

Apple makes around 15% of its App Store money from developers - v21
http://nottheinternet.com/blog/depressing-thoughts-about-the-app-store/

======
rmah
The analysis in the article is breathtakingly wrong. The data used is wrong.
The math used is wrong. The conclusions are wrong.

First, the article assumes each developer creates one app (160,000 * 8700 =
$1.392B revenues, $1.392 * 30% = $418mil "profit"). This error leads to
further errors down the line.

Second, Apple App Store sales is estimated to hit apx $4.9B 2012 [1]. This
means apx $1,470mil in gross income (what the article calls "profit"). The
article uses only $1.39B revenues and $418mil in gross income in its
calculations as outlined in point one.

Third, this analysis assumes every developer would not purchase an iPhone if
they were not developing software. Given that the vast majority of iOS
developers do it part time, I think this assumption is highly unlikely.

Fourth, including profit from phones as a % of appstore profits is just wrong.
Phone profits are not included as part of appstore profits. Thus it cannot be
used as a % of it. It is _additional_ income, on top of the appstore.

Finally, just to give you an idea of how little profits from developer
matter... In the last 4 reported quarters, Apple earned a pre-tax net income
of $49,000mil. Or $134mil per day. This versus the article's $64mil over the
entire year from developers. Somehow I don't think they spend a lot of time or
effort trying to get money out of developers.

[1] [http://www.mediabistro.com/appnewser/apples-app-store-
revenu...](http://www.mediabistro.com/appnewser/apples-app-store-revenue-
expected-to-increase-70-in-2012_b26843)

~~~
saurik
The reason the number in this article is interesting is that it is a
compelling absurdity: the notion that Apple might make an appreciable amount
of money off the average developer due to "developer on-boarding" costs as
opposed to fees from selling their software.

The analysis in the (simple) article, thereby, is actually quite funny, and is
part of an overall correct narrative; although, I agree that it was not
described in quite the right context, and lends itself to your math
complaints, which are technically quite correct.

From this standpoint, using the average developer income does not destroy the
analysis (and is in fact required of it): if I were using a similar analysis
in a talk, I'd want to speak to the people in the room, to give them a feel
for what Apple will make from that sample.

Secondly, it is not problematic to ignore that the developer might have
otherwise purchased an iPhone: the purpose of this kind of analysis isn't to
demonstrate that Apple is "trying to get money out of developers", it is to
demonstrate a comparison in the money made.

However, you are quite right that the math in the article is flawed:
thankfully, some parts compensate by being conservative; once you take into
account processing fees and other fixed costs (as various others have done),
Apple's profit on the App Store is closer to 10%, not 30%.

We then get $4.9b*10%/160k, giving (conservatively, working back up towards
12%) ~$3500/developer. ($300+$99)/$3500 is >10%, which is still an interesting
figure to be able to trot about at conferences (especially if you try to
estimate the money spent on Macs).

(If I were to try to undermine the math in this argument, I'd probably do so
from a different angle: the $99 is not pure profit, as Apple has employees
scanning over the contracts and vetting corporate accounts; the fixed per-
signup costs need to be removed.)

(Additionally, I question whether the average developer buys the most
expensive device Apple offers, or instead purchases an iPod touch to use only
for development; and then, keeps the iPod touch for longer than a year. A bi-
yearly iPod touch would destroy this math.)

~~~
specialist
> compelling absurdity

It's also plausible.

Early Autodesk's entire business model was built on top of fleecing their
dealer (value-added reseller) channel.

Ditto franchises, pyramid marketing, ponzi schemes.

That said, if you're smart and very lucky, it's possible to make real money
playing in someone else's sandbox.

------
mistercow
What's really depressing is that Apple's App Store revenue (whatever its
source) comes from basically having strip mined a thriving freeware and
shareware community. They did at least wait until CNET clear-cut the
VersionTracker rainforest, but still.

Three years ago, a hobbyist could make an app in their free time, put it out
there for cheap or free, and see what happened. If the app was any good, what
would happen could easily be that they made a livable income off of their
creation.

Today, that hobbyist has basically three options:

1\. Pay Apple $99/year for the privilege of showing their creation to the
world, and release it through the App Store. Feel their enthusiasm for the
project drop as they go through that tooth-pulling process, but expect that it
will all be worth it since the App Store will at least give them some good
exposure. Watch as it doesn't.

