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Apple App Store revenues will be how big exactly?

While Microsoft has been the undisputed master of making software dollars, there’s a new kid in town. Born in July 2008,  it looks like junior is set to hand out some mighty beatings over the next decade. KitGuru scans the web and does some calculations.

The launch of the App Store coincided almost exactly with the launch of the 3G version of the iPhone and iPhone 2 software, back in July 2008. From day one, there was a selection of around 500 products. Now it’s just over 400,000.

Word on the web is that Apple takes 30% of the revenue from sales and that around 25% of the downloads are sales of some sort.

The same word also suggests that the average price of what is purchased is around $3 (which translates to around £1.90 in old money).

If you calculate 25% of 15 billion downloads at $3 each, then you have around $11 billion or £7 billion.

In most cases, this business which contributes to Apple’s overall profitability – but which actually costs Steve Jobs & co very little to increase. Apple’s overall approach is very different from Microsoft’s – and it seems to be paying off. Here’s a thought: How much effort would Microsoft put into helping developers distribute a rival to Microsoft Office?

The size and power of the Apple App Store is amazing, but that’s based on historic data. If you look at this neat little graph, you can see that download growth is far from linear. The numbers in the future look positively scary.

The chart has been superimposed by us, the happy-happy look on Steve's face is real/original/untouched by KitGuru hands

So how big could this App Store business get for Apple – in the near future ?

While Gartner might be famous for its over-enthusiasm in calculating the rate at which Acer will increase market share, the folks from Egham in Surrey are not shy of sharing opinions and, earlier this year, they guesstimated that the revenue available from App Stores (including the Android ones – as well as any advertising revenue on those sites) will total $58 Billion in the 5 years from 2010 to 2014, inclusive.

So how close is Apple to Microsoft these days?  Well, even if you include revenues from XBox and its associated marketplace, the two are in the same ballpark. Albeit Apple is ahead in some areas and Microsoft in others. But the rate of expansion is very different.

To get a significant boost in revenue and profits (let’s say £300m), Microsoft needs to develop, launch and market a serious piece of technology like the XBox or Kinect) and then wait for a million customers, mostly in the developed nations, to spent the £300 each necessary for a full experience.

Apple needs just 1 in 28 of its installed user base to be interested, at £1.90 each, and it achieves the same kind of revenue.

But the margins are completely different. The £300m calculated here for Microsoft sales does not include the physical cost of the hardware or the distribution/logistics.

While Microsoft’s struggle to get the product and pricing right has meant that it’s given up the smartphone desktop without a fight, it’s now finding that even its ‘free’ software is taking a beating. Reports over on Fool.com show that Googles Chrome is now the number one browser in Argentina, Chile, Uruguay and – wait for it – Albania. While it once enjoyed a near 100% lead in the browser market – Microsoft is now down to less than 43% and falling.

KitGuru says: Sure, our calculations may not be 100% accurate, but one thing is 100% certain.  Not only has junior come home, but he’s brought the plasma rifle and 15 billion friends. Tough times ahead for Microsoft if it can’t re-establish itself in the modern world.

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