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UPDATED: The Apple App Store Economy

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Update: Thanks to everyone for weighing in about the infographic. The data used was given to us on an exclusive basis from analytics firm Flurry. Indeed, three-quarters of the apps in the App Store are “paid apps,” which was used to calculate the average app price and the subsequent revenue figures in the previous version. However, only one-quarter of the apps actually downloaded are “paid apps,” so the average price per transaction (paid + free downloads) is actually much lower than the average app price in the store. The graphic has been updated to reflect this price. Also, some of the averages in the Flurry data were calculated using projected user numbers from the first quarter 2010; that has been corrected to reflect only data up to the end of the year.

For clarification purposes, here is the math:

According to Flurry, Average listed price of a paid app: $3.63

74% of apps listed in the app store are paid.
Average listed price of an app (including free): 3.63 x .74 = 2.70 (with rounding)

Only 1/4 of downloaded apps are paid.
Average price paid for  an app (including free): 3.63 X .25 = .91

While we make every effort to ensure the accuracy of all the information contained in our posts, sometimes errors make their way onto our site, and this was one of them. We deeply regret any confusion this may have caused. Please accept our apologies.

best, Om


Related GigaOM Pro Research Report: Surveying the Mobile App Store Landscape

Graphic courtesy of Column Five Media

105 Responses to “UPDATED: The Apple App Store Economy”

  1. I dispute this 30% that Apple are always credited with receiving

    Of course for every dollar spent on itunes vouchers or credit Apple retain 30%, but it is never reported that only a part of that is profit.

    In addition to the infrastructure and staffing cost for the app store there is some profit margin for retailers of iTunes vouchers
    Apple also cover promoting the app store and then vouchers are often available as giveaways with iPods or discounted when multiples are purchased.

    I purchased $250 AU for somewhere between $150 and $180 in 2007 and have done a similar thing several times since, most recently purchasing at least six pairs of $20 vouchers for $30/pair

    Does Apple , the retailer or the Developer cover this heavy discounting?
    I suspect it is most likely to be Apple since I have never heard a developer complain that he didn’t receive his 70% because the voucher used was purchased at a discounted price and retailers don’t like to sell things at a loss.

    BTW – Cool Graphic

  2. Your math is flawed. It is not logical to include items which haven’t been purchased when calculating the average price paid. This is like saying the average price I paid for a car over the course of my lifetime is includes the cost of Ferraris, Volkswagens and Rolls Royces when in fact all I’ve ever purchased was used Fords. You’re also not accounting for the weighting some applications have over others. For example, 25 of the top 50 apps were $.99 while only one app was $9.99. So although the average list price is apps is $2.70 the actually average price of the top 50 selling is only $2.59. And because only one if four apps is paid we could divide the actual average purchase price of the top 50 apps, i.e. $2.59, by four to get the actual average price paid per app. So the average price paid per app is only $0.6475. Apple takes 30% of this, leaving $0.45 per app sold for the developer.

  3. CodeMonkey

    Actually, 70% goes to the SELLERS each month, which quite often are NOT the app developers, but software contractors and development houses. I’ve developed dozens of iPhone apps for clients, just as I have desktop applications. It’s the other side of the app store economy that gets overlooked. And, because a “great idea” for software can vary wildly from person to person, for many of those clients, I make more than they ever do. iPhone/iPod users are notoriously cheap when it comes to paying for apps, so the return on investment can be negligible. It’s laughable considering how much we pay for the devices and to our cell carriers like ATT monthly. A typical sentiment seems to be, “I won’t pay more than $0.99 for an app a few times a year, but I’ll pay $90USD+ to ATT every month.”

    I also believe that >80% of the 28,000 developers would not be considered “developers” by professional developers who have experience and a software development background, such as myself. Rather, they’re hacks who think that “I can do it too” without understanding the first thing about software design and development. I mean, “iPhone developers” have even sold sample code that Apple provided on the App Store as their own (the Bubble Level sample, for one). Selling software that someone gave you to demonstrate something (in that case, the accelerometer) takes no skill, just arrogance.

    This is why there’s so much crap on the app store that either doesn’t work, is stupid and pointless or is incorrectly written and crashes. The “app store economy” has made people think that software design and development is basically an unskilled job, which it definitely isn’t, even on the iPhone.

    There are too many people who have no business being iPhone developers and wouldn’t be, except for the fact that Apple has made the barrier to entry too low. There’s a reason you don’t see 80+ fart applications and about as many bikini applications in Best Buy. Good concept development and software design and development is expensive, as is shelf space and marketing. Those are great filters for keeping crap off retail shelves.

