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Apple's rivals battle for iOS scraps as app market sales grow to $2.2 billion

While the mobile handset race is now being frequently described as a two horse race between Apple's iOS and Google's Android licensees, the mobile software world has four major contenders, with RIM's BlackBerry App World and Nokia's Ovi Store maintaining their lead over Google's Android Market.

On the heels of acquiring iSuppli, market research firm IHS has released an interesting look at the current and future markets for mobile software.

At the top of the charts is Apple's App Store, with a 82.7 percent share of the market on revenues of $1.78 billion, aided in part by sales of new iPad apps. The App Store has grown by 132 percent over the last year, but its share has slipped from last year's 92.8 percent as other vendors have worked hard to put in a showing.

In second place is RIM's BlackBerry App World with 7.7 percent share and revenues of $165 million. While offering a smaller catalog of titles, RIM's software is priced higher and aimed at an audience of business users. The market's software sales have grown by 360 percent in the last year. BlackBerry plans to release a PlayBook tablet it hopes will sustain this growth.

In third place is Nokia's Ovi Store, driven mainly through sales of Symbian software. IHS assigned Nokia a 4.9 percent share of the app market on software sales of $105 million, and said the company's mobile market has grown by 719.4 percent. Nokia just announced plans to transition its higher end smartphones to use Microsoft's Windows Phone 7, a platform that does not even appear in IHS' rankings.

Google's Android Market took fourth place, registering a 4.7 percent share on revenues of $102 million, representing growth of 861.5 percent compared to 2009. The discrepancy between Google's strong showing in handset sales and minority position in software sales was alluded to by Google itself, which has said it is "not happy" with the number of apps Android users are buying.

The report said mobile apps are likely to grow to a $3.9 billion business this year, with Apple expected to maintain more than half of all sales through 2014. IHS also figures that Apple's iPad, which currently makes up about 20 percent of App Store revenues, will increase to 50 percent of Apple's business by 2014.

Most apps are games

IHS said games made up 52.2 percent of all mobile app sales in 2010. Apple changed its historically serious stance on software to capitalize on gaming, particularly with the iPod touch and now iPad. Those efforts have put the squeeze not just on other mobile platforms, but also dedicated portable gaming devices from Nintendo and Sony.

One developer report even indicated that the iPad release of its title, World of Goo, performed better in unit sales and revenues than it had on console app markets, including Nintendo's WiiWare, Microsoft's Xbox Live Arcade, and Sony's PlayStation Network, and even Steam sales on PCs and Macs.

Sony is fighting back with a new two pronged approach that targets Apple's iOS with both a high end, next generation PlayStation Portable (codenamed NGP) and a framework for adding basic PlayStation-branded games to Android phones that are certified as capable of running baseline games on the level of the mid-90s PlayStation One. The company has even hinted at releasing a tablet with PlayStation One games installed on it.

Previous attempts to create licensed gaming franchises have not worked out well, ranging from the 3DO program to Nintendo's efforts to license its games on Philips' CDi platform to Microsoft's efforts to launch Gizmondo as a portable gaming platform based on Windows CE, to OpenPandora, an effort at open source portable gaming built on Linux. At the same time, Nokia's efforts to launch cell phone gaming with N-Gage was also a disaster, leaving Apple's creation of a healthy gaming ecosystem for iOS as a rare success story.

Why is Apple ahead?

According to a report by Barrons blogger Tiernan Ray, analyst Toni Sacconaghi of Sanford Bernstein surveyed leading app developers to determine why Apple's iPhone remains for far ahead of Android, despite reports indicating that Android licensees represent a larger group.

Apple's App Store library now stands at 350,000 apps, compared to Android Market's 130,000 titles and far smaller catalogs for other platforms, including RIM's BlackBerry OS, Microsoft's Windows Phone 7, and HP's webOS.

One factor cited was the "45 percent incremental effort" required to port an app from one platform to another, which Sacconaghi interpreted to mean that "platforms beyond iOS and Android will continue to be challenged to develop meaningful developer support."

Interestingly, developers in the survey responded that Android was the easiest platform to write for, followed by iOS. It wasn't clear if this result only referred to matters related to development tools, or also included Apple's app approval process, a factor that many developers have described as frustrating to deal with in getting their apps listed within iTunes.

On the other end of the spectrum, "BlackBerry OS and Symbian were cited as especially difficult to develop on," Sacconaghi said. "We picked up some developer enthusiasm around RIM’s QNX (used in the forthcoming Playbook), while developers talked about a wait-and-watch policy on Windows Phone 7.”

HP's webOS, which it recently demonstrated as powering both new smartphones and a new tablet product, was also said to be easy to be "easy to develop on." The webOS, initially created by Palm, is based on web standards.

Market fragmentation

Ease of code development is not the only factor that impacts developers. While descried as easy to code for, Android was also noted by developers in the survey to have issues related to "fragmentation of both the software and the hardware profile."

The report added, "that’s not going to change anytime soon, given the various competing interests in the Android market that keep parties from getting on the same page," noting that there are 15 different combinations of screen size and resolutions on Android devices that developers must account for, and "five different combinations for memory specification."

At the same time, Android's hardware fragmentation was described by the developer of Angry Birds as "not the issue, rather the fragmentation of the ecosystem," describing Android as becoming chaotic and "open, but not really open, a very Google-centric ecosystem."

Sacconaghi concluded that the survey results indicate “continued dominance by the iOS and Android ecosystems," while holding out that "the most significant wildcard to this thesis is the potential emergence of code-conversion (common-runtime) tools that could deliver new apps to all major platforms at very little incremental cost to developers."

Despite the potential for common runtime tools (such as Adobe AIR) to help facilitate the development of cross platform mobile apps, "only one of the dozen developers surveyed is using such tools currently," the report stated.