3 ms·

Retail/keystone markup is typically 50%.

AnthonyMouse 3y ago
That's gross margin, not net margin. Net margin is as above, because retailers are selling physical goods transported between physical buildings on physical trucks. For digital goods we pretty well know what the costs look like. They'll be paying less than 3% for credit card transactions, even less for bank transfers, and app distribution has costs at the level of "F-Droid does this for free". Or if you want an actual market price, using S3 to store an app of average size (35MB) which costs $1 and gets only one download/month (maximizing storage costs per download), the percentage for storage and distribution would be around 0.12%. Which only goes down if you get more downloads because you can amortize the storage cost over multiple downloads. Then they have to pay programmers, but this gets amortized not over downloads per app but downloads per store, which rounds to zero. Notice that F-Droid does this part for free too, and with much less scale. So their expected total costs are approximately 3%, or less because these are the prices available at retail and at their scale they would be lower, implying that their net margins are at least 27%, compared to 2.8 - 3.5% for most retailers.
- CharlesW 3y ago
  I'm happy if you want to talk net margins as long as we're comparing Apples to apples (digital to digital), so to speak. For most developers, Apple's gross margin is 20% of what's considered a healthy minimum gross margin for SaaS companies, like the ones many of us work for.
  - AnthonyMouse 3y ago
    The most apt comparison here is Stripe or PayPal, but their gross margin is the aforementioned ~3%. Because it's processing payments for a third party, to compare it to something like AWS you would have to use the revenue of the service being provided to the customer as the base. So Facebook uses AWS, what percentage of Facebook's revenue does Amazon get? (Looks like ~0.2%, and that would be the equivalent of their gross margin.) Now, that number is going to vary all over the place because the proportion of value that a generic service represents for a given business is going to depend more on the business than the service. But that's kind of the point -- that's why AWS charges based on usage rather than a percent of their customer's revenue. Because nobody for whom that is a terrible deal would choose them if they used that pricing model in a competitive market.

That's gross margin, not net margin. Net margin is as above, because retailers are selling physical goods transported between physical buildings on physical trucks. For digital goods we pretty well know what the costs look like. They'll be paying less than 3% for credit card transactions, even less for bank transfers, and app distribution has costs at the level of "F-Droid does this for free". Or if you want an actual market price, using S3 to store an app of average size (35MB) which costs $1 and gets only one download/month (maximizing storage costs per download), the percentage for storage and distribution would be around 0.12%. Which only goes down if you get more downloads because you can amortize the storage cost over multiple downloads. Then they have to pay programmers, but this gets amortized not over downloads per app but downloads per store, which rounds to zero. Notice that F-Droid does this part for free too, and with much less scale. So their expected total costs are approximately 3%, or less because these are the prices available at retail and at their scale they would be lower, implying that their net margins are at least 27%, compared to 2.8 - 3.5% for most retailers.

CharlesW 3y ago
I'm happy if you want to talk net margins as long as we're comparing Apples to apples (digital to digital), so to speak. For most developers, Apple's gross margin is 20% of what's considered a healthy minimum gross margin for SaaS companies, like the ones many of us work for.
- AnthonyMouse 3y ago
  The most apt comparison here is Stripe or PayPal, but their gross margin is the aforementioned ~3%. Because it's processing payments for a third party, to compare it to something like AWS you would have to use the revenue of the service being provided to the customer as the base. So Facebook uses AWS, what percentage of Facebook's revenue does Amazon get? (Looks like ~0.2%, and that would be the equivalent of their gross margin.) Now, that number is going to vary all over the place because the proportion of value that a generic service represents for a given business is going to depend more on the business than the service. But that's kind of the point -- that's why AWS charges based on usage rather than a percent of their customer's revenue. Because nobody for whom that is a terrible deal would choose them if they used that pricing model in a competitive market.