

1 Billion Paid out through the Apple App Store - Really?  - yewweitan
http://communities-dominate.blogs.com/brands/2010/06/lets-dig-into-apple-1b-dollars-paid-out-by-iphone-app-store-how-relevant-is-this-number.html

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p0ppe
Worth pointing out is that the author is an old Nokia exec.

Here's what he had to say when the 3G was released; "Now I fear Apple is
entering into a similar mis-step it did with desktop computers with the
Macintosh line some years back, when they tried to take on Windows computers
head-on, tough low-cost pricing and almost identical feature set and just
fighting the "moving boxes" game. Apple is far too expensive a design company
to be able to afford to win in that game. That is mass market bulk game, and
the winners will inevitably be those with the scale to crush Apple, ie Nokia,
Samsung, LG." Doesn't really seem to be what has happened.

~~~
p0ppe
Some more; "But it no longer is the exclusive superphone, and I am afraid that
Apple has now forever abandoned the top end of the market to Nokia, Samsung
and SonyEricsson. Apple moved downstream. And that battle is far more tough
than the top-end market."

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ihodes
I don't know about the rest of you, but I spent over $100 on iPad apps the day
I got it (I knew what I wanted!) and am sure I've spent hundreds over the
three years I've had my iPhone.

Everyone I know with iOS devices has at least $25 worth of apps on each, if
not many, many more.

Given the number of words like "about" and "roughly" and "estimate" and "gut
feeling", I'm going to believe my anecdotal evidence over this.

I'd like to see a similar breakdown, but with more substantial data. Ah, but
that would be a pipe dream. Apple is a locked box. And that is okay.

~~~
jonknee
Just do the math, there are a known amount of devices sold and a known amount
of revenue paid. The average is about $16 which means you're a large outlier
and you travel in a circle that's also made up of outliers.

~~~
jufemaiz
Absolutely agree. Find the non-tech/geeks out there and check what they've got
+ spent _if_ they've an iPhone/iPod Touch/iPad.

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Samuel_Michon
Let's review:

\- 90 million iDevices sold in the last 3 years

\- in the last 2 years, there's been $1.43 billion in App Store sales

\- 70% of that = $1 billion, was paid out to developers

\- there are currently 225,000 apps available in the App Store

\- 85% of all apps are free (according to the author)

That would indicate that an average paid app that debuted in the App Store two
years ago has since grossed $42,370 -- of which the developer received
$29,659.

(0.15*225,000= 33,750 paid apps)

(1,340,000,000/33,750= $42,370 in sales)

Doesn't seem too bad a deal, especially given the rate at which the iDevices
sell. Before the end of the month, there's going to be 100 million iDevices in
the wild. The number of potential App Store customers is growing at a high
pace.

~~~
aristus
"Average" figures are usually meaningless if not outright deceptive. If Bill
Gates gets on a bus the average net worth shoots way up, but it doesn't mean a
thing.

Consider a distribution where the top app earned $1,000,000, the next ten
earned $100,000 total, the next 100 earned $10,000 total. The "average"
earnings would be $10,000. But the vast majority of apps (100 out of 111)
actually earn about 100 bucks.

~~~
wallflower
Without access to the actual iTunes sale data and using anecdotal information
from people posting about their sales rank and revenue, my assumption is you
could get a pretty credible grasp of how many apps are in the long tail/rarely
purchased - just by looking at the number of ratings.

Zero ratings probably means near-zero downloads.

Though not everyone rates the app. In fact, some apps might not get rated
until deletion.

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wallflower
I don't understand this focus on average revenues. With few exceptions, most
of the iPhone developers I personally know make their money by consulting for
companies on their free apps.

They have apps on the app store, sometimes for personal gratification only.
For instance, one guy does tab bar-type content/search apps for most of his
income, and he laments that he can't get paid to make games (his true love -
and he has two games on the app store. One of them, a card game, has done
quite well). Yes, he still carves out a small slice for personal fulfillment
game projects.

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BoppreH

      The latest count I've seen is 225,000 total apps on the App Store.
      So if we divide the 1.43 billion dollars cumulative revenues
      earned by those 225,000 apps, we get an average revenue earned
      of 6,355 dollars per app (over 2 years).
    

But you had just said this:

    
    
      Thus free apps would form 85% of all downloaded apps on the
      Apple iPhone App Store, and paid apps only for 15% of all apps.
    

Shouldn't you divide the revenue only by the number of paid apps? That would
surely make the platform much more financially interesting.

And you are assuming too much averages. How many of the apps got this "average
revenue", what how many spent the "average" in development?

~~~
jufemaiz
Numbers, cuts etc etc.

A billion is a big emotional mark. Breaking it down to a per unit, regardless
of what is _actually_ given out as revenue, is a fairly traditional means of
giving an indication of the per unit revenue (even if unfairly distorting).

