iPhone Apps - Show me the money

Lets dig into Apple 1B dollars paid out by iPhone App Store - how relevant is this number

from Communities Dominate Brands by Tomi T Ahonen

One of the numbers I told readers to look out for, in 2010, was when Apple will announce it has passed 1 billion dollars of App Store sales. We didn't hear that moment, but when Steve Jobs announced the iPhone 4, he did reveal that Apple has now paid out 1 Billion dollars to Apps developers. As Apple keeps 30% of the revenues, that means that as of June 7, 2010 - in a little less than 2 years from launch - the total revenues generated by all iPhone apps sold since July 2008 has now passed 1.43 Billion dollars - of which Apple has kept 30%, and paid out 1.0 Billion to the developers.

So we also heard that the total cumulative downloads had passed 5 Billion apps, so if we count that across all apps, we get an average of 29 cents earned per app downloaded. That is not exactly overwhelming..

Of course the vast majority of all apps are free apps. The conventional wisdom - based on no real facts but some gut feelings and very small smaple surveys, has been saying that 70% of all apps are free - and thus 30% of all apps earn revenues from the consumers who download them. That is now not supported by the facts from Apple.

If we map out app revenues against the 30% of all downloaded apps, we get an average price paid of 95 cents paid per downloaded app. That is clearly not reasonable where the minimum price of any iPhone app is 99 cents and many apps cost far higher levels like 3.99 or 4.99 or 9.99 etc. We had Chetan Sharma's calculation of the average price of a paid app to be 1.90 dollars. Yankee Group measured it at 1.99 dollars. Both of these were numbers effective March 2010. If we assume the average price is the half point of those two - at 1.95 dollars per iPhone app, that means that to get 1.43 Billion dollars total revenues, there were 732 million apps that were paid apps, and almost 4.3 billion free apps. 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.