2\. Pay Apple $99/year for the privilege of showing their creation to the
world, and release it on their own. This is a lot like the old days, except
that now Apple is taxing you, and the old tools for spreading the word have
largely starved.

3\. Don't pay Apple a dime and release the app unsigned. Explain on the
download page that the end user will have to edit their security preferences
to allow unsigned apps. This looks sketchy to users, and now our hobbyist is
suspected of being a criminal.

~~~
2muchcoffeeman
I'm not sure what it is about software that makes people so damn cheap.

Consider all the other activities that people do as hobbies that have
absolutely no possibility of even breaking even. Some of these require
expensive equipment, fees, time. Getting set up to develop for iOS, even
allowing for the cost of buying a Mac, compares well to what else you could be
doing.

~~~
mistercow
It's not just the cost. It's also the bureaucracy and loss of control that the
App Store creates. Releasing and maintaining an app as an individual developer
is difficult enough without adding a whole layer of unnecessary red tape and
fees that serve no legitimate purpose.

~~~
CJefferson
Also it makes it very hard to just leave apps up. Do I keep paying Apple every
year just to give a free app away to people?

~~~
2muchcoffeeman
Why not? If you have a half decent app and it helps people, and that gives you
some satisfaction, do it. That's a well spent $99. Everyone already spends
more money on less worthy things.

------
andrewcooke
_Very few apps do make $8,700 (but those that do, often make far more)_

is that true? i would have thought it's a power law. in which case it would be
more correct to say "Very few apps do make $8,700 (and of those that do, few
make far more)" since with a power law distribution, no matter what level you
pick, the extremes are still extremes (if you see what i mean - the 1% have
their own 1% who are the crazy rich part of the crazy rich...)

so does anyone have any numbers?

[it strikes me that, depressingly, you could summarize this as: no matter how
good you are, getting an order of magnitude better is still hard.]

~~~
SwearWord
Right it's the average a single app makes that matters, the heavy hitters like
Rovio can make up for your dime a dozen fart apps.

------
cinbun8
I doubt apple makes a substantial amount from developers alone. Quoting [1]
which is the research I believe rmah is talking about...

"Global Apple App Store revenue is set to increase to $4.9 billion in 2012, up
from $2.9 billion in 2011, according to an IHS Screen Digest Mobile Analyst
Commentary from information and analytics provider IHS (NYSE: IHS). This means
that nearly half of the revenue generated by the App Store in its five-year
history will be earned this year alone."

Those are some pretty strong numbers. Given that the number is projected, even
with a generous error rate of +-20%, any revenue from developer fee will be
eclipsed by 4.9 billion.

While the author's estimate that apple generates 15% of its revenue from
developers is inaccurate, it has to be said that the entry fee to get into
iphone / ipad development is high. I would know since I'm currently developing
a product that works across iphone / android / web. Here are our costs thus
far (excluding phone-device prices ).

Apple:

Mac Air 1200$

Developer account 99$

DUNS number 200$

Server certificate for notifications 175$

Android: Developer account 25$

<For development - Use the mac or boot an old clunky win laptop with Win-XP on
it>

Web: 0$ so far

Developing for apple devices is costly. For the same 1200$ that I could spend
on mac air, I can get 2 powerful Win-7 laptops - ~ 500-700$ each [2]. Device
fragmentation on android does require you to test on more devices, but there
are services[3] that allow you to work around that problem. Besides, when
netflix can release their app by testing it on a subset of 8 android devices
[4], I don't see why that strategy is not good enough for others.

The author does have a point, but one that should not have been expressed as a
percentage of apple revenues.

[1] - [http://www.isuppli.com/Media-Research/News/pages/Maps-and-
Pa...](http://www.isuppli.com/Media-Research/News/pages/Maps-and-Passbook-in-
iOS-6-Help-Propel-Apple-App-Store-Growth-in-2012.aspx)

[2] - <http://www.dell.com/us/soho/p/vostro-laptop-deals>

[3] - [http://stackoverflow.com/questions/1852248/is-there-an-
andro...](http://stackoverflow.com/questions/1852248/is-there-an-android-
testing-service-i-can-use-to-give-me-real-debug-information)

[4] - [http://techblog.netflix.com/2012/03/testing-netflix-on-
andro...](http://techblog.netflix.com/2012/03/testing-netflix-on-android.html)

[EDIT] - Formatting

~~~
janardanyri
All of the costs cited are rounding errors in comparison to the scarcity of
good developers' time, especially developers capable of delivering product
across iPhone / Android / web.

