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iTunes App Store generated $3 billion in sales

The announcement of $2 billion total for App store payments to developers did not come as a surprise. On January 22nd Apple reached 10 billion total apps downloaded. From that figure and an earlier derivation of the average selling price, I estimated $2 billion was paid out around the same time frame.

We don’t know exactly how many apps have been sold at exactly the moment when $2 billion was paid out so we don’t have the means to update the ASP of apps (currently estimated at 29c).

We do know for certain however that the app store generated $2.86 billion in sales if $2 billion was paid out.

The new data affirms existing estimates.

  • Rob Scott

    Compare this to Android Market's $100 million and laugh, more so given the malware in that store.

    • asymco

      The presence and popularity of blatantly copyright infringing apps on that store begs the question of why there is no policing or even complaining from the copyright owners. Perhaps the value being stolen is so small that nobody actually feels hurt by it or even notices.

      • Evan

        http://www.reddit.com/user/lompolo

        people are complaining, maybe google is not actively acting upon it.

      • asymco

        My point was not about malware but copyright infringement. See http://www.asymco.com/2010/09/04/walt-disney-love

        That was posted in September. I glanced at the current listings and there seem to be fewer blatant infringements but there do seem to be quite a few remaining.

      • asymco
      • huhn

        The thing that disappointed me was that Google don't even virus scan uploads to their marketplace.

        This is the kind of algorithmic solution that Google is known for, and yet they didn't do it. It just looked amateurish.

      • http://www.noisetech-software.com/Perspectives.html Steven Noyes

        Google has no incentive to do that.

        Google will make money serving advertisements even on malware. Google will act like eBay if anything serious happens. By being strictly a server, they just host the apps. They do not make money fromt he app sales directly. So like YouTube and eBay where the courts have said so long as they take down material once notified, that is the limit of their responsibility.

        So as long as people keep buying Android phones, there is no reason for Google to put any more effort into patrolling the Market Place than they have to.

      • huhn

        No, you're missing the point.

        Copyright violations on Youtube drive traffic towards the site, yet only really damages third parties.

        Trojans on the marketplace drive traffic away from it, and damage the consumer.

      • Abhi Beckert

        It's not technologically possible. The patterns which allow virus scanning on emails and websites does not work on an app store.

        The only way to "virus scan" an app store, is with lots of human work, and google doesn't have a big enough profit margin to do that well.

        If anyone can get this to work, it's google — but I wouldn't get my hopes up too high as it may simply be impossible.

      • Pk d e cville

        They ought to be able to scan apps… They're the smartest guys in the business AND it's algorithmic!

      • huhn

        Why do you think this? I have no experience with virus analytics, but surely if your virus scanner can detect when you download a virus, then surely an appstore can detect when you upload one.

      • http://ximagin.co/thecw The CW

        I would wonder who would benefit from the effort involved in curating android apps in a manner similar to Apple's App store. Google gets user data from all apps regardless of their validity and, were they to curate the apps their claims of openness would be called into question. Telcom partners don't want to limit the number of apps they can advertise. When you've got 65,000 apps throwing out a few bad apps doesn't affect your bragging totals in any important way.

      • Abhi Beckert

        Google does curate their apps the same way apple does it, they just do bad job of it (probably because it's a much smaller team).

    • Evan

      where did you get the 100 million dollar figure from ? I don't think Google publishes or announces anything about android market.

  • Paul S

    Are you sure about the 2.86 billion in sales? Not everything is a 70/30 split. iAds are 60/40. Aren't they considered part of App Store revenue?

    (Unrelated, but your commenting system doesn't recognize valid email address characters like "+". You might want to get intensedebate to fix that…)

    • asymco

      This figure does not include iAd revenue.

      • Paul S

        Thanks for the clarification. :)

  • adam

    Its really weird to talk of an average selling price of 29c when the lowest price at which an app can be sold is 99c… maybe would be worth distinguishing between revenue and 'sales'. It would clearly be highly interesting to get a handle on how much rev is generated from ads and how much from sales in the strict sense.

    • JonathanU

      The average selling price is derived from merely taking total number of apps downloaded to date and dividing it by the amount of money being generated from the store. Since the total number of apps downloaded includes apps that are downloaded for free, then you are highly likely to get a number sub $99c…

      What you are asking for is impossible to calculate given the information that has been supplied by Apple…

  • http://ximagin.co/thecw/ The CW

    Apple has two groups that garner all of their love, affection, and attention… users and developers. They'll do anything to create a great user experience. They'll do anything to make a great developer experience… so long as it doesn't interfere with that first one.
    Happy developers make happy users. Happy users make rich developers.

