Originally Posted by AppleInsider

Although many imagine the App Store a cash cow for Apple, a detailed examination has revealed that the iPhone maker may only have earned between $20 million and $45 million from the store for its first billion downloads -- a figure the company is likely more than happy to accept.

Lightspeed Venture Partners' Jeremy Liew made the calculation after learning that there's typically a ratio of 15 to 40 free apps for every one paid example and after discovering an O'Reilly estimate which determines that the mean price for an app is about $2.65.

At the time Apple crossed the billion app mark, this would have resulted in about 25 million to 50 million downloaded paid apps and produced raw revenue of between $70 million to $160 million. But because Apple only takes 30 percent of that revenue for itself, the company has only earned $20 million to $45 million itself. That could be cut in half again if the weighted average is actually at a lower figure such as $1.50, Liew says.

The calculation would have App Store purchases account for an extremely small fraction of Apple's iPhone revenue to date; if it were put up against Apple's early 2009 revenue alone, it would represent less than 3 percent.



Still, the Cupertino-based firm is unlikely to be concerned with the exact amount of income attached to its mobile software store. Similar to its stance on the iTunes music and movie stores, Apple has maintained that the App Store isn't meant as a profit generator and is instead a means of attracting customers to the iPhone and iPod touch, where the majority of the profit exists. The reasoning is most evident in Apple's recent, app-centric marketing campaign as well as in the billion-app contest itself, which gave the prize to a downloader of Bump, a free data exchange app.

Originally Posted by bizlaw

And the calculations above do not take into account credit card processing fees, server expense, employee costs, or anything else. If Apple made money on the App Store, it made very little. The App Store is likely a loss leader which brings developers to the iPhone platform, and thus eventually to the Mac platform.

Originally Posted by bizlaw

Don't forget, the entire reason Apple has the App Store is to sell more iPhones and iPod touches. This creates the halo factor, which sells more Macs (just talked to a buddy yesterday who finally saw the light and bought a Mac).

Originally Posted by Eriamjh

Many companies would be happy to make $45 million on something.

Originally Posted by AppleInsider

The reasoning is most evident in Apple's recent, app-centric marketing campaign as well as in the billion-app contest itself, which gave the prize to a downloader of Bump, a free data exchange app.

Originally Posted by btitusjr

What does that mean. I thought apple gave the winner a computer, a ipod, and a 10k gift card. At least thats what it said on the apple site when I entered the contest. Not just a free data exchange app?! WTF