Let’s begin by declaring a few assumptions about the App Store Economy based on the data supplied by GigaOm and Tomi T Ahonen for the previous post How does the new mobile app store economy shape up against the old dot com economy?.
- The most popular paid download is $0.99.
- Developers retain $0.69 from each sale
- The average development cost for an iPhone App is $35,000
- This means you need 50,505 downloads to breakeven
- Subscribers spend around $4.37 per month
- This is an average of 4 x $0.99 apps
These assumptions translate into the following sustainability metrics
- The App Store can support 80 new paid apps per month per million iPhone subscribers
- This translates into an annualized sustainability figure of 960 new paid apps per iPhone million subscribers
Today the real App Store economy looks like this:
- An estimated 65 Million iPhones have been sold
- The App Store has an estimated 285,000 apps
- An estimated 70% (i.e.200,000) of those Apps are Paid Apps
Now let’s apply our sustainability metrics to the App Store economy and determine just what percentage of paid apps can be supported.
65 million iPhone subscribers x 960 paid apps per million subscribers = 62,500 paid apps
62,500 paid apps out of 285,000 Apps = 22% Paid Apps
(vs. 78% Free Apps)
However if developers seek a 30% profit margin on their app sales then the “sustainability” figure would fall to 15% Paid vs. 85% Free.
The bottom line is the App Store economy is probably around 3 to 5 times smaller than the developer community’s expectations.
Further Reading
- More Apps Store News and Stats
- Watch out! iPhones have long tails too!
- Finally revealed. The easiest way to make money as an iPhone Developer
December 7th, 2010 → 9:24 pm
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