  • http://twitter.com/Niilolainen @Niilolainen

    Interesting data

  • HTG

    Well the interesting (scary) thing about Android is that apps are appearing with malware payloads than in turn upload more malware to the phone… so one a user has got one of these things on their devices there is literally no stopping them… the viruses can quite literally kill the patient (being the phone)..

    The big risk for Google is that it is allowing this to happen… can't wait for the lawsuits to be served on Google and the respective phone manufacturers…

  • http://twitter.com/Niilolainen @Niilolainen

    I just got an email newsletter thingy (Digitimes) comparing the prices of iPad vs. other tablets launching in the coming weeks.

    (all are starting prices)

    - Apple iPad 2 $499
    - Motorola Xoom $600
    - HTC Flyer $900

    I also read somewhere that Samsung were due to put the Galaxy Tab 10.1 out at $900.

    A common thread amongst a lot of commentary regarding the Android tablets is that they are all just too expensive.

    But, all of these devices have very similar BOM costs. 1GHz dual core ARM CPUs, 10" touchscreens, cameras, sensors, cellular modems etc. etc. The BOM cost calcs I have seen for iPad 1 and Xoom are quite similar. Yet Apple is able to price lower.

    Does this mean that Apple is able to accept a lower GM on the iPad because they make it back on iTunes/iBooks and apps? Is apple in effect able to subsidize the cost of hardware because they earn revenue from apps?

    I feel this is a really interesting question with huge implications if true. Would love to read your thoughts.

    • davel

      I think it is the economies of buying in bulk and pre-order the supplies before the competition even designs their products.

    • Iosweeky

      Where did the $600 xoom come from – isn't that a subsidized price?

      • Huxley

        I think that's supposed to be the price for the WiFi only model of the Xoom.

    • asymco

      Knowing the margins on the other products we can back out the iPad. It's getting about 30% to 33% GM. It's not a slouch by any means, though far below the iPhone.

      I think Apple is enjoying first mover advantage. The challenge on relying on capacity constraints is that they can be relieved with new capacity build-out. We'll see that over the next few years. By the time prices come down for competitors and there is enough capacity it's possible that Apple will have a huge lead, similar to what they had with iPod. The two products start to look more and more alike strategically.

      • http://twitter.com/Niilolainen @Niilolainen

        http://www.nytimes.com/2011/03/07/technology/07ta

        I'd say the NYT is scooping you on this Horace, :-)

        "Mr. Sacconaghi said Apple also could subsidize some of the cost of building iPads with the money it makes through its App Store, which generates more than a billion dollars each year. This means that Apple can take a lower profit margin on the iPad, 25 percent, than it does on, for example, the iPhone, which can yield as much as 50 percent profit. "

        Is Apple able to subsidize their own HW and make it up on back-end Apps sales? A razors and blades business model similar to game consoles or carrier-subsidized handsets? If yes then this is frankly pretty scary for their competitors, not only is Apple able to deliver superior HW + UX, but also beat up the Android Club on price. Google might have to start paying folks to use Android!

        Again, I say this is *extremely* important and I am amazed that you and the Asymco community gave this angle such short shrift above.

      • asymco

        I am unconvinced by the idea that the App Store could generate enough excess revenues to materially affect the margins of its hardware. I'll have to revisit the numbers, but there is significant operational expense associated with curating and serving up apps, many of which are free.

        Of the $3 billion the App store generated so far, $2b went to developers leaving ~$1b in opex. That's over a two and a half year period. I make that $500 million a year before you pay for hosting, bandwidth, curation and marketing. It does not sound compelling. Assuming $100 million or less as "profit" to be allocated to iPad subsidy we're looking at $6 to $7 per iPad last year (and much less if you include iPhones, and why shouldn't they get subsidy since they generate most of app store sales).

        But what's most important is that Apple said they target break-even for their iTunes stores. So the whole discussion is moot. My take is that Apple is re-investing app store surpluses into new capex like the NC data center.

      • http://twitter.com/Niilolainen @Niilolainen

        Thanks Horace. Good analysis.

      • http://twitter.com/Niilolainen @Niilolainen
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