Apple’s iPhone App Store, which has set the model for online phone stores with more than a billion apps downloaded, is actually not making much money. That’s the conclusion of several industry observers, including Lightspeed Venture Partners, an early-stage technology venture-capital firm based in California’s Silicon Valley.
In a posting earlier this week on the company blog, Lightspeed’s Jeremy Liew took a few pieces of publicly available data and estimated that Apple’s revenue, after paying third-party developers, is between $12 million to $27 million on the low end and $20 million to $45 million on the high end.
Plus Developer Fees
Liew first took industry estimates for the ratio of paid to free applications, which ranged from 1:15 to 1:40, and calculated that 25 million to 60 million of the App Store’s one billion downloads were sold. He noted that the mean price, according to research and publications company O’Reilly, was about $2.65.
That yields a total revenue of between $70 million and $160 million, he noted, and Apple gets 30 percent, which results in the low-end/high-end estimates.
Another estimate using somewhat different assumptions by Christian Zibreg at Geek.com comes up with $110 million in annual revenue for Apple. Zibreg projects that this isn’t enough for Apple to break even, although the store could become a moneymaker in the future.
Some observers have also noted that Apple collects fees for developer licenses. With about 50,000 individual and corporate developers and annual licenses ranging from $99 to $299, the developer fees are a significant addition to Apple’s bottom line.
‘Designed to Cover Costs’
On April 23, Apple announced that the App Store had delivered a billion downloads in its first nine months, and a 13-year Connecticut boy won the prizes the company offered to the person who downloaded the record-breaking app. The downloads and the revenue estimates highlight the…