Huge Tech Growth Expected From Apps

Includes: AAPL, BB, GOOG
by: Investment U

By Matthew Carr

I read a quote earlier this week that said, “The sky’s not the limit because there are footprints on the Moon.”

Someone promptly one-upped that and wrote, “The sky’s not the limit because there’s a @#$%! robot on Mars.”

There’s certainly a market out there reaching for the stars – at least in one area of the tech sector. It’s spawning numerous start-ups and has ushered in a golden age for developers.

We’re talking about apps, man…

As I mentioned in a recent column, the global app market topped $2 billion last year. Astonishingly, Gartner, Inc. (NYSE:IT) expects the market to generate $15.1 billion in revenue in 2011… $27 billion by 2013… and north of $35 billion by 2014, according to International Data Corporation.

If those projections prove true, the global app market would experience a mind-numbing growth rate of 1,958% between 2009 and 2014.

Now maybe you agree with Co-Chairman and Co-CEO of Research in Motion (RIMM), Jim Balsillie, who believes the app market is a fad and is destined to fizzle out. But the statistics say otherwise…

10 Billion Served and Counting

Apple’s (NASDAQ:AAPL) App Store just notched its 10 billionth customer served in January (the prize for this notable milestone was a $10,000 App Store gift card).

That’s a McDonald’s (NYSE:MCD)-esque level of notoriety. Even more impressive is that the App Store only went live in July 2008, with what now seems like a laughably small inventory of available downloads – a mere 500.

Today, that’s ballooned to over 350,000 apps. And the pace of downloads is a runaway train…

  • A report from Pew Research showed that 24% of U.S. adults are using mobile apps, with the average user downloading 18 of them.
  • The number of mobile app downloads is expected to jump from under 11 billion in 2010 to 77 billion by 2014.

For 2011, Apple’s App Store is anticipated to bring in at least $2 billion by itself. And where there are apps, there’s the tertiary smartphone market “in-app advertising.” Google’s (NASDAQ:GOOG) in-app advertising is anticipated to generate $1 billion in revenue in 2012.

So what say you now, Mr. Balsillie?

Angry Birds and Beyond…

To further squash the fad notion, apps are now serious business.

And propelling this rampant activity is an increasing number of smartphones and tablets. Morgan Stanley forecasts tablet sales to surge over 100 million by 2012.

Over the next three years, projections call for a six-fold increase in the use of smartphones and other mobile technologies in the daily course of business.

Chew on this: More then half of all physicians are using smartphones or some other mobile device on a regular basis in everyday treatment. And the use of smartphones is rapidly increasing in the healthcare industry…

  • In 2009, $41 million was spent on medical apps. In 2010, that doubled to $84 million.
  • There are now more than 2,000 healthcare management and medical apps, ranging from scheduling daily exercise and managing diseases like diabetes, to heart rate monitors and accessing medical records.

All this growth is why Kleiner Perkins Caufield & Byers doubled the size of its venture capital iFund to $200 million in March 2010.

And the marketplace is more than just Rovio’s “Angry Birds” and InfoMedia, Inc.’s “iFart” or “Fleetmaster.” Apple’s “Pages” – a word-processing program – is No. 4 for iPad downloads at a premium price of $9.99.

So while fun and games will continue to dominate the download charts, there’s real work being done, too.

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