Apple Inc.'s (AAPL) iPhone software store contributes next to nothing to the company's revenue. Yet, the digital bazaar continues to prove a key weapon keeping Apple's iPhone atop a growing number of smartphone rivals.

Since it opened 10 months ago, the App Store has been a runaway hit selling a host of software that turn the smartphone into everything from a carpenter's level to a virtual change purse. Any day now, the Cupertino, Calif.-based computer company is expected to announce total downloads have surpassed 1 billion.

The App Store shows no sign of letting up. That, analysts say, is key to the iPhone retaining its popularity with consumers, even as a host of new competitors are readied for market. "They are little value enhancers," Gartner analyst Mike McGuire said of the downloads. They are why "Apple is the platform of choice" in the consumer smartphone area, he added.

The App Store's popularity may never have been more important. In coming weeks, Sprint Nextel Corp. (S) will begin selling Palm Inc.'s (PALM) Pre smartphone, a cutting-edge gadget that's getting good reviews and is seen as a big challenger to the iPhone's popularity. Meanwhile, Nokia Corp. (NOK) and Research In Motion Ltd. (RIMM), both battling the iPhone with their latest smartphones, have launched online application markets hoping to capture some of the magic the App Store has delivered for Apple.

On Wednesday, Apple is expected to report second-quarter results that show earnings rising 5% to nearly $8 billion even as the economy sputters. During the quarter, sales of iPhones, which retail at $199 apiece, are expected to reach 2.3 million units. The App Store will likely contribute less than 1% to revenues, even though roughly 110 million "apps" are downloaded every month.

On Monday, Apple shares were down 2.7% at $120.04. Apple had no immediate comment.

Behind the App Store's success is a dedicated army of software companies that prefer to write for the iPhone rather than for rival devices. More than 30,000 developers write iPhone software. Though many are smaller than the companies focusing on phones from Nokia and RIM, they stock the App Store with somewhere around 4,000 new programs a month.

This puts Apple ahead of competitors, chiefly because developers will devote more of their time to the iPhone, instead of its competitors. This impact is felt more so in smaller software operations rather than large iPhone developers, like game publisher Electronic Arts Inc. (ERTS) and online auctioneer eBay Inc. (EBAY), with the resources to churn out iPhone-compatible versions of their products.

-By Ben Charny, Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com