By Ed Oswald | Thursday, May 14, 2009 at 10:52 am
Lightspeed Venture Partners‘ managing director Jeremy Liew threw some cold water on Apple Thursday, saying that while the company has indeed sold some one billion apps, it likely has made no more than $45 million in revenue overall from the App Store.
Liew did some research to find that only one paid app is sold for every 15 to 40 free apps. This would infer that between 25 and 60 million of those one billion apps were paid for.
Going forward, he used the mean price for sold iPhone apps of $2.65, as released by O’Reilly. Together that would add up to revenues of $70-160 million, of which Apple only sees 30 percent of. Thus, $20-45 million in profits.
The kneejerk reaction here is to gasp and say, “wow, Apple’s App Store has been a failure from a revenue standpoint.” Not so fast, though. The company has repeatedly said it did not expect much revenue from its service, so this should come as no big surprise.
Add to this the fact that the App Store has a bigger purpose for the company over and above making money. It’s meant to draw people to the platform. While there’s no “killer app” for the iPhone just yet, the broad-based support it gets from services across the industry is a definite draw.
Notice how Microsoft and RIM have been scrambling to develop App Stores of their own? There’s a reason for that.