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Apple's App store revenue is very substantial and likely has very low overall costs and microscopic per-unit costs relative to a hardware business like iPhone o

Apple's App store revenue is very substantial and likely has very low overall costs and microscopic per-unit costs relative to a hardware business like iPhone or Mac. Apple paid out $45 billion to developers in 2020 with $64 billion gross, which means they had as high as $19 billion in revenue from the app store commission alone.[1] Unfortunately Apple doesn't break out profit per category but we know that their net income for 2020 was $58 billion [2]. As far as I'm aware we don't know operating costs for the App store, but I think its fair to say that the portion of the ~$19 billion that is profit is far from being "peanuts". [1] https://www.cnbc.com/2021/01/08/apples-app-store-had-gross-sales-around-64-billion-in-2020.html https://www.cnbc.com/2021/01/08/apples-app-store-had-gross-s... [2] https://www.macrotrends.net/stocks/charts/AAPL/apple/net-income https://www.macrotrends.net/stocks/charts/AAPL/apple/net-inc...

Retric 4y ago
Apple annual gross profit for 2021 was $152 billion. That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense. Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020. So sure they might make 3-5 billion from the App Store in 2021, but that’s like 2% of total profits.
- savingsPossible 4y ago
  at 5%, cc fees would result 2.9 billion. So more like 16B in profit
  - Retric 4y ago
    > at 5%, cc fees would result 2.9 billion. So more like 16B in profit So you assume they can do all the stuff I just mentioned for 0$ and changing their fee structure had no long term impacts on profits. Also your math doesn’t work out if 5% of 64B = 3.2B, though 25% or 64B is 16B. Not that actual CC fees are 5%, or that their old revenue model is relevant any longer.
  - emn13 4y ago
    It strikes me as hard to be believe it's that much - surely Apple does not pay 5% in CC fees. They _must_ have managed a better deal than that...
  - nl 4y ago
    There is no way that Apple is paying 5% on credit card fees. Average fees paid by merchants are 1.3% to 3.5%[1]. You can bet Apple negotiates hard on that fee. It wouldn't surprise me to learn they are paying 0.1%. [1] https://www.fool.com/the-ascent/research/average-credit-card-processing-fees-costs-america/ https://www.fool.com/the-ascent/research/average-credit-card...
    - chrischen 4y ago
      If transactions are small, like 99 cents, transaction fees can exceed 29%.
      - nl 4y ago
        And you think Apple can't negotiate that?
        Retric 4y ago
        Not much, Apple can negotiate with the payment processor but but the minimums are still quite high. https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
- enragedcacti 4y ago
  Net income is, imo, a better number to use given the sheer amount of R&D that goes into developing Apple hardware that is necessary but unaccounted for in gross profit. further, if we are looking at 2021 their App Store gross revenue went to $85 billion. > That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense. I don't disagree with any of that, but I don't think its anywhere near 2/3 of revenue after developer split. I don't have any evidence for that because Apple is very secretive about those numbers, but I think level with which they protect that information is evidence on its own. if Apple were making a piddly 3-5 billion on $65 billion in gross revenue they would be screaming it from the rooftops to (rightfully) justify their 30% cut as being reasonable. > Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020. the app store is extremely top heavy with top devs being responsible for a huge amount of the revenue. The policy is great for small devs but the aggregate split is probably still much closer to 30% than it is to 15%.
  - Retric 4y ago
    Defending their cut based on expenses is a losing strategy because if they 2 billion dollars or 20 Billion anyone would love to have that income stream. Further stating their actual costs simply invite the idea of competition lowering prices. Apple clearly wants to profit from the App Store, but just as important to them is maintaining the ecosystem and the mountains of cash iOS provides when change means risk.
MBCook 4y ago
Apple makes peanuts from app sales. It’s those stupid game ISPs they make all the money off. Smurfberries and pseudo-gambling and such. Ruined the App Store and iOS gaming, but it’s so insanely profitable it will never go away.

Retric 4y ago

Apple annual gross profit for 2021 was $152 billion. That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense. Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020. So sure they might make 3-5 billion from the App Store in 2021, but that’s like 2% of total profits.

savingsPossible 4y ago
at 5%, cc fees would result 2.9 billion. So more like 16B in profit
- Retric 4y ago
  > at 5%, cc fees would result 2.9 billion. So more like 16B in profit So you assume they can do all the stuff I just mentioned for 0$ and changing their fee structure had no long term impacts on profits. Also your math doesn’t work out if 5% of 64B = 3.2B, though 25% or 64B is 16B. Not that actual CC fees are 5%, or that their old revenue model is relevant any longer.
- emn13 4y ago
  It strikes me as hard to be believe it's that much - surely Apple does not pay 5% in CC fees. They _must_ have managed a better deal than that...
- nl 4y ago
  There is no way that Apple is paying 5% on credit card fees. Average fees paid by merchants are 1.3% to 3.5%[1]. You can bet Apple negotiates hard on that fee. It wouldn't surprise me to learn they are paying 0.1%. [1] https://www.fool.com/the-ascent/research/average-credit-card-processing-fees-costs-america/ https://www.fool.com/the-ascent/research/average-credit-card...
  - chrischen 4y ago
    If transactions are small, like 99 cents, transaction fees can exceed 29%.
    - nl 4y ago
      And you think Apple can't negotiate that?
      - Retric 4y ago
        Not much, Apple can negotiate with the payment processor but but the minimums are still quite high. https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf https://usa.visa.com/content/dam/VCOM/download/merchants/vis...
enragedcacti 4y ago
Net income is, imo, a better number to use given the sheer amount of R&D that goes into developing Apple hardware that is necessary but unaccounted for in gross profit. further, if we are looking at 2021 their App Store gross revenue went to $85 billion. > That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense. I don't disagree with any of that, but I don't think its anywhere near 2/3 of revenue after developer split. I don't have any evidence for that because Apple is very secretive about those numbers, but I think level with which they protect that information is evidence on its own. if Apple were making a piddly 3-5 billion on $65 billion in gross revenue they would be screaming it from the rooftops to (rightfully) justify their 30% cut as being reasonable. > Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020. the app store is extremely top heavy with top devs being responsible for a huge amount of the revenue. The policy is great for small devs but the aggregate split is probably still much closer to 30% than it is to 15%.
- Retric 4y ago
  Defending their cut based on expenses is a losing strategy because if they 2 billion dollars or 20 Billion anyone would love to have that income stream. Further stating their actual costs simply invite the idea of competition lowering prices. Apple clearly wants to profit from the App Store, but just as important to them is maintaining the ecosystem and the mountains of cash iOS provides when change means risk.

MBCook 4y ago

Apple makes peanuts from app sales. It’s those stupid game ISPs they make all the money off. Smurfberries and pseudo-gambling and such. Ruined the App Store and iOS gaming, but it’s so insanely profitable it will never go away.