4 ms·

Can anyone point me to numbers regarding the app store revenue vs. hardware revenue? I'm surprised that the app store revenue would be "just a drop in the buck

Can anyone point me to numbers regarding the app store revenue vs. hardware revenue? I'm surprised that the app store revenue would be "just a drop in the bucket" compared to the hardware revenue.

DavidAdams 15y ago
I think of it this way: the majority of iPad users probably spend less than $10 on apps, ever, and the same for media. And a big proportion of them spend $0, only using the iPad for Web, email, Facebook, etc. So on this group, Apple makes a couple bucks on apps and media, tops. Compared to the ~$100 they make selling the iPad.
- kirillzubovsky 15y ago
  I would disagree and say that the majority probably spends significantly over $10 on the apps. Remember, the "normals" who don't have the time to jailbreak their devices and such, those people actually pay money for games/apps ...etc. For somebody who was willing to pay ~$1,000 for an iPad, paying $10 for an app is not a terrible option, so I'd guess those people spend _significantly_ more than $10. On top of that, there's probably a smaller segment of users who spend _ridiculously_ more than $10 on applications, and then even more on in-app purchases.
  - mikeklaas 15y ago
    iPads don't costs ~$1000.
roc 15y ago
http://www.asymco.com/2011/01/21/65-of-apples-sales-from-ios-powered-devices-and-90-depends-on-its-own-os/ http://www.asymco.com/2011/01/21/65-of-apples-sales-from-ios... http://www.readwriteweb.com/archives/iphones_ipads_are_nearly_70_of_apples_revenue.php http://www.readwriteweb.com/archives/iphones_ipads_are_nearl... Keep in mind those cite revenue; of which Apple retains only 30% on apps. In short: if the app store loses to HTML5 in the long run, but people continue to prefer iPads and iPhones at current rates, you'd need a microscope to see the effect on Apple's bottom line.
ansy 15y ago
Apple has suggested the App Store is just above break even [1]. I personally find this believable. I download at least 15 free apps for every paid app. It might even be worse. Approving, hosting, and marketing all those free apps comes at a cost that adds up. By contrast Apple likes to mark up hardware at 100% over bill of materials. That is to say if $300 worth of components goes into an iPhone, Apples wants to sell it for at least $600. The major exception to this is the iPad which Apple takes less to keep pressure on the competition. Regarding iAds, I believe iAds was suppose to have sold around $65 million worth of ads for the initial launch. The revenue from that being split between Apple and the app maker. This is a tiny drop in the bucket. And there are reports Apple is having a hard time getting advertisers to renew. [2] [1] http://www.macobserver.com/tmo/article/apple_app_store_runs_just_above_break_even/ http://www.macobserver.com/tmo/article/apple_app_store_runs_... [2] http://www.macrumors.com/2011/02/10/apples-iad-program-struggling-to-fill-slots-and-renew-advertisers/ http://www.macrumors.com/2011/02/10/apples-iad-program-strug...
- MatthewPhillips 15y ago
  The profitability of iAds should not be construed as a measure for the profitability of advertising in general.
  - ansy 15y ago
    The parent had a specific question about Apple's profits outside of hardware sales. Third party advertisements do not make money for Apple.
cmhamill 15y ago
Apple's total software sales, which include but aren't limited to their cut of the App Store revenue, brought in $696 million this past quarter [1]. For comparison, their total hardware revenue was just under $28 billion [Ibid.]. Making software something like 2% of their total revenue. That is, more or less, a "drop in the bucket," as Gruber says [2]. [1]: http://images.apple.com/pr/pdf/fy11q3datasum.pdf http://images.apple.com/pr/pdf/fy11q3datasum.pdf [2]: Which doesn't of course, make Gruber any less of an insufferable ass, yada yada, so on and so forth.
joaquin_win 15y ago
Recently Steve announced 2 billion paid to devs. That makes apple's cut close to .9 billion. Meanwhile in a quarter Apple has profits of 7billion.
- ugh 15y ago
  Also, that cut is revenue, not profit.
- jakewalker 15y ago
  Apple has also said that they operate close to breakeven on iTunes / the App store. See http://allthingsd.com/20100225/apple-billions-of-songs-billions-of-apps-not-much-profit/ http://allthingsd.com/20100225/apple-billions-of-songs-billi...
- tptacek 15y ago
  Over what time period? Is that a top line of 30% of $2Bn over 10-12 quarters? That is a microscopic amount of money for HP.
  - joaquin_win 15y ago
    As I understood, thats since the beginning. So basically nothing compared to HP or even Apple
mikeklaas 15y ago
How much did Apple make from your iPhone(s)? Let's say $300 every 2 years. How many apps have you purchased in that time? It's going to be less than $300 for most people, and Apple only gets 30% of that total, and has their own costs on top of it.
- r00fus 15y ago
  I have spent a decent amount on apps... but I spend to put on about 6 devices (iPhones, iPads, iPod touches for family members), and any new iDevices we buy. That Apple recognizes and allows this behavior really tells me that they don't care about profit from apps. Apps, for Apple, are features of the real product, the hardware. Hundreds of thousands of features where the competing hardware platforms don't compare as favorably. It was the same with AAC DRM music on the iPod (when few other players at the time supported AAC, and none supported FairPlay DRM)... these were little land mines in a music library that prevented users from switching or even considering it.

