App Store profits minor?

The App Store has not been as profitable for Apple as one might expect, claims the venture capital firm Lightspeed. The company recently achieved the goal of over 1 billion app downloads, but of these, the ratio of paid apps is said to be anywhere between 1:15 and 1:40, according to people involved in the industry. This translates into just 25 to 60 million downloads which could generate income for Apple.

An O'Reilly survey is said to show that the mean price for paid apps is $2.65, which if multiplied by 25 to 50 million, results in cumulative revenue of $70 to $160 million. Subtracting the 70 percent owed to developers, Apple may have only earned $20 to $45 million from a billion apps. Such a figure is moreover believed to be optimistic, given that a weighted average app price of $1.50 would cut Apple revenue down to between $12 to $27 million.

Lightspeed suggests that like the music and video sections at iTunes, the true purpose of the App Store is to encourage people to buy iPhones and iPod touches; some 13.7 million iPhones alone were sold in 2008, each being far more profitable than an app. The rate of app sales is said to be increasing however, as while it took six months to reach 500 million downloads, only half that time was required to add another 500 million. A third-generation iPhone and the iPhone 3.0 firmware could accelerate sales further.

by MacNN Staff