The $45m headline number is a drop in the bucket compared to what Apple makes from selling iPhone and iPod Touch hardware. The crucial point this story misses is that Apple has generated a marketplace worth $50m-$112m in revenue for makers of iPhone apps, with an App Store that launched less than a year ago. This is huge.
While $100m and $50-112m seem like comparable numbers, the difference between investment and revenues is huge. Think about it, would you rather have $100m in VC money or $100m in revenues (per year!) from customers?
The biggest benefit to Apple is not the revenues they get from Apps. The biggest benefit is from the thriving community of iPhone app makers who are probably willing to spend on the order of $50-$112m of effort (per year!) improving Apple's platform. A platform worth $2+ billion/yr for Apple.
Agreed. On top of that, Apple really isn't spending that much to create this platform. Once it's made, it requires a bit of overhead but basically the revenue from this should cover it.
This is a really good example of mutual benefit marketing. The 45m is nothing to sneeze at, but it's gross, so their actual take may be minimal, but it's a fantastic service to their customers and drives hardware sales for them.
I honestly think it's the only future of marketing as the mindshare we're all vying for becomes more and more saturated/savvy. I've written about this a few times at my agency's blog (http://voltagecreative.com/blog/?s=mutual+benefit) and I'll probably do a write up on this.
I disagree. Their current 'There's an app for that' advertising campaign is clearly targeted at people who would like certain applications on their phone, irrespective of the phone itself. If they see the iPhone can do what they wish, they will be more inclined to purchase one.
I personally know of several people who have recently purchased iPhones and the App store was a major consideration for them.
I totally disagree — the iPhone isn't that great of a phone without 3rd party apps. I mean, it has an awesome browser and such, but I cant imagine owning a phone which didn't have a big 3rd party ecosystem behind it.
I don't think that Apple really needs the App Store to be a money maker. In fact, if it breaks even, it would be a win since the applications themselves are adding value to the iPhone and iPod touch in the same way that third party applications for Microsoft's operating systems have created so much value for Microsoft.
The apps are quickly establishing the iPhone/iPod touch as _the_ platform in handheld computing making it very difficult for third parties to compete against Apple. With the Palm Pre coming out soon, a lot of people are going to be looking at it like people looked at Macs a few years back - sure, I could get a Pre and you can even argue that it's a better device, but everything runs on an iPhone and I have no idea whether people will port things to the Pre.
Apples knows - or at least should know - that the App Store is what will give them the Microsoft advantage in the mobile space. As everything is iPhone/iPod touch compatible, sales will keep going up which will drive even more app creation which will drive even more sales. What a wonderful cycle, unless you are on the outside trying to compete.
So how did Apple compete against Microsoft in the desktop computing space? They built an ecosystem of their own. To make sure people would come there, they saw what sucked about Microsoft, and made sure that those very weaknesses were their own strengths.
There are plenty of things that suck about the iPhone. If Palm has the insight to spot those and capitalize on them, then they'll win a place in the smartphone businesss.
How could that sort of miniscule revenue finance some servers, bandwidth, and a payment system? You'd almost think Apple were trying to make more money from selling the phones and contracts :) </lowest form of wit>
All joking aside, their app reviewers might cost more money than all their bandwidth, as they have already invested heavily in that infrastructure for the iTunes store.
There are almost certainly not 600,000 paying iPhone developers. I'm guessing that number is people who have downloaded the SDK (which is available for free).
There are only about 35,000 apps, and the average number of apps per developer (who has an app on the store at all) is probably closer to 2 than 1. Even with twice as many paid developers as people who have shipped apps, you're talking about a maximum of 75,000 devs.
That also means that the mean revenue / developer is $300... Doesn't sound like too profitable a business as $99 of that $300 has bought you the registration fee ;)
Compare that to the $100m "iPhone Fund" that Kleiner Perkins announced in March 2008 (http://www.techcrunch.com/2008/03/06/kleiner-perkins-anounce...). This seemed like a lot at the time, eclipsing the $10m "fbFund" for Facebook Apps from Accel, which itself seemed big at the time (http://www.techcrunch.com/2007/09/17/facebook-launches-fbfun...).
While $100m and $50-112m seem like comparable numbers, the difference between investment and revenues is huge. Think about it, would you rather have $100m in VC money or $100m in revenues (per year!) from customers?
The biggest benefit to Apple is not the revenues they get from Apps. The biggest benefit is from the thriving community of iPhone app makers who are probably willing to spend on the order of $50-$112m of effort (per year!) improving Apple's platform. A platform worth $2+ billion/yr for Apple.