    The downside of the App Store is also the upside of it– if you have $99 for a developer account and a computer to play “software developer” on you can be an “iPhone developer.” That doesn’t mean you’re qualified to develop software any more than building a birdhouse in my basement qualifies me to build houses for those people to live in.

    To become an “iPhone developer,” Apple should really require that you’ve taken at least one “intro to programming” class sometime in your life. The number of “iPhone developers” would probably be cut in half if that were the case and the quality of the average app would go up considerably. It still would leave many unqualified “developers” releasing crApps, but it would be a start.

    • CodeMonkey

      Doh. Botched up my first line. It should have read something like:

      “Actually, 70% goes to the APP SELLERS each month. Quite often, apps are not developed by the sellers, but by software contractors and development houses, for the sellers.”

  4. In support to the stupid Irishman, some people really have lots of time trying to prove other people wrong. If they just would read the article all through. Even at the end of the article they state, quote: “While we make every effort to ensure the accuracy of all the information contained in our posts, sometimes errors make their way onto our site, and this was one of them. We deeply regret any confusion this may have caused. Please accept our apologies.”

    Not all info is there to make any assumption listed above. These are only various statements to show how well App Store is doing. If you want to know how much money Apple made in the last quarter you need more info than listed in the gigaom article.

    In case I may have spelled any word wrongly, I ask for forgiveness from the spelling freaks, since math is not their strength.

    And for the conspiracy theorists, I would look at 9/11 and the swine flue, for that matter, this should give you enough to dive into.

    For the rest of us, enjoy the world and be happy….

    • Nitwit,
      What makes anyone who notices and points out an error in a written forum, a spelling freak?
      What makes anyone who notices and points out an error in arithmetic (nothing more nor less), unable to spell correctly?
      It is possible to enjoy the world and be happy.
      Must that be at the expense of numeracy, literacy, and the ability to soundly reason?

      • And here too, I agree. But when I read through this or any written forum, I find so many halfwits trying to prove others wrong. Everyone makes mistakes and at the same time everyone thinks he is the only one in the world who is right. What is ‘right’ in the eyes of an observer? Especially in this time and age when every halfwit can publish the accumulated garbage of his mind in a written forum. Read above and find that I am not too far off.
        Who cares if someone writes a report even if there seem to be some differences, or how much money Apple makes, as long as the programers get their share, the IRS get their money and some funky investors get their profits. What does it concern for Tim and Henry on the exact details of Apple’s earnings with their AppStore. The store seems a good idea and it makes money… and it has nothing to do with me or Tim and Henry.

  5. Thank god we have people like Stupid Irishman sitting on the computer all day policing our internet sites. I dun tell ya, all dat fancy math of yers jus’ blows my mind!

    • Michael, It’s not “fancy math.” It’s called the ability to read, think, and apply sound reasoning. You appear to be embracing ignorance by your comment. Not a good side of any argument to be on.

      • Thanks for the clever analysis. Boy, you sure got me there. Next time I’ll be more careful before I say something that could be interpreted as “embracing ignorance.”

  6. James Lim

    I think the figures are still wrong.

    The average cost of “Top 50 paid” apps is $2.59 which is
    129.5 divided by 50. But there are 3 times more free app downloads than paid apps. So if we want to get the average
    cost of “Both Paid & Free” apps, we need to
    divide 129.5 by 200(addition of original 50 + 3 times of that) not 50 and we get $0.6475 not $0.91.

    This is about 30% less figure than the original and so all the rest should be fixed by this amount making monthly total
    revenue of Apple app economy approximately $175 million not $250 million.

    Correct me if I’m wrong.

    • Stupid Irishman

      You think you are lazy? I don’t want to get up for lunch, so I’m eating Cheetos while surfing the net (the “puffs” kind- they are probably filled with crack, as I can’t stop eating the damn things).

    • Mark Wilcox

      Yes pretty diagram and nice presentation but total nonsense content, as commented in the rest of the thread – the sums don’t add up – the conclusions on revenue at the end are complete fiction.

      • TooFineAPoint

        Apple found it worthy enough to put in to their web-site so couldn’t be that nonsensical, no? Here’s Om’s tweet:

        OMG. Woke up this morning to find one of our stories from @gigaom linked on Hot News page. Awesome. 5:59 AM Jan 16th from Tweetie

      • irish, your so pessimistic.

        Russell, get into the app business, keep an open mind and think outside the box (app). Not everyone is making big money, but failure doesn’t hurt that much. Its a competitive market, that’s always good for the consumer.

