Android app volume to pass App Store but iOS developers to lead in revenue

Ovum research analyst Nick Dillon issued a report cited by CNET stating that the group estimates that a variety of stores serving Android apps could deliver up to 8.1 billion app downloads this year, contrasted with an estimated 6 billion served by Apple's iOS App Store.

The Android platform has lots of software stores in addition to Google's own Android Market, including GetJar and Amazon. The Ovum report noted that Apple "can't compete with such diversity, but still leads in the value of its apps."

The group estimates that five years from now, Apple will be generating $2.86 billion in app revenue, while all Android stores combined will pull in just $1.5 billion, even while it claims Android stores will be servicing almost twice as many app downloads (21.8 billion vs 11.6 billion apps by Apple) in 2016.

Ovum track record not great

In July 2010, however, Ovum predicted that "the dominance of Apple’s iPhone in the mobile app download market will be eroded over the coming years as rivals Android, Symbian and BlackBerry make inroads." That report was made before the implosion of Symbian, BlackBerry and Windows Phone 7.

At that time, the group forecast that by 2015, Apple's share of the app market would plummet from 67 percent of all apps downloaded in 2009 to just 22 percent, while figuring that Nokia's "burning" Symbian platform would take a 19 percent share. It also figured that RIM's BlackBerry and Microsoft's Windows Mobile/Phone 7 would both lose smartphone share but somehow double or triple their app share over the next five years.

The report's author stated at the time that "the iPhone generates the lion’s share of smartphone app downloads but over the period we will see the share of application downloads becoming more equally distributed." Just over a year later, Ovum is now predicting that Apple will retain a massive revenue lead, even as it buries that fact under the more sensationalist idea that Android stores will service a lot of downloads.

Lots of apps, little revenue

Part of the reason Android has so many app downloads is because Google has no real limits on what users can upload into its Android Market. Apps with actual functionality are buried by massive volumes of phony apps that are really just wrappers for wallpapers and ringtones, as any search in the store demonstrates.

However, a larger problem for Android developers is rampant piracy. A study by Yankee Group analyst Carl Howe on Android app piracy notes that "Piracy is a problem for Android and Google isn’t helping."

"Android developers make much less money from paid apps than iPhone developers do," the report notes. While suggesting steps Google could make to help reduce rampant piracy, the report recommends that Android developers "consider adopting business models beyond direct app sales," including ad banners and in app purchases to unlock key features.

Among Android developers, the report states that 27 percent reported piracy to be a "huge problem," while another 26 percent view it as "somewhat of a problem." A full 53 percent said Google is too lax in its Android Market policies. While Google has responded to remove active malware from its software store, many malware titles have generated a quarter million downloads or more before being identified as malicious.

Android a leader in copy/paste

But Google isn't the only company selling Android apps. While its own market may be lax, there are even more permissive stores offering Android downloads, and many of these welcome illegitimately copied and republished versions of developers' apps. This is done to spread malware under the guise of functional apps (as illustrated below by research firm Lookout).

Howe reports that three quarters of Android developers said it was "easy to copy and republish an Android app," while half said that pirating Android apps is "very easy."

Recent reports by Lookout and Retrevio noted an 85 percent increase in the number of mobile malware detections and that Android users are 2.5 times as likely to encounter malware than just six months ago, but that Android users are also the least prepared and informed about malicious mobile software.

Both groups contrasted Android's security problems with the safety of Apple's iOS walled garden. Lookout specifically described a new form of malware attack ("malvertizing") directed at pushing Android users to download malware directly from websites through legitimate looking web banners within existing apps, something that isn't even possible on iOS.

Rampant Android piracy hurting more than just apps sales

In addition to lost sales, Howe stated that 32 percent of Android developers reported that widespread piracy has increased their support costs, while another quarter noted that the network load of pirated copies of their apps resulted in increased server costs.

A third of the developers said that piracy has cost them more than $10,000 in revenue, making developing for the platform less rewarding on top of the fact that Android users are less likely to pay for apps in the first place, despite the high download figures announced by Ovum.

"Android apps are living in the Wild West without a sheriff,” Howe wrote. “With five other major mobile OSs competing for consumer dollars, Google can’t afford to simply let pirates kill app developers’ businesses. They need to foster some law and order or developers will flee to other platforms and Android will lose customers.”