Blog Post

The Meteoric Rise of the App Store

Apple (s aapl), in the current second era of Steve Jobs, doesn’t “invent” products. Instead, the company generally takes existing ideas and massively improves upon them. The digital music player, smartphone, online music store and cell phone application store all existed in various forms at other companies before Apple decided to get involved — and turn those industries upside-down.

The App Store is just the latest game changer to come out of Apple’s Cupertino labs, and it has been a smashing success. The company today announced that 1.5 billion applications have been downloaded, with the latest 500 million downloads coming since just April. Approximately 65,000 apps are available for more than 40 million App Store-capable devices (the various forms of the iPhone and iPod Touch), and 98 percent of iPhone users have downloaded at least one app. AdMob founder Omar Hamoui thinks the App Store will be a $5 billion business in two years, though it looks like a relatively small number of apps will capture the lion’s share of that revenue — of course, like any consumer industry, advertising helps (subscription required). Some even think the iPhone is the hottest gaming platform out there; the rate at which downloads are growing would excite any investor:


Success breeds competition, though, and a number of Apple’s rivals are bringing their own wireless app stores to market:

Only one of these, Android, seems to be getting any real traction, though none are anywhere close to the size and depth of the Apple App Store. Google is having success mostly because it’s Google, and it is the only company that can come even close to matching Apple’s hype machine with developers. At the end of the day, though, Android is just a hobby for the company, and it will never be able to match Apple’s marketing prowess. (For more analysis on other players’ efforts to offer app stores, read this subscription-only piece on GigaOM Pro.)

Apple might latch onto other people’s ideas just to improve on them, but the company does so with fantastic success. Because Apple doesn’t launch products until they are ready, the massive hype is quickly followed by a real product that is totally unique to the marketplace. Meanwhile, competitors announce products before they’re finished, and when they finally ship, they remain inferior to Apple’s offering. Of course, with 40 million devices — and with users who download way more apps than their non-Apple using counterparts — it’s a circle of growth that will drive the App Store, and the iPhone/iPod Touch ecosystem, into further stratospheric heights, as will the new subscription and micropayments potential of the changes in iPhone OS 3.0. The company would be well-served to continue coming up with new App Store features to drive further growth.

Two years ago, I predicted Apple would be bigger than Google. It happened in less than a year, though more because Google lost value than because of Apple growing exponentially. I noted that the iPhone was the weakest of Apple’s three “tripod” legs: Macintosh, iPod, iPhone. Now, with the iPhone and App Store growing so quickly, it may soon eclipse the Mac as Apple’s greatest revenue generator. It makes sense that the company changed its name to Apple Inc.

(Chart from Apple 2.0)

27 Responses to “The Meteoric Rise of the App Store”

  1. I see an important hurdle to individual APP authors taking a larger share : the one with the idea for a ‘killer APP’ is not necessarily the one with development skills. Is there a virtual platform where one can, IN CONFIDENCE, get acquainted with a developer, share the costs and an proceeds?

  2. Yes the Apple Apple store thingy has done pretty good! BUT, that is only because Microsoft has not directly entered this space! With the coming of ZuneHD and the coming ZuneStore let me say that this minority platform store has seen it’s best days!

  3. eyeoftiger

    Hi is the app phenomenon related only to smartphones? with the smartphones penetration still small as compared to the rest of devices, would symbian (read nokia) be a contender in this arena?with the reach nokia has it would be interesting to see what dent they are able to make with their ovi store… cheers.

  4. “Because Apple doesn’t launch products until they are ready”

    At least you didnt say complete. The whole iPhone strategy appears to be built around 1st releasing a product lacking in fundamental features and then enticing all the fanboy’s and girls back to “upgrade” each year by gradually adding them in: 3G; MMS; cut and past; video; video calls, etc. all features available on other manufacture’s devices when they launched their first crippled 2G model.

    • student

      @Allen “The whole iPhone strategy appears to be built around 1st releasing a product lacking in fundamental features and then enticing all the fanboy’s and girls back to “upgrade” each year by gradually adding them in: 3G; MMS; cut and past; video; video calls, etc. all features available on other manufacture’s devices when they launched their first crippled 2G model.”

      Nobody launches a “complete” first generation product. You’re an idiot. Plus, you can just upgrade the software to 3.0 for free to get most of the features your talking about.

  5. I believe Apple has told a reporter (Pogue?) that the download count doesn’t include app updates, i.e., Apple was counting transactions (Note an update download doesn’t generate a iTunes transaction receipt). I don’t have a link.

    But work through the numbers, and you’ll quickly realize that it can’t include updates. Apple told us in April that there are about 40 million devices and there were 1 billion downloads by April, so that works out to about 25 apps downloaded per device. If updates were counted, that would push the number down to less than 10 downloads per device. We know also that many owners want the number of apps pages to be increased further because they’ve downloaded over 150 apps, so a less-than-10 average seems truly unrealistic.

  6. Does anyone know if the 1.5 billion downloads includes application updates? It would be a much less impressive total if it counted each of the 6 updates pushed out for each of my 24 apps…I’d like to see a metric like unique apps per user on iPhone (I’ve got several apps I downloaded, and leave in iTunes, but don’t sync with my phone – though they do receive updates)

    • Not sure, but I could argue the opposite. Updates prove that people continue to engage with the app experiences — lcok-in. I’d rather have one update than three or four downloads.

    • @Austin – I certainly see your perspective and would amend my statement relative to encompass phones (vs phone OSs & App Stores) this way:

      “….Android, WebOS and Blackberrys truly seem to be competitive products; the…….., Windows has been successful though disfunctional….. but Blackberrys and the iPhone have demonstrated it to be an inferior…”

      It is fair to say that RIMM came, saw and conquered the corporate email world. Plus, they make some good and very good products that business and non-business users really like and want. You can’t say that about most cell phone manufacturers.

  7. Android, while not exactly a rival, certainly provides incentive for Apple and other to continue innovating. Therefore, it serves consumers and developers (as long as it remains significant) keeping Apple and other from resting.

    Competition is good. As a happy owner of the original iPhone, I use the heck out of it and love it, but I appreciate other worthy products in the market as well. Android and WebOS (Palm) seem truly to be competitive products; the jury is still out the others. Technically, Windows has been successful though disfunctional to this point; but the iPhone has demonstrated it to be an inferior product but perhaps MS’s next offering will be better (not that I’m holding my breath.) No one has yet come close to providing the additional value that Apple has twice added to my 20 month old purchase: iPhone OS 2.0 & 3.0.

    In addition, I second Jordan’s point – “local” apps!

  8. Please take the Android Market off the “rivals” list – We all know its just Google stalling for time until HTML5 spec gets blessed by WC3 ( See it for yourself, use GMai with Android’s browser ).

    Mobile browser+HTML5+Gears = zero need to have local apps installed on your phone!

      • Todd, until the perception and real experience changes, consider it established that people prefer applications. I will hazard to guess that people could care less what developers call them, they care about a concise experience that allows them to accomplish a task. The beauty of the iPhone applications is that they can function as applications and incorporate web content.

        The web is more than a browser. I consider browsers to be the most dangerous concept to the web as a whole. It is about networking. It is about your toaster talking to the web, or more usefully your refrigerator. Take us and browsers out of the equation and reconsider the possibilities.

        Google is an excellent example because so much of the experience we never even really see. We have specific access points. iPhone applications are exactly the same. How they are written matters little if the market is large enough to warrant the expenditure.

    • Developers who are brave enough to develop apps that work well across the different brands… and supporting these apps will be more of a nightmare.