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Summary:

In the latest earnings call, Apple COO Tim Cook reiterated that the Mac-maker has paid out over $2 billion to developers. That’s an impressive number, but how much of that app revenue is actually making its way to the average developer?

AppStore-featured

In the latest earnings call, Apple COO Tim Cook reiterated that the Mac-maker has paid out over $2 billion to developers. These transactions were the financial result of over 10 billion downloads of the more than 350,000 apps available in the App Store. While iTunes electronic sales have been steadily increasing, the logical assumption that it’s the app sales and not the music, movies, television and books being sold driving success. So how much of that app revenue is actually making its way to the average developer?

According to 148Apps.biz, there are approximately 370,000 iOS apps from 78,000 publishers with an average price of just $2.52 U.S. per app. While there may have been over 10 billion app downloads, that number spreads the $2 billion that Apple has paid to publishers over its three-year lifespan very thin. These numbers translate into an economy where there is just over $8,500 per publisher per year to go around.  Keep in mind that a publisher may be just a single developer, or a whole team of analysts, developers, testers and managers.

Looking at the numbers in a slightly different manner, consider the recently published AdMob survey that indicates most smartphone and tablet owners are using their devices to play games. This breakdown is supported by the fact that 43 of the top 100 paid apps in the App Store are games. Assuming an exponential distribution of downloads, where the cheaper apps are being downloaded more often than the expensive ones, we can extrapolate how many downloads it would take to account for the $2 billion in payments to publishers.

By breaking out games from the rest of the apps in a 60/40 split of revenue (40 percent going to games), you can see why games in particular are more lucrative than other types of apps.  What this analysis doesn’t take into consideration are the runaway success stories that would only skew the data even more.  This analysis assumes an even distribution across all apps based solely on the textbook supply vs demand premise that cheaper apps sell larger volumes.

While the latest research from comScore  may show how people are spending their money on new smartphones, it doesn’t show how people are spending their money on apps. According to this data, if the app market is to continue to thrive, alternate funding models that aren’t based on the sale of apps in the App Store will need to take shape.

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  1. Maybe I’m misreading the post, but there seems to be 1 big flaw… Doesn’t that 10 billion downloads number represent ALL apps, including free apps? If so, the number of paid app downloads is significantly smaller.

    Also, when you ask, “how much of that app revenue is actually making its way to the average developer?”, the answer is simple – 70%. Apple has a 70/30 split with developers.

    1. The total downloads represented above is for paid Apps only and is about 12% of the 10B downloads. The data was worked backwards from $2B in developer payments to derive the number of downloads at each price point.

      The 70/30 split that Apple pays to developers was taken into account as well, as the $2B represents only 70% of the revenue for each price point.

      The two weak points are the assumption of the percent breakdown of sales is based on price alone, and the assumption that all Apps at a given price point will share revenue equally.

      The point was that the App Store alone does not generate the funds necessary to fully support the development that is currently taking place on the iOS platform.

  2. I call FUD. Statistically, your premise is correct. However, let’s examine the flaw in your argument. Over my career, I have written software for PCs. Not very good software, but I did manage to sell two applications in very limited numbers. If you were to take everyone from me up to and including Microsoft and perform the sort of statistical analysis you’ve performed here, your conclusion would be that developers writing software for PCs don’t make much money. The truth of the matter is that app developers who write GOOD apps make a lot of money and that app developers who write crap apps don’t make any money at all. I think you have used straight statistics to arrive at a stupid conclusion.

  3. Andrei Timoshenko Friday, April 22, 2011

    See no reason for mobile apps not to follow the same trajectory as desktop software… or any other applications (e.g. websites) for that matter. Games will be important. A small number of huge players will produce wildly successful tools, and mostly work on updating them. A decent handful of really good indie players will dominate their niches and do really well for themselves. There will be some good, simple software offered free by hobbyists. There will be some interesting free apps from players who make most of their money elsewhere. Everyone else will come and go, mostly toiling in obscurity.

    Because of easy comparison and wide availability, you’re either the best at what you do, or you are largely irrelevant. There is generally progressively less room for also-rans in the consumer space.

    1. With every sort of software development, there are more revenue opportunities than just the direct sale of commercially available software to consumers. The fact that only 12% of Apps in the App Store are paid Apps is an equally strong point that supports this.

      Even with the admitted flaws inherent in this statistical approach, it does show that if you are interested in generating revenue from the direct sale of software in the App Store, there is a greater opportunity of success with Games than with non-Games. I like it when data backs popular perception.

  4. The average actor doesn’t make much money. The average musician doesn’t make much money. The average blah-blah-blah.

    Your concern generates mostly ennui. Redundant at that.

    1. I have always struggled with developers being more of a technical profession or part of the liberal arts. While there is evidence of science, the perception is that of witchcraft (tat which most do not understand).

      The point had nothing at all to do with how much an iOS Developer can earn as income. It had more to do with the App Store not being the only source of revenue. If you are looking to get into the business of mobile app development, consider other sources of income than just direct sales from the App Store.

  5. @ChrysalisCEO Really? Look at how much money app developers are making: http://t.co/814e45gf, http://t.co/PJ0tH7xE and http://t.co/ZuehAOcF

  6. @ChrysalisCEO Really? Money app developers are making: http://t.co/814e45gf, http://t.co/PJ0tH7xE and http://t.co/ZuehAOcF

  7. The Average #iOS App Publisher Isn’t Making Much #Money http://t.co/GNWuBnG6

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