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Saturday 17 January 2009

iPhone App Store Hits 500 million Downloads

Apple are now advertising that the App Store passed the 500million download mark recently which is a pretty impressive number no matter how you look at it.

I’m always suspicious of these sort of claims because (naturally)  any company will try to put as positive a spin on numbers like these as they can so I dug a little bit to see if they give a breakdown of what the number actually means – unfortunately Apple don’t really publish enough data to really figure out what that 500million actually means but there is just about enough other data out there to work it out for ourselves.

There are various estimates in the Blogoshphere of 16-18 million iPhones sold to date. That seems reasonable as there’s solid info from Apple that there were 4 million total to date at the start of 2008 and TMO showed that at least 10 million were sold or in the distribution channel by the end of September 2008 so 17 million seems like a good estimate of the total. There is very little info on the total number of iPod Touch sales but there are some hints – notably that the iPod Touch now outsells the iPod classic and that the average selling price for all iPods is in the $150-$160 range with a total volume of around 40million units for the year. A reasonable total number from that would be 6million or so iPod Touches for the year and something like 8 million in total. So overall we’re looking at about 25million potential iTunes App store users as of the end of December.

That would give us 20 downloads per user which is a remarkable number. Power users on high end Symbian\Windows Mobile phones would have downloaded some apps but on average a typical mobile phone user rarely downloads and installs any applications at all, for Apple to have created an ecosystem where the average user downloads 20 apps over a period of 6 months is incredible.

Looking at my own iPhone I have a total of 53 separate apps downloaded. Digging a bit deeper that breaks down into 18 paid apps and 35 free apps. Looking at the invoices from the iTunes Store it appears that I have a total of 74 downloads recorded which means that in addition the the basic downloads for new apps I’ve had 21 update downloads. That seems a bit low to me but it’s possible that it’s right and it’s definitely not significantly off the mark as most apps never seem to get updated. I’ve spent a total of €65.22 on the 18 paid apps. Now I’d say that I’m probably more likely than most to pay for apps so let’s assume that the average user (with 20 downloads) breaks down to 15 apps in total, 3 of which are paid apps with a total cost of ~€10 at an average cost of around $3-$4 each.

That should then mean that the App Store would have pulled in about €250m in 2008 with 30% ($75m) of that going to Apple. Those numbers are in the middle of the range of the $50-$100m estimate from Silicon Valley Insider at the start of December which was based on total downloads of 300m. I think they overestimated the percentage of paid apps (at 33% versus my guess of about 20%) but the average price is certainly right at $3 per paid app.

It’s useful to compare this reality to Eric Schonfield’s June 11 2008 TechCrunch article on projected iPhone App Sales for 2009 where he was tearing down a prediction of $1.2billion revenue from iTunes Apps in 2009 by Piper Jaffray’s Gene Munster. Schonfield correctly predicts that at least 70% of apps will be free and that the average price will trend towards $3 or less per paid app. He then also correctly estimates that the total number of iPhones by the end of the year will be around 16million and estimates the total iPhone sales for 2009 will be 25million at most. In fact the seems to think that the cumulative iPhone numbers by the end of 2009 will be somewhere between 25 million (ie 10 million new sales in 2009) and 50 million (the more optimistic but still realistic upper end estimates from other analysts) and implies that total revenues from the App Store are therefore likely to be between $150m and $300m. What he got dead wrong is that the average user appears to be downloading at a rate of around 30 apps per year and paying for around 6 of those. There’s no shame in that to be fair, I don’t think that any rational commenter at the time thought the App Store would be as popular as it has turned out to be.

I also think that he failed to factor in the iPod Touch which appears to be a very significant factor for the App Store and I personally I think the total number of iPhones\iPod Touches by the end of 2009 will almost certainly be close to 55m (the existing 25 million + about 30 million new sales in 2009). As we now have strong evidence that the average App sales number appears to be about $10 per device over 6 months (and it’s accelerating remember, not slowing down yet) so that total revenue projection of $1.2bn for the App Store for 2009 actually looks like a good bet right now, despite the recession. 

1 comment:

Zardaz said...

Noticed your comment about the infrequency of application updates from the App Store and thought that this post from Kevin Carmony might interest you - he's the CEO of a company that publishes an application via the App Store :