Though the purchase price is an anomaly, the message behind Facebook's $1 billion agreement to buy photo-sharing application Instagram is not: apps are where the money is.
It's a sentiment echoed by countless startups now writing software applications for smart phones and tablets. All are hoping for a share of the $6 billion in revenue that Forrester Research says apps generated in 2011 from purchases and ads. Forrester expects app revenues to double this year, to $12 billion—an incredible figure for a market not yet four years old.
The mobile market's size and fast pace have convinced some investors to focus on it exclusively. The venture capital firm Kleiner Perkins Caufield & Byers, for instance, is investing $200 million from its so-called iFund in mobile software. Now some startup incubators and accelerators (which trade funding and sometimes office space for a stake in new companies) are also switching to an all-mobile model, among them Tandem Capital and Archimedes Labs.
But could it be risky to put all your eggs in one mobile basket? Overall, the odds of runaway success are very low. In March Apple said it had paid developers about $4 billion since launching its app store in 2008, but that money was split among some 340,000 apps, according to Distimo, a market research company in the Netherlands. Distimo estimates that the average app currently pulls in just $20 a day, or around $7,300 a year.
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