Apple's iPhone App Success Overstated

Dennis Faas's picture

iPhone users have spent $30 million on applications for the new 3G model in the month since it's released. But Apple will get 'only' $9 million of that take.

Users can buy applications, produced by third-party developers, from the iTunes store. There have been around 60 million application downloads so far, though many of these (estimates say as much as 90%) are free.

Paid applications range from around a dollar for novelty items to around ten dollars for games, so an average $5 price would fit the estimates. The most expensive item, a thousand dollar screensaver, was pulled by Apple recently.

At the time of writing, the top-selling paid downloads were a Koi Pond fish simulator, a tool which plays relaxing sounds to help people sleep, and a slimmed-down edition of the Crash Bandicoot game.

Apple boss Steve Jobs told the Wall Street Journal the applications market could one day be a billion dollar market. That's misleading for several reasons.

First, Jobs says that at the current rate, application sales will total $360 million a year. That's mathematically true, but unlikely in the real world. The chances are that sales figures will drop in future once the novelty wears off.

Indeed, early analysis suggests people are using applications barely once a day, for less than five minutes. However, it's worth remembering those figures may be higher for applications people have actually paid for. (Source:

Secondly, while all-time sales could well top a billion dollars at some point, a "billion dollar market" is usually regarded as one that does that level of revenue in a single year. To do that, Apple would have to consistently triple the first month's sales figures.

Finally, Apple only gets a 30% cut of all application sales. While that still means a healthy sum for comparatively little work, the first month's cut of $9 million isn't that significant for a company grossing $30 billion, largely from hardware sales. (Source:

Indeed, that's one of the few valid knocks against the hugely successful Apple: it still has a high proportion of its business coming from hardware which has a low mark-up and hasn't yet fully exploited the more profitable (as a proportion of sales price) possibilities of software.

Rate this article: 
No votes yet