Just a month ago, Apple announced that one billion apps had been downloaded in the first nine months of the App Store's existence. But Lightspeed Venture Partners managing director Jeremy Liew suspects the company made just $20 to $45 million from those 1 billion apps.
In a blog post on Lightspeed's site, Liew tried to wager the math behind that suggestion.
Using a 1:15 to 1:40 ratio of free to paid apps, Liew estimated that 25 to 60 million paid apps have been downloaded. Using a recent O'Reilly survey that noted a mean price for paid apps of $2.65 -- but acknowledging that "the weighted average price for paid apps is probably lower than this as the median is $1.99."
Using that price and multiplying it by 25 to 50 million paid apps, that suggests a cumulative revenue from apps of $70 to $160 million. Taking into account Apple's 30 percent cut of the profits, and we're talking $20 to 45 million, with a safer guess of $20 to $27 million.
But that's not a whole lot of cash in the grand scheme of things, Liew says. It's all about the hardware:
Given that Apple sold 13.7m iPhones in 2008, the app store is not a meaningful direct contributor to their overall revenue. Much like iTunes, Apple is using the App Store to drive demand for their hardware.
To me, this just seems too easy. For example, what about the overhead of running the App Store? And isn't $20 to $45 million still significant in this economy? Still, I concede that attempting to corner the smartphone market is without a doubt the more lucrative strategy.
What do you think? Is Apple banking on App Store profits, or is it all one big sales pitch for the hardware? Tell us in TalkBack.