iPhone App-Trepreneur: Part 2 — Opportunity Always Ring-Tones Twice

“Sir, if you have a milkshake, and I have a milkshake, and my straw reaches across the room, I’ll end up drinking your milkshake.” [1]

The biggest milkshake in the software world is Microsoft’s. For 20 years, if you wanted to make money by writing retail software, you did so by targeting Microsoft operating systems: DOS and then Windows and then Vista (just kidding about that last one!).

In 2007, Apple introduced the iPhone. At the time, Steve Jobs said that there was no need for 3rd party developers to directly program the device, that instead they could program awesome iPhone-enabled Websites that would be just swell. No one liked that idea.

In July of 2008, Steve Jobs opened the iPhone SDK to general development and announced the creation of the iTunes App Store. In its first three days of availability, users downloaded more than ten million small programs from Apple’s brand-new “App Store.”

In April 2009, a little less than 2 years later, the number of app downloads exceeded 1 billion. Five months later: 2 billion. 3 months later: 3 billion. In June of 2010, at the introduction of the 4th generation iPhone[2], Steve Jobs said that Apple had crossed 5 billion downloads. That’s a pretty good growth curve:
appstoresales
That’s about 10 million app downloads per day. To give you a sense of proportion, there are about 3 billion books sold in the United States every year.[3]

Apple has been drinking Microsoft’s milkshake.

About 25% of apps are free. Free apps are far more likely to be downloaded than paid apps (no surprise), but at the same iPhone 4 launch, Jobs said that Apple had paid out $1 billion in royalties to iPhone developers.

He also said that that in June 2010 there were 225,000 apps in the App Store; implying around 170,000 paid apps. OK, so $1,000,000,000 / 170,000 apps == $5,882.35 average revenue per app. That’s a glass half-full, glass half-empty number. Hit apps can make much, much more than that — at least 1 app has made more than $1,000,000 (Major League Baseball’s At Bat). So that means that the median app revenue (50% of apps make more, 50% make less) is certainly lower than $5.8K. On the other hand, several thousand dollars is not chicken feed — it implies that even if you don’t score a “hit” with your app, you might be able to recoup your expenses and time investment — as long as you keep your development costs down!

Which, not coincidentally, will be the subject of our next spine-tingling update!

Footnotes

[1] This was originally said by Senator Albert Fall in an explanation of the Teapot Dome Scandal, but it’s unlikely he said it with the elan demonstrated by Daniel Day Lewis in “There Will Be Blood.”

[2] Closer to the fifth generation, given the differences between the iPhone 3G and 3GS.

[3] This is comparing global app sales to US book sales.


  1. Prologue
  2. Part 1: Desperately Seeking Ka-Ching
  3. Part 2: Opportunity Always Ring-Tones Twice
  4. Part 3: Cost Control
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