expect to open them soon, Apple may create an advantage simply through being early. Google's store for Android apps isn't anticipated until the November launch of the first Android phone with T-Mobile, while Microsoft's Skymarket isn't due until the launch of Windows Mobile 7 sometime in 2009.