When Apple (NSDQ: AAPL) launched its iPhone application store in mid-2008, it pointed out that the company wasn’t looking to make a ton of dough. It was more interested in creating a community that would help drive iPhone sales, a strategy that worked with the company’s launch of iTunes and the iPod player. So far the strategy appears to be paying off – Apple sold almost 14 million iPhones in 2008, but Jeremy Liew from venture firm Lightspeed Venture Partners has crunched the numbers and calculates that the apps have earned Apple a modest $20 – $45 million. Here is how he gets there:
–After surveying app developers and others in the industry Liew estimated 25 million to 60 million of the billion apps downloaded thus far were paid for.
–Using an online survey the median price per app was $2.65.
–That equals revenue in the range of $70 to $160 million, of which Apple keeps 30 percent.
The remaining 70 percent ($50 million to $115 million) goes to the developers, which may lead some to ask with that spread between so many developers why are venture funds putting so much money into companies whose only business model is to develop iPhone applications? Advertising, of course. Some estimate that ads either disguised as iPhone apps or placed within them will help increase mobile ad spending by $100 million this year. And don’t forget opportunities for commerce or virtual goods in game applications, which represent 25 percent of all apps downloaded from the Apple store.