Developing on "an old clunky win laptop" in particular is far from zero cost.

~~~
fleitz
I always love how much developers think they can save skimping on hardware.
$700 is a day worth of downtime. My Macbook Air is easily worth $4000 to me
now because it broke 3 times and they turned it around each time in under 24
hours. When my windows laptop breaks im with out it for 2 weeks requiring me
to purchase another one.

~~~
cinbun8
Who said anything about skimping on hardware ? My point was that you don't get
the same horse power for price ratio on an apple laptop that you get from a
Windows laptop. As for support it depends on your geographical location. You
were able to get your mac air replaced thrice within 24 hours each time and I
get similar support for my Windows laptops. It took me 4 days just to get a
human being to respond to a problem I had with apple up-to-date support.

Developer time is more valuable than hardware costs hands down. The horse
power that you can back in return for that hardware cost varies between apple
and windows.

------
jankins
Even if the stats were correct, it wouldn't make any difference to me as an
iOS developer. The author seems to suggest iOS development is apple-win and
developer-lose. Which might be the case if iOS were not an in-demand skill.

But as a developer, your own income is obviously not limited to what you can
make on your own apps, and since diving into iOS six months ago my income has
far exceeded any investment i've made in the platform. Mostly through making
apps for other people, by my own app itself has very nearly recouped my total
apple investment to date.

This is somewhat tangential to the author's main point, but my take is that
there are many angles the author has failed to think of, and it's not a fair
analysis of either apple or developers.

~~~
uxp
This really hits on a key _long term_ solution. A hobbyist could pick up a
macbook pro, or already have one because they're trendy, and play around with
Xcode and the simulator for a long time _for free_. Once the lightbulb flicks
on and that hobbyist decides to plop down $99 for the paid account and signing
certificate, releases one or two apps into the store, that _developer_ is now
a highly sought after asset to thousands of companies as a full time employee
or contractor.

Where's the back-of-the-envelope calculations on spending $500-$1500 for a Mac
and $99 for the Dev Account and turning that into a lifelong and highly
valuable skill? It might be more money than $800 + $25 for the same on a
Windows PC and Android, but it's not a huge difference when you compare the
output. What other hobbies can be turned into a lucrative career with a soft
cap of $2000 and 6 months to a year of practice?

------
saurik
I did the math out for people in my talk at JailbreakCon, and <1% of Apple's
iPhone-related profit could possibly be coming from the App Store, and it is
likely quite a bit less than that (I made a couple conservative estimates, and
totally ignored iPod and iPad hardware).

(The talk was recorded, and I believe has been posted in various places; it
also goes through why tiered pricing models for things like bandwidth work the
way they do, as many people who are confused by the App Store also never
worked that out for themselves either.)

~~~
mistercow
Edit: Ignore me. I misread the parent comment.

"I've done the math before, and this post is wrong" isn't very compelling when
the post in question shows the math behind its conclusion. What would be most
compelling would be to point out the flaw in the post's math, and also to show
us your own approach.

~~~
mst
Actually, he was saying "I've done the math before, and the results are
actually even more skewed than the post suggests".

So you can take the post as right on the basis of the math in there, or even
-more- right on the basis of saurik's calculations.

I think "The talk was recorded, and I believe has been posted in various
places" was basically "you can find a citation if you look but I don't have
one handy, sorry", which is fair enough for a brief HN comment; I, at least,
still find the data point somewhat useful.

~~~
saurik
No. I was pointing out yet another quite specifically different number, and
pointing out a way for people interested in this to learn more on this topic.

This article is focusing on a specific number that I actually found quite
hilarious (money made from the App Store being swamped by developer hardware),
and is not something I have previously analyzed.

~~~
mistercow
Oh I see. I misread your comment. My apologies.

------
Spooky23
How many developers are doing precisely the same thing? How much revenue is
Amazon making because I can read Kindle books on my iPad vs buying a kindle?
How many skinner-box game developers are hocking virtual sheep with a free to
sart game?

------
miahi
<http://www.elearnenglishlanguage.com/difficulties/its.html>

~~~
v21
Ta, fixed.

------
SwearWord
Well Apple's content (iTunes, App Store) exists mostly to move their hardware.

Compared to Amazon where the hardware exists to give users access to content.

Explains some of the price differences between the devices.

