App Store is Still Not a Major Profit Center for Apple (NASDAQ: AAPL)

More than four billion free applications have been downloaded from Apple’s (NASDAQ: AAPL) App Store and paid for applications sell for an average price of $1.49, according to data from an analyst at Piper Jaffray.

Analyst Gene Munster released new statistics and facts related to Apple’s App Store in a research note on Wednesday. He noted that the top 50 applications have an average selling price of $1.49 and 81% of downloaded applications are free. He noted that iPad applications are more pricey than iPhone and iPod Touch applications, with an average price of $4.66 for the top 30 applications. Munster’s numbers also suggested that iOS users download more than 16.6 million applications every day, more than double the number of music downloads daily on iTunes.

Apple makes about $0.29 for every application downloaded, Musnter said. The number was calculated using a straight average selling price for both free and paid apps. He added that the App Store has a gross margin of 44%.

Earlier in the month, Apple announced that developers had earned more than $1 billion in revenue from the App Store since it opened in 2008. Munster said he believes Apple has made about $428 million in revenue since the launch of the App Store. Apple takes a 30 percent cut of all sales, but has to give $0.20  20 cents plus 2 percent to the credit card processing company and 1% for application processing, leaving Apple with  $189 million in gross profit on paid apps alone.

“This does not factor in the roughly $81m Apple has spent since launch to deliver the 4b free apps that have been downloaded,” he wrote. “Over the same time period, the iTunes store has generated $3.6b in revenue, to which the App Store has contributed $429m, or 12%,” he added

The figures put into perspective what a small part of Apple’s business the App Store is. A contribution of $189 million amounts to just 1 percent of the $33.7 billion in gross profit the Cupertino, Calif., company has earned since the App Store launched. Apple has long admitted that the App Store is not a major profit center for the company.

“We see a virtuous cycle of Apple’s robust app ecosystem adding features and functionality to the iOS devices, which drives sales, which makes the ecosystem more robust, which encourages more developers to write apps, and the cycle repeats itself,” Munster Wrote



Leave a Reply