Total downloads over mobile app stores will surge 60% in 2013 to 102 billion, according to Gartner.
App revenue will jump 44% this year to $26 billion, with free apps accounting for 91% of total downloads in 2013.
Gartner said that in-app purchases (IAPs) will account for 48% of app store revenue by 2017, up from 11% in 2012.
"Free apps currently account for about 60% and 80% of the total available apps in Apple's App Store and Google Play, respectively," said Brian Blau, research director at Gartner. "These app stores are still increasingly active due to richer ecosystems and large and very active developer communities.
IAP purchases will drive 17% of the store revenue in 2013 and increase to 48% in 2017. However, as with downloads, IAP is expected to have strong growth in 2013 and 2014 and slow in later years.
This is due to smart devices reaching more mass-market consumers whose willingness and/or affordability to spend on IAPs is lower than early adopters.
Nevertheless, IAP will become a major monetization method for apps stores and developers.
Research shows that IAP contributes to a significant amount of Apple's App Store revenue from iPhones worldwide.
Other platforms have not reached such high levels as the iPhone, but analysts expect they will also see IAP contributions increase in the future.
“We believe that IAP is a promising and sustainable monetization method because it encourages performance-based purchasing,” said Blau. “Users only pay when they are happy with the experience, and developers have to work hard to earn the revenue through good design and performance.”