Eg: cost of military + war in Iraq (in particular) is often distilled down to
the cost born by each man, woman and child in the USA - despite the fact that
each man, woman and child does not bear an even cost (nor some would argue an
even benefit).

~~~
BoppreH
That is perfectly acceptable.

But the author is claiming that the developers are not making money with it
and he's using flawed logic to get there. That's not ok.

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houseabsolute
Here's my thing. I think people are irrationally buying too few apps.

What do I mean by that? Well, good apps have the potential to really improve
the experience of using your phone. They also cost very little compared to the
price of the phone itself. If there are ten apps that could increase the value
of your phone to you by ten percent each and each app cost $5, then it would
be very silly not to buy each of these apps. This is for two reasons: first,
your phone being twice as valuable to you means the dollars spent per unit
value has gone from ($500 / v) to ($225 / v). Second, spending money on the
apps created by good developers in aggregate grows the availability of good
apps by encouraging more talented people to enter app-making.

The other thing is that the price of apps is typically peanuts compared to the
cost of the hardware. I have a $500 phone (Nexus One). I was recently
considering breaking my contract with Apple to go over to t-mobile because I
have the Google-issued version of the N1 whose 3G radio works on t-mobile
only.

Initially, I thought I would be able to buy a t-mobile plan for $50/mo with
the "unlimited internet for phones" plan. But it turns out I'll need the one
for smartphones. Now, this is undoubtedly stupid. But the level of stress I
gave myself over $10 per month, which will still represent a $15/mo savings
over my iPhone plan, is ridiculous, especially compared to the other costs
involved, or, for example, my $1500/mo rent.

TL;DR: I think people in general succumb to false economies when thinking
about small prices that could possibly greatly enhance the experience of using
various devices.

And I think I'm going to go get my number ported this afternoon.

~~~
orangecat
_TL;DR: I think people in general succumb to false economies when thinking
about small prices that could possibly greatly enhance the experience of using
various devices._

Agreed. I'm not sure I'd call it "irrational" though; defaulting to not buying
is a reasonable way of avoiding the annoying mental transaction costs when
you're faced with a huge number of small potential purchases. Clay Shirky's
piece on micropayments 10 years ago is relevant here:
<http://openp2p.com/pub/a/p2p/2000/12/19/micropayments.html>

~~~
houseabsolute
I should modify "irrational" to say just "mistaken" or "suboptimal."

------
swombat
The author of this post is pulling numbers out of his arse and sticking them
together with hand-waving maths to try and make a larger point about App Store
business-worthiness. That makes for a pretty poor article.

Here's a simple truth:

You can make numbers say whatever you want, particularly when you don't care
about getting real, accurate, relevant numbers.

In short, there is no information in this post other than the author's
preconceived judgements. If the author's original opinion had been that the
App Store is a great deal for developers, I have no doubt that the numbers
would have shown just that.

~~~
megablast
Well, no he isn't. He is trying to extrapolate information from a few
different data sources, the figure of $1 billion from Apple, and the average
price of a sellable app.

From that, and some seasonal data, he is trying to calculate how much has been
made over time. While he is probably not entirely accurate, what he has done
makes perfect sense, and he is not waving his hands in the air to try to make
up results according to an agenda.

~~~
swombat
You could take the same numbers and make them say the opposite with subtly
different assumptions. In short, those numbers are meaningless, or at least
this analysis is meaningless.

------
orangecat
I suspect the average cost of app development is far less than the $15k to
$50k the article claims. The formal budget for lots of apps is zero or close
to it, and even if you include the opportunity cost of a hobbyist's time
(which is silly), you'd only get to the low thousands in most cases. Maybe
there's a few big-budget apps inflating the mean cost, in which case the
median would be more informative.

Although along similar lines, the median app almost certainly earns well under
the $6355 average.

~~~
megablast
The cost is very different if you are developing your own apps, or you are the
'brains' and need someone else to develop the apps for you.

I think this is what the article is trying to say, that a return for someone
like that may not be there yet, but this always depends on the idea.

------
allend
This is the same guy that said iPhone sales had peaked by 2010, a couple weeks
before Apple announced record sales: [http://communities-
dominate.blogs.com/brands/2010/04/iphone-...](http://communities-
dominate.blogs.com/brands/2010/04/iphone-in-memoriam-a-history-from-its-peak-
moment-who-copied-whom.html)

And then blamed his faulty analysis on Chinese New Year: [http://communities-
dominate.blogs.com/brands/2010/04/apple-t...](http://communities-
dominate.blogs.com/brands/2010/04/apple-to-thank-year-of-tiger-for-china-
surprise-in-iphone-strong-quarterly-sales.html)

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clearf
I suspect that people do not write an app hoping to be the "average" app, but
are instead hoping to be a breakout app that becomes very popular. It seems
like an example of superiority bias.

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ZeroGravitas
The 85% apps being free is an important figure. That means only 15% of apps
are taking advantage of the killer feature provided by the App store, easy
billing. The overlap between the 85% that don't need billing and the X% that
don't need high processing power is the sweet spot for cross-device HTML5
developers.

With that in mind it's interesting that Apple is moving into ads (a way to
monetize without direct billing).

