Rising demand for complex multimedia-centric applications is forcing handset manufacturers to design increasingly smart and highly personalized Web-enabled mobile devices.

A new report from Juniper Research forecasts that smartphones will account for 23 percent of all new handsets sold per annum by 2013. Driving interest in smartphones will be the proliferation of online stores selling specialised applications that will make these devices better suited to individual users' needs.

"The strong growth in popularity for smartphones is attributed to numerous trends," said Andrew Kitson, analyst for Juniper Research, Hampshire, Britain. "Firstly, more new phones coming onto the market are smartphones because consumers want and need multimedia devices that can properly address their Internet-centric and social networking needs."

He cites examples including FaceBook, YouTube, music downloads, video downloads and mobile banking.

"Although we're in the midst of a recession, people believe they're getting better value for money by buying multifunctional devices than they would derive from, say mid-range phones," Mr. Kitson said. "At the same time, vendors are always brining prices down and operators are offering flat-rate tariffs and unlimited data download services, so it's become more affordable to run a smartphone.

"There's also the fashion element involved," he said. "These smartphones are very attractive and desirable products in their own right."

Juniper Research provides research and analytical services to the global hi-tech communications sector.

Vendors adopt App Store model
The runaway success of Apple's App Store -- reportedly 300 million applications were downloaded by iPhone users within five months of its launch -- underscores the rapidity with which smartphones are being adopted by ordinary consumers, eager to build a complete multi-utility lifestyle tool rooted in the Web 2.0 culture.

The App Store was not the first on the market, but its high visibility and ease of use has prompted players such as Nokia, BlackBerry-maker Research In Motion and Google to also jump into the applications market.

Popular applications include mobile versions of social networking sites such as Facebook and MySpace.
Also, music downloading or streaming, video downloading, emailing, picture messaging -- MMS -- are in demand.

"The applications market is really beginning to take off, thanks to the model employed by Apple with its App Store," Mr. Kitson said. "It's now incredibly easy to get applications onto the market and have them properly promoted.

"The 70-30 split on royalties in favor of the apps developers is also behind the massive growth in demand for and usage of mobile applications, though the quantity of new apps being put onto the App Store means that it's already difficult to find what's new," he said. "It also dilutes potential sales, by having too much of a similar type available in one place.

"Nevertheless, the other vendors are following suit with their own App Stores, and all of this should massively boost usage of mobile devices -- if only it wasn't happening in a recession!"

Other findings from the ?Next Generation Smartphones: Players, Opportunities & Forecasts 2008-2013' report include the prediction that, by 2013, annual smartphone sales will reach around 300 million.

Juniper also predicts that sales of smartphones will remain healthy during the recession, as fewer mid-range devices compete for buyers' attentions and pricing becomes more attractive, while consumers will come to believe that they will be getting more for their money by buying high-end devices.

Device vendors are seeing falling margins on handset sales and need to diversify into service provision with high-value content from which they and their network operator partners can profit, according to Juniper Research.

While the most popular smartphones are constantly changing, Apple's iPhone and Research In Motion's BlackBerry are the two most established brands in the U.S. Plenty of competitors continue to enter the space, however.

"I think the most recent Nokia N-series devices, as well as their music-enabled devices, are selling very well here in Europe, as is the iPhone and the various consumer and professional models of RIM's BlackBerry," Mr. Kitson said. "Sony Ericsson's Xperia X1 is doing the business here in Europe, as is a number of their Walkman phones.

"Samsung and LG Electronics' handsets are also selling very well at the moment," he said. "Poor old Motorola isn't getting a look in at the moment, possibly because its products can't compete with the iPhone and BlackBerry.

"Palm's new Pre device looks very good and has got some good reviews, but it likely won't sell in iPhone-like quantities."

Sprint offers a Simply Everything plan starting at $99. All-you-can-eat data plans are becoming more common in the larger European markets because these markets are saturated, and carriers and resellers are finding it difficult to get new customers.

"To keep existing customers, they need to offer very attractive subscription rates and subsidise handset prices," Mr. Kitson said. "To make money, they need to sell value-added services such as data and content and, by offering flat-rate plans, they hope to at least keep traffic levels as high as they are or to grow them.

"Because smartphones are data-centric, this helps boost take-up and usage of content and data," he said.

It is well known that smartphones are an ideal platform for mobile marketers.

"Smartphone adoption should hopefully be very attractive to advertisers and marketers because they can derive a lot more information about customers' social, working and personal lives through the way in which they use their phones," Mr. Kitson said.

"Some services are now offering customers the option of getting free or low-cost services by accepting targeted advertising," he said.

Mr. Kitson cited the example of the European MVNO Blyk. Virgin Mobile offers a similar initiative called Sugar Mama.

"The multimedia capabilities of smartphones also means the opportunity is there to create more dynamic and interactive advertising and marketing, based around video and audio-based content, which may either be delivered as part of the initial email or can be reached via a link -- like Google links, etcetera," Mr. Kitsom said.

"Very soon, the majority of new phones will be smartphones," he said.