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Summary:

If I were to tell you that Apple’s app economy was worth more than $2.5 $2.4 billion a year, you would laugh hysterically, shake your head and walk out of the room, yes? Surf on over to some other web site? But here I am telling […]

iStock_000007334181SmallIf I were to tell you that Apple’s app economy was worth more than $2.5 $2.4 billion a year, you would laugh hysterically, shake your head and walk out of the room, yes? Surf on over to some other web site? But here I am telling you exactly that! According to mobile advertising startup AdMob, there are some $200 million worth of applications sold in Apple’s iPhone store every month, or about $2.4 billion a year.

Just to put that in context, Apple says about 1.5 billion apps have been downloaded from the App Store. In comparison, the Android marketplace brings in about $5 million a month or on a run rate to do $60 million in a year, AdMob says. I bet that number rises up sharply once more handsets come to market. As you know, Motorola is announcing its new Android handsets at our Mobilize 09 conference on September 10.

AdMob bases its monthly reports on the usage behavior found on various applications and web sites across its ad network. For the month of July, the report combines AdMob network data with survey results from over 1,000 users of iPhone, iPod touch and Android devices. The result is a broad overview of not only the Apple iPhone app ecosystem, but of Google’s Android-based app marketplace as well.

appstoremarket

Why the focus on the iPhone? Because as the report points out, “the iPhone represented 60 percent of U.S. smartphone usage in AdMob’s network in July 2009, followed by RIM and Android devices at 13 and 12 percent, respectively.” Here are some additional findings:

androidiphoneappsjuly2009* Each month, Android and iPhone users download approximately 10 new apps, while iPod touch owners download an average of 18.

* Android and iPhone users download eight new free apps per month vs. iPod touch owners, who download twice as many. The iPod Touch application activity can also be correlated with the sharp increase in Wi-Fi usage from these portable devices, something we’ve noted in recent posts.

* Nearly 50 percent of iPhone users and 40 percent of iPod touch users buy at least one app every month vs. 19 percent of Android-based phone owners.

* iPhone/iPod Touch owners, an average, spend $5 to buy five paid apps every month.

* Given the high number of app downloads, it’s easy to see why nearly half of Android and iPhone users are spending more than 30 minutes every day using them. Nearly a quarter of Android and iPhone users devote a full two hours a day.

The biggest takeaway from this data: People are happy spending money on apps for their smartphones, especially after they’ve had a chance to try them for free.

mobileappsdiscovery

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  1. Oh, but, Om – all the geeks tell us that the Evil App Store Empire is an obvious affront to at least 1 or 2 heroic developers every week. And therefore will fail.

    Har!

    1. I think it is the money or rather the potential of making money that is going to keep them coming back to the New Evil Empire for near foreseeable future. :-)

      1. Om wrote: “the New Evil Empire”
        It’s Microsoft Anti-Apple propagandists like you, Om, that are the real Evil Empire. You’re the sick PC egoists who will lie, cheat, and do whatever all over the internet, to limit and discredit Apple’s success.

      2. And one more thing – from the charts above, It’s clear that iPhone/Touch owners are more than twice, maybe three times as likely to pay for apps. This fact stands out very clearly from the above charts, yet you say NOTHING about it, because it doesn’t serve your anti-iPhone agenda.

      3. Om your post is not about Apple per se.

        It seems to me that you are using AdMob’s metrics as a vehicle to primarily legitimize Android by association to the leading player in the field – Apple and it’s iPhone OS – while audaciously but I suppose archetypically denigrating Apple at the same time.

        You can not run with the hounds AND the fox.

    2. If the iPhone App Stone is the Evil Empire then Nokia Ovi is Jar Jar Binks maybe?

    3. Although I am rather upset with Apple for not approving applications that would allow for visuals with music — rather upset! — this is where the market is at currently. So, Apple is another corporation. The only people surprised by this are those that believed the Gandhi “Think Different” posters.

      Apple is no different than Microsoft! A corporation… And, Steve is another CEO — an effective one — but another CEO. I plan to develop for Android when they are more established, and I will be that if Apple does not open the platform, that Android will out perform it in the long haul.