        The app market is only getting started, the iPhone is still young, and as new companies look to develop apps and mobile sites to complement their websites, developers will be in demand for a long time.

    • Stupid Irishman

      You know- the math errors are mostly due to the format/layout of the text of the piece. I think people are getting confused because of the layout. The data is all correct, though, so if you’re going to start faulting people for crappy math skills, start with Vijay (up top).

  7. The developer figure is interesting. I wonder though how many of them simply built something quick, threw it in the AppStore and hoped for the best.

    Just like every business iPhone app development requires a long term and end-to-end strategy.

    Great post though.

  8. According to this, iPhone developers are earning an average of $12,500.00 per month from App Store sales. Nice little earner – that works out to $150,000 per year.

    However, I think the real numbers are skewed somewhat, as we hear of a handful earning over $1m per year, and LOTS of smaller dev shops earning a pittance (i.e. a few hundred dollars) per year.

    • Stupid Irishman

      Consider this: each “developer” registered with Apple most likely has several submitting under the same developer account. Unless you are in the top of that bell curve for earnings distribution, you are not making much at all & that is most cases.

  9. Anonymous

    If I was not viewing this page right now on my iPod touch I would be a little outraged!! How many american dollars do you think are leaving the states each day?!?

  10. The numbers for revenues are all wrong. There is no way the app store is generating more than $500mn per month.

    From Sept 2009 to Jan 2010, 1bn apps were downloaded according to Apple, both paid and free. That makes to be 71mn paid apps per month (1bn * 0.25 paid apps / 3.5 months). Even assuming $2.59 average price, that makes to be $180mn per month in revenues. AND $2.59 is not a reasonable average price. The $0.99 apps are likely to be downloaded much more than just a simple average of the top 50 apps will show.

    Please correct me if I’m wrong. But otherwise, it is shocking irresponsible how anyone can put such numbers up.

    • Stupid Irishman


      The 1B figure is September 2008 (not 2009) to January 2010- that’s about 16 months of downloads and revenue. That changes your analysis quite a bit, right? Glass houses, brother… You don’t happen to work for Google, do you?

      It would be appropriate to assume $2.59 is the average price for ALL paid app, but $2.59 was the average price for only the “Top 50 Paid Apps” in December.

      Stop getting all dramatic about “responsibility” & go back to work. You do have a job, right?

      • Let me clarify, on 28th Sept 2009, Apple announced 2bn apps downloaded. On 5th Jan 2010, Apple announced 3bn apps downloaded. Between this period from Sept 2009 to Jan 2010, 1bn apps were download (3-2).

        This is important to me as I run an iPhone startup. Knowing such numbers is the bread-and-butter of our business.

  11. James Lim

    How is it that each iphone/touch users spend $10 per month when users only download less than 1 paid app(a quarter of 3.7 apps) each month? If we round up that the users download 1 paid app each month and the average cost of an paid app is
    $2.59, then the average amount the users spend per month should be $2.59 not $10.

  12. Vijay Adusumilli

    Sorry, I am missing something here. Are users dowloading 3.7 paid or total number of applications per month? If it is the former, then total number of downloads (4 times paid) for December are 3.7x4x56M = 828.8 million. Towards end of September Apple announced 2 billion downloads and on Jan 5th Apple announced 3 billion downloads. If about 830 million of them were downloaded in December alone, App Store must have really had a very dry period in October and November. What am I missing here?

    • I am missing something too. Using the data above, the average paid apps cost $2.59. If 75% are free then the average including free would be closer to $0.65, correct?

      So the average iPhone user would spend closer to $2.40/month than $10.

      Showing my work!:



      • Stupid Irishman

        The average paid app does NOT cost $2.59!!!! Your statement implies you mean for ALL PAID APPS. You read it wrong. In DECEMBER, The average price of apps in the “Top 50 Paid Apps” section just happen to be $2.59.

        75% of apps are NOT FREE, but 75% of apps downloaded in December happened to be free.

        You had to have failed the whole word problem thing back in school, right?

        Why did you show your work? All you did was come one step shy of showing what they quoted (129.5/50= $2.59- the average)

        Could you please submit all work showing how you arrived at $2.40 per month? I want to include it in my next board meeting. Thanks.

      • Stupid Irishman

        OMG!!!! I just realized that you were even more wrong than I had previously imagined.

        The “one quarter” figure (and it’s inverse, naturally) is in no way related to the $2.59 pricing figure. Multiplying them together gives you nothing more than headache. Did you actually read the piece?