Can anyone point me to numbers regarding the app store revenue vs. hardware revenue? I'm surprised that the app store revenue would be "just a drop in the bucket" compared to the hardware revenue.

DavidAdams 15y ago

I think of it this way: the majority of iPad users probably spend less than $10 on apps, ever, and the same for media. And a big proportion of them spend $0, only using the iPad for Web, email, Facebook, etc. So on this group, Apple makes a couple bucks on apps and media, tops. Compared to the ~$100 they make selling the iPad.

kirillzubovsky 15y ago
I would disagree and say that the majority probably spends significantly over $10 on the apps. Remember, the "normals" who don't have the time to jailbreak their devices and such, those people actually pay money for games/apps ...etc. For somebody who was willing to pay ~$1,000 for an iPad, paying $10 for an app is not a terrible option, so I'd guess those people spend _significantly_ more than $10. On top of that, there's probably a smaller segment of users who spend _ridiculously_ more than $10 on applications, and then even more on in-app purchases.
- mikeklaas 15y ago
  iPads don't costs ~$1000.

roc 15y ago

http://www.asymco.com/2011/01/21/65-of-apples-sales-from-ios-powered-devices-and-90-depends-on-its-own-os/ http://www.asymco.com/2011/01/21/65-of-apples-sales-from-ios... http://www.readwriteweb.com/archives/iphones_ipads_are_nearly_70_of_apples_revenue.php http://www.readwriteweb.com/archives/iphones_ipads_are_nearl... Keep in mind those cite revenue; of which Apple retains only 30% on apps. In short: if the app store loses to HTML5 in the long run, but people continue to prefer iPads and iPhones at current rates, you'd need a microscope to see the effect on Apple's bottom line.

ansy 15y ago

Apple has suggested the App Store is just above break even [1]. I personally find this believable. I download at least 15 free apps for every paid app. It might even be worse. Approving, hosting, and marketing all those free apps comes at a cost that adds up. By contrast Apple likes to mark up hardware at 100% over bill of materials. That is to say if $300 worth of components goes into an iPhone, Apples wants to sell it for at least $600. The major exception to this is the iPad which Apple takes less to keep pressure on the competition. Regarding iAds, I believe iAds was suppose to have sold around $65 million worth of ads for the initial launch. The revenue from that being split between Apple and the app maker. This is a tiny drop in the bucket. And there are reports Apple is having a hard time getting advertisers to renew. [2] [1] http://www.macobserver.com/tmo/article/apple_app_store_runs_just_above_break_even/ http://www.macobserver.com/tmo/article/apple_app_store_runs_... [2] http://www.macrumors.com/2011/02/10/apples-iad-program-struggling-to-fill-slots-and-renew-advertisers/ http://www.macrumors.com/2011/02/10/apples-iad-program-strug...

MatthewPhillips 15y ago
The profitability of iAds should not be construed as a measure for the profitability of advertising in general.
- ansy 15y ago
  The parent had a specific question about Apple's profits outside of hardware sales. Third party advertisements do not make money for Apple.

cmhamill 15y ago

Apple's total software sales, which include but aren't limited to their cut of the App Store revenue, brought in $696 million this past quarter [1]. For comparison, their total hardware revenue was just under $28 billion [Ibid.]. Making software something like 2% of their total revenue. That is, more or less, a "drop in the bucket," as Gruber says [2]. [1]: http://images.apple.com/pr/pdf/fy11q3datasum.pdf http://images.apple.com/pr/pdf/fy11q3datasum.pdf [2]: Which doesn't of course, make Gruber any less of an insufferable ass, yada yada, so on and so forth.

joaquin_win 15y ago

Recently Steve announced 2 billion paid to devs. That makes apple's cut close to .9 billion. Meanwhile in a quarter Apple has profits of 7billion.

ugh 15y ago
Also, that cut is revenue, not profit.
jakewalker 15y ago
Apple has also said that they operate close to breakeven on iTunes / the App store. See http://allthingsd.com/20100225/apple-billions-of-songs-billions-of-apps-not-much-profit/ http://allthingsd.com/20100225/apple-billions-of-songs-billi...
tptacek 15y ago
Over what time period? Is that a top line of 30% of $2Bn over 10-12 quarters? That is a microscopic amount of money for HP.
- joaquin_win 15y ago
  As I understood, thats since the beginning. So basically nothing compared to HP or even Apple

mikeklaas 15y ago

How much did Apple make from your iPhone(s)? Let's say $300 every 2 years. How many apps have you purchased in that time? It's going to be less than $300 for most people, and Apple only gets 30% of that total, and has their own costs on top of it.

r00fus 15y ago
I have spent a decent amount on apps... but I spend to put on about 6 devices (iPhones, iPads, iPod touches for family members), and any new iDevices we buy. That Apple recognizes and allows this behavior really tells me that they don't care about profit from apps. Apps, for Apple, are features of the real product, the hardware. Hundreds of thousands of features where the competing hardware platforms don't compare as favorably. It was the same with AAC DRM music on the iPod (when few other players at the time supported AAC, and none supported FairPlay DRM)... these were little land mines in a music library that prevented users from switching or even considering it.