      1. Hamranhansenhansen Nicholas Thursday, August 27, 2009

        > Apple is no different than Microsoft!

        That’s just ridiculous. They are opposite in every way. They are fundamentally 180 degrees apart.

        What you mean is, in this one limited instance of the day-to-day management of the App Store, Apple reminds you of Microsoft. That’s really different. And even that is a stretch. Apple did not put malicious code into OS X to make Google Voice run flaky and then later introduce Apple Voice with the same features, like Microsoft does. Apple did not sabotage their browser so it can’t run standard Web apps like Microsoft does, and that is where Google Voice will run on iPhone (and probably where it belongs, especially given that Google Chrome OS only has the HTML 5 API).

        The iPhone literally has 2 API’s, 2 whole levels for developers to work on. They are like 2 sides of a yin-yang, one open, one closed, one private, one public. If you’re complaining about one, you should stop complaining and just develop for the other. The answer to your problems is on the other side of the platform.

        Especially when you can do things like 3D accelerated transforms in the HTML 5 environment on iPhone that you can’t do natively on other smartphones.

        > upset with Apple for not approving applications that would
        > allow for visuals with music

        I’m a songwriter and musician and I make trippy stuff and love visualizers, but I can’t imagine how you could have made this app in any way that wouldn’t run my whole iPhone battery down in less than 1 hour.

        As with every rejected app I have heard of yet, you can make this in another way and it will be practical: you make a Mac app that takes an arbitrary MPEG-4 audio file as input, and gives back an MPEG-4 video file as output and puts it into iTunes. The video track would obviously be the visualizer rendering.

        Then all the user has to do to enjoy the visualizers is sync the new videos to their iPhone or iPod and they can watch for about 8 hours on a battery charge instead of wiping their iPhone out in less than an hour trying to render the graphics in real-time on the device itself.

        Also, by doing it as a Mac app that makes MPEG-4 movies, your visualizer runs not just on iPhone and iPod, but also on iPod nano, iPod classic, AppleTV, Blu-Ray, Adobe Flash, YouTube, and hundreds of other players from hundreds of manufacturers.

        > I plan to develop for Android

        MPEG-4 movies run on Android also. So one Mac app that renders video visualizers will not only work for iPhone but also for Android. You can be an Android developer now for free, no further effort required, because Apple warned you not to try and attempt any supercomputing tasks on the iPhone.

      2. The key point of iPhone App Store’s astonishing economy is providing apps related to new trends and technologies. Also the device. People die to buy it when they get more options to get a smarter user interface combined with modern technologies. Sure Android is developing as a good competitor to Apple. But we need to see, who stays ahead in the long run.

  2. Friends of Dave (friendsofdave) ‘s status on Thursday, 27-Aug-09 12:07:37 UTC – Identi.ca Thursday, August 27, 2009
  3. Hey according to this report, the more the device the more apps downloaded. I am waiting to see some cool I-pod killer device running Android ( as rest of OS are closed )

    Archos is making one.. but its very niche market, we need some serious competition to I-Pod touch

    Prashant

    1. I think there are ample “touch screen e-devices” in development but will they compete with iPod Touch? Who knows. It doesn’t matter if they use Android. Seriously. the battle is Android versus iPhone.

      1. Based on these numbers, it seems like the real battle at the moment is iPhone vs iPod Touch.

    2. Why don’t you just buy an i-pod?

      You guys are silly. Always waiting for Godot!

      1. And why don’t you eat each and every one of your dinners at McDonalds™, use Facebook™ and Twitter™ for all your correspondence, and only travel with Honda™ brand cars?

        The poster you replied to specifically cited being “closed” as a negative.

      2. +1 for working in beckett. +3 if you can work in ‘ubu’ / jarry.

  4. Interesting post Om. Truly aggregating those penny apps generate a multi-billion dollar businesses. But couple of things :

    1. Does monthly revenues from App store i.e. $200 million really make $2.4 Bn dollar business without any fluctuations since I believe these sort of businesses are more cyclical (also looking at economic turbulence we (were) in!).

