1 Billion Paid out through the Apple App Store - Really? | Hacker News Reader

1 Billion Paid out through the Apple App Store - Really?

communities-dominate.blogs.com

21 pointsyewweitan27 comments

Worth pointing out is that the author is an old Nokia exec.

Here's what he had to say when the 3G was released; "Now I fear Apple is entering into a similar mis-step it did with desktop computers with the Macintosh line some years back, when they tried to take on Windows computers head-on, tough low-cost pricing and almost identical feature set and just fighting the "moving boxes" game. Apple is far too expensive a design company to be able to afford to win in that game. That is mass market bulk game, and the winners will inevitably be those with the scale to crush Apple, ie Nokia, Samsung, LG." Doesn't really seem to be what has happened.

Some more; "But it no longer is the exclusive superphone, and I am afraid that Apple has now forever abandoned the top end of the market to Nokia, Samsung and SonyEricsson. Apple moved downstream. And that battle is far more tough than the top-end market."

I don't know about the rest of you, but I spent over $100 on iPad apps the day I got it (I knew what I wanted!) and am sure I've spent hundreds over the three years I've had my iPhone.

Everyone I know with iOS devices has at least $25 worth of apps on each, if not many, many more.

Given the number of words like "about" and "roughly" and "estimate" and "gut feeling", I'm going to believe my anecdotal evidence over this.

I'd like to see a similar breakdown, but with more substantial data. Ah, but that would be a pipe dream. Apple is a locked box. And that is okay.

Just do the math, there are a known amount of devices sold and a known amount of revenue paid. The average is about $16 which means you're a large outlier and you travel in a circle that's also made up of outliers.

Absolutely agree. Find the non-tech/geeks out there and check what they've got + spent if they've an iPhone/iPod Touch/iPad.

Let's review:

- 90 million iDevices sold in the last 3 years

- in the last 2 years, there's been $1.43 billion in App Store sales

- 70% of that = $1 billion, was paid out to developers

- there are currently 225,000 apps available in the App Store

- 85% of all apps are free (according to the author)

That would indicate that an average paid app that debuted in the App Store two years ago has since grossed $42,370 -- of which the developer received $29,659.

(0.15*225,000= 33,750 paid apps)

(1,340,000,000/33,750= $42,370 in sales)

Doesn't seem too bad a deal, especially given the rate at which the iDevices sell. Before the end of the month, there's going to be 100 million iDevices in the wild. The number of potential App Store customers is growing at a high pace.

Of course, like the distribution of free vs. paid, it's likely that a majority of the money is going to a minority of the paid apps (I would imagine a pretty similar 85% to 15% distribution), which means its probably working out decently for the top 15% but not so much for the rest of the developers. A substantial portion of the top apps are also likely the ones from companies like EA or branded apps like Scrabble, especially given that most of those apps go for $5-10, higher than the average sales price.

"Average" figures are usually meaningless if not outright deceptive. If Bill Gates gets on a bus the average net worth shoots way up, but it doesn't mean a thing.

Consider a distribution where the top app earned $1,000,000, the next ten earned $100,000 total, the next 100 earned $10,000 total. The "average" earnings would be $10,000. But the vast majority of apps (100 out of 111) actually earn about 100 bucks.

Without access to the actual iTunes sale data and using anecdotal information from people posting about their sales rank and revenue, my assumption is you could get a pretty credible grasp of how many apps are in the long tail/rarely purchased - just by looking at the number of ratings.

Zero ratings probably means near-zero downloads.

Though not everyone rates the app. In fact, some apps might not get rated until deletion.

I don't understand this focus on average revenues. With few exceptions, most of the iPhone developers I personally know make their money by consulting for companies on their free apps.

They have apps on the app store, sometimes for personal gratification only. For instance, one guy does tab bar-type content/search apps for most of his income, and he laments that he can't get paid to make games (his true love - and he has two games on the app store. One of them, a card game, has done quite well). Yes, he still carves out a small slice for personal fulfillment game projects.

  The latest count I've seen is 225,000 total apps on the App Store.
  So if we divide the 1.43 billion dollars cumulative revenues
  earned by those 225,000 apps, we get an average revenue earned
  of 6,355 dollars per app (over 2 years).

But you had just said this:

  Thus free apps would form 85% of all downloaded apps on the
  Apple iPhone App Store, and paid apps only for 15% of all apps.

Shouldn't you divide the revenue only by the number of paid apps? That would surely make the platform much more financially interesting.

And you are assuming too much averages. How many of the apps got this "average revenue", what how many spent the "average" in development?

This calculation also ignores ad revenue (vs. purchase revenue)

Also ignores the constantly fluctuating percentage of paid apps to free apps. It's 15% today but was it 30% 2 years ago? 50%?

