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The iPhone App Market Size Debate: Is It $2.4B a Year or $250M? AdMob Responds

AdMob, a San Mateo, Calif.-based mobile advertising company, yesterday released a report that indicated Apple’s iPhone App Store generates about $200 million a month, or a run rate of some $2.4 billion a year. My post elicited some strong reactions from app developers and many commenters who took issue with the claims contained in the report.

App developer David Barnard of App Cubby estimates that the iPhone App Store brings in between $250 million and $500 million a year. He told The Cult of Mac blog that the average price of apps ranges from $1.99 (for a Top 10 app) to $3.18 (for an app found in the Top 100). From the post:

According to Barnard, it takes about 400 sales per day to break into the top 100; and about 10,000 sales per day to hit the very top of the charts. Assume the average sales in the top 100 to be about 1,000 per day. If the average price for an app in the top 100 is $3.18, that’s about $116 million per year for the top 100 apps. “Most apps sell in the single digits per day, and quite a few don’t sell at all,” Barnard says. There is a long tail, but it’s a very skinny one. I wouldn’t be surprised at all to learn that the top 100 grosses as much as all other apps combined.”

Given the variance in the estimates, we got in touch with the folks at AdMob, which in an emailed statement explained how the company came up with the market size:

As to the market size estimate, it is based entirely on our survey responses and an estimate on the number of devices in the market, with our methodology clearly laid out in the supplemental report. Perhaps the average $ per month or the % of people who purchase paid apps is higher than actual figures, but those are the results we obtained from our user survey and we thought that others might find the monthly estimate useful. All of the results from the individual survey respondents are included in the report for others to comment on as well. It is good dialogue for others to build market size estimates using a different approach and using different methodology, as in the example the number of sales per day given individual developer insights.

“The primary goal of our survey was to gain further insight into the app user behavior throughout our network and we believe the results are useful for the community to gain further insight into user behavior,” said Mike Fyall, manager of product marketing at AdMob, in a separate written statement. “It is always difficult to size a fast growing market, and we view our survey results as just one of the many data points that can be used to do that.” (If you want to download the supplemental survey data, you can do so by clicking here.)

24 Responses to “The iPhone App Market Size Debate: Is It $2.4B a Year or $250M? AdMob Responds”

  1. My Apple story:
    I have bought the iPhone 3G when it was published in June of 2008. I was strictly against buying apps from appstore. Later, I saw the potential of iPhone and I started to buy some really good apps. So far as good, but now, i wanted a mac! I have bought an iMac, and now i buy more and more in the iTunes store, because there are so great features for Mac and iPhone (Things, etc.). And I am just happy to use the entire Apple stuff… Have a nice one….

  2. 90% of all the Tech articles on the internet are written to benefit Microsoft. When something like the Admob article is released, the Microsoft propaganda machine immediately goes to work to discredit it all over the internet. In the above example, a link to “Cult of Mac” quotes discrediting sources who are known Microsoft “PR” operations, the Yankee group.
    There is no “real” tech news on the internet, nearly all of it is Microsoft propaganda.

  3. An optimistic estimate of the current run rate is 150M downloads/month x 25% of downloads are paid x $2 average selling price x 12 months = $900M/year. A more realistic estimate is 150M downloads month x 10% of downloads are paid x $2 average selling price x 12 months = $360M. This would give developers a $252M/year stake, with the remaining $108M/year going to Apple.

    • I’ve discussed this topic with a few top iPhone app developers and have heard representatives of the iFund speak about the topic. Ian, your realistic estimate is closer to the truth. the ratio of paid to free downloads is at best 1:10. The $2 seems about right as about half of the top 50 apps (at a glance) are $0.99 and the other half varies between $1.99 and $6.99).