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Apple basically breaks even on the iPhone app store, too.



I'd like to see hard numbers about this assertion

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They discussed it in their shareholder's call. But really though, is it that surprising? 30% does not go far when you take servers/bandwidth, customer support and credit card transaction fees into account selling mostly $0.99 products.

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Being conservative

Credit Card Processing: $0.25+2.9% Bandwidth for downloading even the largest 99 Cent apps (2GB) using amazon S3 (or a smaller version multiple times): $0.32

So that's basically 60 cents in cost for certain apps to be downloaded in the worst case.

Honestly, looking at that, it somewhat looks like they should wipe out the Tier 1 price point. Then it would seem they'd break-even on every paid app download.

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except that they don't have CC transactions for EACH app you download, do they? I believe they make a bulk charge at the end of the day so if you download a $2.99 app and three 99 apps, they don't pay a transaction cost for each app. They pay $.25 + 2.9% of $5.95.

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I was being conservative with worst case scenarios.

The purchase of a single 99 cent app likely costs apple money. The purchase of a free app does as well, but usually a much smaller amount (the cost for the download bandwidth).

1.99 is probably guaranteed profit. We work with some of the largest downloads in the store from what we can tell, and even at amazon s3 rates, a 1.99 sale should generate a few cents for app.

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They may break even on the numbers, but the apps are one of the biggest features and selling points for an iphone. Apple even knows this too, when was the last time you saw an iphone commercial that didn't say 'there's an app for that'?

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That may or may not be true at the moment, but Apple is definitely trying to change that with their new iAds.

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And iTunes in general. Profit comes from hardware margins.

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