It doesn’t matter if Apple isn’t making a lot of money with the App Store

Posted by Bhavishya Kanjhan on May 15, 2009 in Default | 0 comments

Lightspeed Venture partners is reporting Apple may have only made around $20-45 million from the 1 billion applications downloaded in the 9 months. Taking the paid to free ratio to be in the range of 1:15 to 1:40 and the mean price to be $2.65, they arrive to a revenue of $70-160 million, 30% of which is the magic number they have come up with.

Clearly the App Store is far from a cash cow for Apple, especially when compared to the money its hardware lineup brings in. SDKs and development platforms in general have been around for a long time now but it is the distribution of these apps which had been a source of frustration for developers. By making them all available at one place, Apple has simplified the distribution chain and in turn generated  an additional source of revenue for it, no matter how small it may be.

The greatest source of pride, however, for Apple will be that the App Store is (or was) a source of competitive advantage for them and has converted potential buyers into buying consumers. Take a look at an iPhone running 1.x version of the OS and it looks practically naked when compared to a fairly used 2.x one. At the end of it all, even if Apple was breaking even with the App Store it wouldn’t matter because it’s served as a major pull factor enticing buyers.

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