      • Dear Stupid Irishman,

        The figure of $2.40/month came from multiplying the number of apps users downloaded in a month by the average cost of an app, which is the average cost of a paid app multiplied by the percentage of downloaded apps that are not free. It is the same math that Om walks through in the update above. The exact numbers are slightly different because the original data provided by the info-graphic was different. The math is the same.

        Why did they go to the trouble to change it those of us who suggested the update are all idiots, failing the whole word problem thing back in school, and OMG this and Cheeto that? STFU.

    • I would assume total.

      To quote the above, “iPhone users downloaded an average of 3.7 apps in December, one quarter of which were paid.”

      Of course, the interesting part is that one quarter of 3.7 is 0.925. We’ll be nice and round that up to 1. So everybody bought an App in December. They spend $10 a month, but the average price for an App is $2.70?

      I think we might need to consider not using “averages” here. I’d love to see what the deviation is. We might want to consider using a mean or median. Do we have 1% of the customers downloading everything that’s not nailed down and the other 99% downloading very little?

      • Stupid Irishman

        Peter- you sound like a smart dude. Let me run this by you:

        First, the $10 figure is meta-data- all months averaged for all consumers of all app store products.

        Second, the average price quoted in the piece was only for what was in the “Top 50 Paid Apps” section of the itunes app store (it was quoted as $2.59, not $2.70).

        Why would you draw a correlation between two disparate phenomena? Also- what does deviation do for you in this story? All they are trying to do is show how kick-butt and popular the technology is. What’s the big deal?

    • Ben Phelps

      3.7 apps rounded up to 4
      $2.56 per app rounded up to $2.6
      comes to a grand total of
      $10.4 rounded down to $10

      The problem here is that the math continues on with all four of the apps being paid, and not just the one.

      The proper math would be:
      125 Million in Revenue Each Moth with
      37.5 Million to Apple (30%)
      87.5 Million to Developers (70%)
      $1,500,000,000 Each Year on iPhone Apps

    • TooFineAPoint

      Your point may be absolutely right, but I would like to see the forest here rather than trees.

      With due respect, by the time your calcs get done, the #s change. So the larger point is apple makes apprx $150 revenue/month ($500M x 30%). Take costs out and lets say they make (profits( of $100M/month = $1.2B/year + growth. Very decent #s – almost needle moving in the grand scale of things + incredible platform stickiness (both for users + devs). Thats the point.

    • Stupid Irishman

      Calm down, big boy. Yes- you are missing something- alot of somethings, actually. Your assumptions are all wrong, so you are making gobs of mistakes in your calculation. Who gives a crap, anyway, though??? And why did you start off by apologizing? That was as weird as my fascination with wanting to reply to you, I guess.

      Anyway… I’ll point out the err in your calculation after I point out the first obvious mistake on your part- to use these facts/figures for anything other than what they were meant for: To demonstrate that smartphones are a prolific technology… and maybe that people at Apple think they are really smart marketers.

      Listen, Vij- I’m worried about you over here. Take a rest on trying to figure out Apple’s revenue or total download figures or whatever. You sound like some kind of freaked-out conspiracy theorist trying to uncover the next great insider trading scam. You have poor Frioga flippin’ out over her calculator, too! (Sorry, Frioga- I had to say something)

      Here goes…

      – Of all of the dipsticks who downloaded Apps (not all Apple customers who have ever downloaded an app- JUST the December dipsticks), they averaged 3.7 apps per dipstick.
      – They never reported how many dipsticks there actually were in December, so stop trying to guess at it.
      – Using a multiplier of 4 to reverse the “one quarter” figure makes you a dipstick, too, by the way.
      – The quarter figure was meant by author to apply to the 3.7 figure. Meaning this: Every dipstick in December who downloaded 3.7 apps downloaded 2.78 free apps and .92 paid apps. Now do you see why multiplying 3.7 by 4 is really stupid and irrelevant? Hope so…
      – The 56M figure is a TOTAL CUSTOMERS of the appstore since the biginning of appstore time. Again- they never reported quantity of December-only customers. This is your largest calculation mistake: combining facts/figures that aren’t related to each other. You are making me feel like a complete NERD in having to explain this to you… and now I’m starting to feel idiotic for even entertaining your question. (DAMN my obsessive-compulsive need to correct idiots) :-(
      – The billions of downloads figure (though never reported in this piece, but since you referenced it, and it feels fun to explain… I will). This number you read about in the National Inquirer refers to the number of TOTAL APP DOWNLOADS since they started offering app downloads a year and a half ago.
      – I am so PISSED that I spent all of this time replying to you. Please don’t ask any more questions so I don’t get sucked in.

      p.s.- Frioga got it all wrong, too, so don’t feel bad.