Apple Only Making $20-45m from App Store

By  |  Thursday, May 14, 2009 at 10:52 am

Lightspeed Venture Partners‘ managing director Jeremy Liew threw some cold water on Apple Thursday, saying that while the company has indeed sold some one billion apps, it likely has made no more than $45 million in revenue overall from the App Store.

Liew did some research to find that only one paid app is sold for every 15 to 40 free apps. This would infer that between 25 and 60 million of those one billion apps were paid for.

Going forward, he used the mean price for sold iPhone apps of $2.65, as released by O’Reilly. Together that would add up to revenues of $70-160 million, of which Apple only sees 30 percent of. Thus, $20-45 million in profits.

The kneejerk reaction here is to gasp and say, “wow, Apple’s App Store has been a failure from a revenue standpoint.” Not so fast, though. The company has repeatedly said it did not expect much revenue from its service, so this should come as no big surprise.

Add to this the fact that the App Store has a bigger purpose for the company over and above making money. It’s meant to draw people to the platform. While there’s no “killer app” for the iPhone just yet, the broad-based support it gets from services across the industry is a definite draw.

Notice how Microsoft and RIM have been scrambling to develop App Stores of their own? There’s a reason for that.



5 Comments For This Post

  1. John Baxter Says:

    It would be nice to know (although there is no need to know) whether updates to applications (free or not free) are counted in the one billion. Since the word “downloaded” is used, I suspect so.

  2. Dave Barnes Says:

    Next, they will be telling us that Apple makes very little money selling songs from the iTunes store.
    So, I just Apple should just get out of the music player business and abdicate it to Microsoft.

  3. drew Says:

    “Only” $45 million? The App Store opened on July 10th, 2008. That means (depending on the date they used for their data) in roughly 10 months (or say 300 or so days) the App Store has taken in $150,000 a day. That is not to shabby a revenue stream.

  4. Backlin Says:

    I’m agreeing with Drew on this one.

    And I always thought that the App Store was not about money, but about streamlining the way to get external applications.

  5. drew Says:

    I was also thinking about this paid-nonpaid “divide”. Can I assume that the Apps Store has “shareware” or try before you buy versions? I have downloaded terrabtyes of sharware/trial programs in my time, and most I don’t buy; but some I do, and at times, spending a fair amount of money on it. Could some of those free downloads be driving future purchases?

    Also, considering the poor state of the economy (with people seeming to be more cautious about spending money) could that $150,000 a day jump to say $225,000 or $300,000 when the economy takes off?