    2. Does these stats reflect in Apple’s Balance sheet in the last couple of quarters? May be then we can truly realize the extent of the “App Economy”


    @Sampad

    1. Sampad

      These are numbers based on July 2009 sales (by AdMob) so that is why I am saying on-a-run rate of $2.4 billion, not $2.4 billion. As more devices sell (and more Apple promotes the iPhone apps), the more will sell.

      Secondly, I expect Android to do well too, except I have to admit, the choice of apps is pretty limited for now.

      1. Agreed Om on the Android comment. Recently I came across an Android device (though in India we still don’t have it) and I should say that comparing Android OS with iPhone’s OS, people would be surprised with Android’s stability. Even I’m waiting for an Android OS based device to emerge soon enough.

        And thanks for the clarification too :)

        Cheers!

      2. Om,

        I agree with you that, in the super smart phone market, Android is likely going to be the next biggest contender that matters. Let met open by saying while I’m working on an iPhone application right now, I am also thinking about the whole super smart phone market and which device to support next. Is it Blackberry, Palm or Android?

        My suspicion is that Android has a 50/50 chance of doing really well. The deciding factor will be the hardware and the overall user experience for the /masses/.

        Today the all-in-one Apple solution is superior to other options on the market b/c Apple controls both the hardware and software and, frankly as being vented by some of the comments here, what apps are allowed on the platform. Time has shown us, in the mobile market, that OS vendors who don’t control the hardware and software end up devices with sub-par consumer user experience. I hope Google can change that. Time will tell.

        Today Android is found on generally less than acceptable HTC devices and reports of the common folk being blown away by the overall user experience is nil. Even some podcasters to whom I regularly listen have tried in earnest to switch to Android but have returned to iPhone. I believe their sincerity in wanting competition to keep Apple in check.

        Android does offer the swiss army knife solution. It’s, essentially, a toolkit whereby the tech savvy user could do anything and everything he wants unlike the iPhone. Android has the potential to make a narrow set of users very happy. The market they should be after is main stream users (the 95%) that want a simple solution with one way to perform actions on their device vs. the tech dabbler user base (the 5%) who want flexibility to do their actions however they please.

        Here’s a related example. Last time I checked only 1% of US households have home theatre PCs yet podcasting networks & show, blogs, and office water cooler chats abound are filled with tech folks arguing over the merits of Unbuntu, Boxee, Tivo, streaming video, Apple TV, etc etc. Until someone makes IP TV for the living room as simple as plugging in an old B/W or Colored TV to an AC outlet and turning it on, it’ll never hit the mainstream.

        Palm Pilot was a hit because of their form factor (hardware) and their simplicity (software). It fit in your pocket and allowed users to do four things really well: contacts, calendar, notes, to do’s. Failure to figure out proper augmentation for a sustained future was their failure. Blackberry came along and could do the basic things of a Pilot and send email, without a stylus. I remember those blackberry days on Saturday mornings when three hours would flash by, heads down catching up on all my emails from the work week. Then came the myriad of Treo, Blackjack, XYZ devices. I’d watch so many coworkers struggle to get theirs to work properly. IT always had a pile of defunct units in the corner of the call center’s desk.

        The game is augmentation. Apple has strategically augmented, where it matters, while becoming a lifestyle company. Android is playing catchup but should focus on augmentation instead; hard to do when you don’t own the hardware. Instead Google’s bet is that cloud computing is all the augmentation we’ll ever need – put all your info in our cloud, use our OS on any device you want and all will be OK; trust us. And Palm Pre is attempting to augment with Synergy and other features that predictively think for the user.

        Most importantly the essential ingredient for the masses is ease of use. It doesn’t matter if a device can do 150 things if people only use 2% of it.

        My point is this:

        Simplicity = less flexibility => mass market adoption
        Flexibility = more features => finite market adoption

        From where we are today, it’s certainly Apple’s to lose.

        The next augmentation. What will it be? Who will it be from? When is it coming? WIll it be easy to use & adopt? Pre, Curve, Storm, Tour, Android .. none seem to have that “A HA! I got to have it!” emotion that Palm Pilot, iPod and iPhone had. Maybe that will change but I doubt it. Time will tell …

      3. Om,
        Dumb question, did apple specifically said that they made this much money ?
        Or is it AdMob coming with the numbers ?

