What Apple's 50 Billion App Downloads Can Teach Developers About Making Money

Today Apple is boasting that more than 50 billion apps have been downloaded from the iOS App Store since 2008, and that it has paid out more than nine billion US dollars to developers. Digging deeper into those numbers reveals the strategies you can use to get a larger chunk of that money -- but also suggests you probably won't be getting any at all, since at least three-quarters of app downloads are for free apps.

Here are the numbers Apple announced in its press release:

  • More than 50 billion iOS apps have been downloaded since July 2008 (we're not told how many were paid for, but we are told the download numbers don't include updates or people re-downloading an app they already own).
  • More than $US9 billion has been paid to developers over that time. Given that Apple keeps 30 per cent of sales to itself, that means it has pocketed something like $US3.8 billion from app sales.
  • Apple says the current rate of downloads is 2 billion apps per month, or 800 apps per second. (.)
  • The iOS App Store now contains 850,000 apps, including 350,000 for iPad.

These timing of these numbers needs to be treated with a degree of cynicism. It strikes me as remarkable that the last time Apple chose to announce such neat round figures back in January (its 40 billion app downloads milestone), it was in the middle of the Consumer Electronics Show (CES). This time, it has reached the 50 billion marker right in the middle of rival Google's I/O Developer conference. Android has overtaken iOS as the world's biggest smartphone OS, so it seems handy to be able to disrupt its latest developments with some App Store boasting.

Assuming the numbers are accurate though, a few trends become evident if we compare them to the January figures. Back then, Apple said 20 billion downloads happened in calendar 2012. With an additional 10 billion downloads in a four-month period, that figure seems likely to be exceeded in 2013. Android's dominance doesn't seem to be a major drama here as yet.

The number of apps overall has increased by 75,000 since January, while the number of iPad-specific apps has risen by 50,000. That means that iPad apps are becoming the dominant area for new development. You could see that as a sign that you should concentrate in that area; it could suggest that competition in tablet apps is fiercer and you should hold back if you don't have an idea that specifically benefits from the larger tablet form factor.

The numbers also suggest Apple has paid more than $2 billion to developers in just four months, which is a quite remarkable achievement. One important caveat: that figure appears to include both apps and in-app purchases. Without knowing the ratio, it's hard to tell which strategy works better (though caution is advised with overdoing the in-app purchases, which are often unpopular with consumers).

What the figures do suggest is that the majority of developers probably don't make money from apps. Look at it this way: the minimum Apple has to pay out to a paid app developer is 70 cents (on a 99 cent app, which is the cheapest tier). If we divide $9 billion by 70 cents, we get 12.85 billion downloads. (Credit to reader J for suggesting this methodology last time I discussed this topic, albeit from a different perspective.)

That's the maximum number of paid downloads there could be: apps selling at higher prices would drive the figure down, as would in-app purchases. And even at the maximum number, close to three-quarters of all apps are going for free. That doesn't mean you can't make money, but it does mean your audience is showing a demonstrable unwillingness to spend it if it can grab free stuff instead. Bear that in mind when you price your app.


Comments

    The take home lesson from this is to be a shameless monopolist.

    Operating systems and some other software markets are mini natural monopolies within their ecosystem, due to compatibility locking - think adobe in the design space, or Microsoft in the OS space in the 90s.

    All marketplaces are natural monopolies (sellers all gravitate towards the biggest pool of buyers and buyers all gravitate towards the biggest pool of competing sellers.
    (Think Ebay for online goods, or Google in online advertising, Itunes for music sales)

    So the lesson is when you have a natural monopoly; create walled gardens, crush competition at every turn, and screw the consumer for every last dime, and lobby governments to weaken antitrust laws and tell the dumb punters that's all about 'freedom'.

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