Apple's App Store Numbers Continue to Amaze

The App Store is an accident of history. (But one that was predicted here). Apple (AAPL) had been making MP3 tracks available for a few years on the iStore. When they added a bit more memory and processing power to the iPod, they realized that it could run third party applications, so they made an iStore for applications. And amazingly they were only doing it as a service to users; they didn’t see the business potential.

Now after a little over a year, there are over 100,000 Apps and there have been over 2 billion downloads. 125,000 developers have signed up with Apple and 19.6% of Apps are games. All this has brought up some very pertinent points.

• This is the biggest success and the fastest growth, by a huge margin, of any new gaming platform in history. It has changed everything.
• Most App authors self publish to cut out the greedy publisher. They end up making far less money as a result. Apps need marketing and marketing is one of the jobs of a publisher.
• Intense competition has driven down App Store prices remorselessly. This is largely due to self publishers, in their ignorance, using the price mechanism as a marketing tool.
• Apple put up very little in the way of barriers of entry to publishing on App Store. This means that there are vast quantities of total rubbish on there.
• The other side of Apple’s policy is that there has been a vast flowering of creativity on App Store. The biggest ever in the history of the video game industry.
• Because Apple set this up as a service, not as a proper business, there is little IP protection. Piracy is rampant. Several game publishers have reported it as being in the 90% zone. Even at the stupid low prices that Apps are, people will steal to save pennies.
• The App Store gives you instant global distribution. 77 countries can download your app the instant it is available. This has shocked the whole digital IP distribution industry. There are now lots of App Store clones for other platforms.
• High street, cardboard and plastic retail distribution of digital IP has been shown up as being a dinosaur, their business model is now in steep decline.

Apple realizes that they have a business model that is a license to print money. So it is pretty obvious that they will use it as a template. First for their imminent tablet device, which will be like a cross between a netbook and an iPhone. Then with their home console which will evolve from Apple TV just as the iPhone evolved from the iPod.

Comments

[GetMeOnTop]

Bruce, you make some valid points, enjoyed your posting!

2009 Nov 05 08:26 AM

[iJah420]

Cinderella Story in tech. 2010 will be fun to watch Apple and how they will mature in so many areas of tech.

2009 Nov 05 09:05 AM

[mollytjm]

I had wanted an iPhone so i could just carry one device what was a phone and an iPod... i never thought i'd play games on it or read books, or use it for navigation, or even surf the web in such a small format... but i do, constantly... and now i 'also use it as a phone':).

2009 Nov 05 10:16 AM

[GSlusher]

"Apple (AAPL) had been making MP3 tracks available for a few years on the iStore."

No, it hadn't, as there is and never was anything called "iStore." It was originally, "iTunes Music Store," then became iTunes Store. That is sloppy writing that has no place in professional journalism.

I wonder if the author also calls the iPod touch the "iTouch"?

It's fairly trivial when a layman or commentor uses those terms, but a very different situation when a professional journalist does it.

2009 Nov 05 10:51 AM

[noibsguy]

"Most App authors self publish to cut out the greedy publisher. They end up making far less money as a result."

If you are going to make such a blanket statement, please provide data.

There are thousands of developers with small, one-trick apps that ARE making some money. Without the app store, their apps would never see the light of day and they would make zero money and no one would ever see their app ideas.

Either you believe in capitalism AND ITS ATTENDANT COMPETITION or you don't. You seem to be arguing for developer monopolies so that customers could be screwed like they are when buying most commercial software.

From my Libertarian position the app store is working just fine, thank you.

2009 Nov 05 11:19 AM

[Synthmeister]

Another amazing tidbit. Ebay said yesterday that they are making $500 million in new revenue from the app store that didn't exist two years ago. CNBC.


BTW, all of your references are to yourself. Hmm.

2009 Nov 05 12:09 PM

[servertap]

I don't see how the app store model is sustainable. I know that out of all the apps on my phone I only use a few regularly like NeuroMobile. Most were free and the others I only used a few times. If this is a typical usage pattern developers can't be making any money and will not be able to continue to offer and support their products. I suspect that the free apps will go away and paid apps like NeuroMobile will eventually cost more. How many paid downloads would need to occur to support the companies currently developing for the app store.

2009 Nov 05 02:59 PM

[Catalina588]

The first paragraph of this article is total fiction. Apple absolutely built the Appstore with profits aforethought. The iPhone was not an "a ha" faster iPod, but a sniper shot at the smart phone market. Please give Apple some credit. Not too much as it goes to their heads, but certainly more than present in the article above.

2009 Nov 05 03:33 PM

[Synthmeister]

On Nov 05 02:59 PM servertap wrote:

> I don't see how the app store model is sustainable.

It's easily just as sustainable as any other software development platform. Think about it,
1. Any 10 year old or mega corporation can download the SDK,
2. Developers tools are first class.
3. $100
4. No worries about webhosting, packaging, billing, shipping or DRM
5. If your app flops, you've gained experience programming for iPhone and indirectly the Mac with less investment than probably any other platform. And you might put yourself in a position to develop for say, the future Apple tablet.
6. Over 50 million potential customers in a very homogenous market which will probably double in one year.

Just look at a little company called Pangea. Developed games for years for the Mac with modest success. But when the iPhone came along, they hit the ground running with several games and have been wildly successful and now only program for the iPhone.

Sure there is gonna be some churn with the gold-digging devs that don't know what they're doing or simply don't have good app ideas, but lots of people can risk flops in the app store because the price of entry is so low.
And we haven't even touched the custom business app market combined with custom hardware. Look how Apple is going convert to iPod touches for the POS system in Apple retail stores, using a custom barcode scanner/credit card swiper. That's the kind of solution that's going to make Apple and other 3rd parties lots of money that the other mobile platforms can't even dream of right now.

2009 Nov 05 05:16 PM

[Doug, Mtn. View, CA]

"When they added a bit more memory and processing power to the iPod, they realized that it could run third party applications, so they made an iStore for applications."

Uh, no. There was never an App Store until the iPhone came along, and even then Apple had to be prodded to do it. Apple's initial idea of phone apps was web-based, which went over like a lead balloon. The App store was created for the iPhone, not the iPod. Only when the Touch followed the iPhone could you run an app on an iPod.

A lousy historical overview, to say the least.

2009 Nov 07 03:06 AM

[GSlusher]

Doug is technically correct, but Apple did sell games for the iPod 5.5G--and perhaps later versions, as well. I have two on my iPod 5.5G.


On Nov 07 03:06 AM Doug, Mtn. View, CA wrote:

> Uh, no. There was never an App Store until the iPhone came along,
> and even then Apple had to be prodded to do it.

2009 Dec 02 03:42 AM