        I find it rather funny that these numbers show up in public domain. These are important business secrets , and should be known no one but APPLE .
        Bottom line, they must be in the ballpark , but the revenue aspect it not a true figure.

      4. The math is incorrect. Roughly 150 million downloads/month x 25% which are paid x $1.80 average per paid app = $67.5M/month for iPhone + iPod paid apps. That sums to $810M/year–> $243M to developers and $567M to Apple. Still, these are big numbers.

    2. This assumes that people will buy $5-10 worth of apps per month forever. I don’t think this is a sustainable assumption. People buy their iphone/ipods and download a bunch of apps in the first few months, but then that trails off. It would be interesting to revisit these stats in 3-6 months to see if they are still relevant.

      1. I disagree. I’ve had my iPod touch for nearly two years, have had access to the App Store since it became available, and just spent $5 last week on Civ Revolutions. I have purchased many apps off and on over the last year or so.

        There are always new apps to buy, and there is no lack of willingness for users to buy new apps. It is a marketing challenge to reach buyers with compelling offers through the noise of 10’s of thousands of apps…

  5. I use both iPhone and Android. I am a big fan of mobile applications, but surprisingly have never paid for an app. I believe the majority of mobile users feel the same way, they don’t want to pay for apps.

    I’m surprised to see how many are actually paying for apps. I know this data includes ad revenues for free apps as well, but the fact that 50% of iphone users purchase apps, spending almost $10/mo is shocking ot me. I would have expected it to be much less.

    1. You’re missing out guy. The absolute best apps I’ve used are paid apps.

    2. Juan Carlos de Burbon George Thursday, August 27, 2009

      The interesting trend that should be noted is that Apple customers typically pay more and are willing to pay more. While the Android OS and store may have a broader reach the margins and profitability may be higher due Apple’s customer’s willingness to spend money.

    3. I share your view. My wife, on the other hand, has no problem spending $0.99 on an appealing app. To her, $0.99 is basically free.

      1. which is why they made it .99 – a lot of people think a buck is nothing. they just don’t look back and realize they bought 10 apps for a buck last month. So $10/mo :)

  6. Marketing, Mobile, Technology & Business Daily News » Candeias Blog » How Big Is the Apple iPhone App Economy? Thursday, August 27, 2009

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  7. Patrick Murphy Thursday, August 27, 2009

    Om,
    Not to be a killjoy but can some of these stats be verified by another firm? They just seem a bit out of whack… inflated. The mobile app space is certainly growing and extremely vital. However, too much hype does create bubble effects. Not something we need…
    Is there any way you can work your magic and get Apple to provide an honest ( behind the scenes) reaction to these figures?
    I want to believe but…
    Thanks for your work.

    1. Patrick, there are some sketchy infos from Apple:

      – In August 2008, Steve Jobs told the Wall Street Journal that the AppStore in its first month saw 60 million downloads and revenues were about $30 million. I think this was the only time Apple talked about AppStore revenues.
      – According to Apple, AppStore downloads hit 500 million in12’08, 1 billion in 03’09 and 1.5 billion in 06’09.

      Unless average revenues per app have increased since last August (most people would say they have shrunk) and/or download figures have picked up a lot of steam since June of this year, AdMob’s figures are not supported by Apple’s figures.

    2. See my comments lower down. I totally share your doubts, and analysed the report some to discuss it’s shortcomings.

  8. Fenixnordic Group » Blog Archive » How Big Is the Apple iPhone App Economy? | GigaOm Thursday, August 27, 2009

    [...] especially after they’ve had a chance to try them for free,” the technology journalist writes at GigaOm (emphasis [...]

  9. Nick Stamoulis Thursday, August 27, 2009

    I think it comes down to the branding power of the iPhone. Android is not a household name, iPhone is.

  10. iPhone App Store $2.5 Billion a Year Business? | Gizmo Addiction Thursday, August 27, 2009

    [...] a month, or $125 million in August alone? That’s the story AdMob’s latest figures (via GigaOm) are telling, with 26.4 million iPod touch users, at 40% who pay, averaging $9.79 or $73 million [...]

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