The App Store is not a meaningful direct contributor to Apple’s overall revenue
About a month ago Apple announced that one billion iPhone apps have been downloaded in the first nine months. An impressive milestone given that it launched less than a year ago. But how much money Apple was making from the app store? Between 25m-60m paid apps have been estimated, using a 1:15 to 1:40 range. O’Reilly recent did a survey of appstore aplications and noted that the mean price for paid apps is $2.65. Multiplying this by 25-60m paid apps, that suggests that the revenue from iphone/ipod touch apps is around $70-$160m.
Apple gets 30% of this so probably has made between $20m and $45m from the billion iPhone apps sold. Given that Apple sold 13.7 million iPhones in 2008, the AppStore is not a meaningful direct contributor to their overall revenue. Why are venture funds (iFund) putting so much money into companies whose only business model is to develop iPhone applications? Advertising, of course. Jeremy Liew from venture firm Lightspeed Venture Partners concludes that much like iTunes, Apple is using the App Store to drive demand for their hardware.
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