Some Depressing Thoughts On The App Store

One thing that’s useful to bear in mind is you’re developing for the iOS App Store is that Apple doesn’t care too much about making money from it. A very quick Google shows that the profit per iPhone is in the $300-350 range. Over a two year contract, you’d need to be spending over $10 a month to match that number. And that doesn’t account for Apple only taking a 30% cut – to match that, users would have to be spending over $30 a month. On average.

Which they pretty clearly don’t. Which means that the role of the App Store is far more in generating iPhone and iPad sales than it is in making money directly. The entire developer ecosystem is largely there to drive sales of the phone, not as a direct revenue stream. I’m sure you can think of your own examples of Apple making decisions that don’t directly benefit developers that this theory can help explain.

In fact, there’s a back of the envelope calculation that makes this even crazier. Again, using the first numbers I find: There are 160,000 developers for iOS. Assuming each one buys an iPhone to develop for ($300 profit) and a single year developer account costing $99, they’ve generated $64 million of profit for Apple before they’ve even opened XCode. With a mean revenue per app being $8,700 (of which Apple takes $2610), about 15% of Apple’s revenue from apps comes from people buying devices to develop for and buying developer accounts (and this doesn’t take into account people buying Macs to develop on).

Which is actually pretty depressing. Very few apps do make $8,700 (but those that do, often make far more). In fact, I would be surprised if most apps break $400. Which means, as over 80,000 people know only too well, most people who make apps for iOS pay Apple for the privilege, and make the App Store more enticing as a side-effect.

06 October 2012