ABI Research (http://www.abiresearch.com) expects mobile application downloads from Apple’s iOS and the Android to account for 78% of all application downloads in 2010, with iOS (the iPhone’s operating system) taking the lion’s share of 52% of all applications.

The numbers are driven by availability, variety and novelty in both the Android market and the Apple App Store, which is currently unmatched by any other smartphone platform, says the research group. In addition, the sale of Android phones has taken off in 2010, with over 160,000 activations being reported daily.

“The Apple App Store’s days of being the only game in town are over, although the store will continue to be the biggest player in the market,” says wireless research analyst Bhavya Khanna. “However, downloads from other platforms, such as Blackberry’s App Store and Nokia’s Ovi Store remain sluggish, hampered by a lack of variety and fragmentation among both manufacturers’ many devices.”

Revenues from mobile app sales continue their decline, as high competition leads to a “race to the bottom.” Full-featured games are available from between US$.99 and $5, and many popular applications are adopting ad-supported models. Application store owners such as Google, Apple, and mobile operators will continue to support low-priced and free applications because they help market and sell their devices. Making money will become a difficult proposition in a market that is expected to peak in 2011, with annual sales of just under $8 billion, according to ABI Research.