Numbers, cuts etc etc.

A billion is a big emotional mark. Breaking it down to a per unit, regardless of what is actually given out as revenue, is a fairly traditional means of giving an indication of the per unit revenue (even if unfairly distorting).

Eg: cost of military + war in Iraq (in particular) is often distilled down to the cost born by each man, woman and child in the USA - despite the fact that each man, woman and child does not bear an even cost (nor some would argue an even benefit).

That is perfectly acceptable.

But the author is claiming that the developers are not making money with it and he's using flawed logic to get there. That's not ok.

Here's my thing. I think people are irrationally buying too few apps.

What do I mean by that? Well, good apps have the potential to really improve the experience of using your phone. They also cost very little compared to the price of the phone itself. If there are ten apps that could increase the value of your phone to you by ten percent each and each app cost $5, then it would be very silly not to buy each of these apps. This is for two reasons: first, your phone being twice as valuable to you means the dollars spent per unit value has gone from ($500 / v) to ($225 / v). Second, spending money on the apps created by good developers in aggregate grows the availability of good apps by encouraging more talented people to enter app-making.

The other thing is that the price of apps is typically peanuts compared to the cost of the hardware. I have a $500 phone (Nexus One). I was recently considering breaking my contract with Apple to go over to t-mobile because I have the Google-issued version of the N1 whose 3G radio works on t-mobile only.

Initially, I thought I would be able to buy a t-mobile plan for $50/mo with the "unlimited internet for phones" plan. But it turns out I'll need the one for smartphones. Now, this is undoubtedly stupid. But the level of stress I gave myself over $10 per month, which will still represent a $15/mo savings over my iPhone plan, is ridiculous, especially compared to the other costs involved, or, for example, my $1500/mo rent.

TL;DR: I think people in general succumb to false economies when thinking about small prices that could possibly greatly enhance the experience of using various devices.

And I think I'm going to go get my number ported this afternoon.

TL;DR: I think people in general succumb to false economies when thinking about small prices that could possibly greatly enhance the experience of using various devices.

Agreed. I'm not sure I'd call it "irrational" though; defaulting to not buying is a reasonable way of avoiding the annoying mental transaction costs when you're faced with a huge number of small potential purchases. Clay Shirky's piece on micropayments 10 years ago is relevant here: http://openp2p.com/pub/a/p2p/2000/12/19/micropayments.html

I should modify "irrational" to say just "mistaken" or "suboptimal."

The author of this post is pulling numbers out of his arse and sticking them together with hand-waving maths to try and make a larger point about App Store business-worthiness. That makes for a pretty poor article.

Here's a simple truth:

You can make numbers say whatever you want, particularly when you don't care about getting real, accurate, relevant numbers.

In short, there is no information in this post other than the author's preconceived judgements. If the author's original opinion had been that the App Store is a great deal for developers, I have no doubt that the numbers would have shown just that.

Well, no he isn't. He is trying to extrapolate information from a few different data sources, the figure of $1 billion from Apple, and the average price of a sellable app.

From that, and some seasonal data, he is trying to calculate how much has been made over time. While he is probably not entirely accurate, what he has done makes perfect sense, and he is not waving his hands in the air to try to make up results according to an agenda.

You could take the same numbers and make them say the opposite with subtly different assumptions. In short, those numbers are meaningless, or at least this analysis is meaningless.

I suspect the average cost of app development is far less than the $15k to $50k the article claims. The formal budget for lots of apps is zero or close to it, and even if you include the opportunity cost of a hobbyist's time (which is silly), you'd only get to the low thousands in most cases. Maybe there's a few big-budget apps inflating the mean cost, in which case the median would be more informative.

Although along similar lines, the median app almost certainly earns well under the $6355 average.

Yea that figure looks suspect and a source for it isn't cited.

The cost is very different if you are developing your own apps, or you are the 'brains' and need someone else to develop the apps for you.

I think this is what the article is trying to say, that a return for someone like that may not be there yet, but this always depends on the idea.

This is the same guy that said iPhone sales had peaked by 2010, a couple weeks before Apple announced record sales: http://communities-dominate.blogs.com/brands/2010/04/iphone-...

And then blamed his faulty analysis on Chinese New Year: http://communities-dominate.blogs.com/brands/2010/04/apple-t...

I suspect that people do not write an app hoping to be the "average" app, but are instead hoping to be a breakout app that becomes very popular. It seems like an example of superiority bias.

The 85% apps being free is an important figure. That means only 15% of apps are taking advantage of the killer feature provided by the App store, easy billing. The overlap between the 85% that don't need billing and the X% that don't need high processing power is the sweet spot for cross-device HTML5 developers.

With that in mind it's interesting that Apple is moving into ads (a way to monetize without direct billing).

Reply on news.ycombinator.com