Apple Is a Haven for Freeloaders

Apple (NASDAQ: AAPL  ) put out some pretty meaty round numbers in kicking off its WWDC powwow for developers on Monday.

  • There have been 50 billion downloads from the App Store since its debut five years ago.
  • A whopping $10 billion has been paid out to App Store's developers.
  • There are 575 million iTunes accounts tied to credit cards.
  • There are 900,000 applications presently available in the App Store, and 6 million developers have registered with the program.

These are big numbers, but simple math offers some grim statistics that aren't as flattering to Apple. Did you know that the average iTunes account has only shelled out roughly $26 for apps in its lifetime? Did you know that a developer is generating App Store revenue of just $0.30 per download, making it clear that most iPhone and iPad users are going for free apps? 

In this video, longtime Fool contributor Rick Munarriz breaks down some of those conclusions -- and a few more surprising nuggets -- that should not only scare Apple, but also Google (NASDAQ: GOOGL  ) and Amazon.com (NASDAQ: AMZN  ) , which have taken bigger margin sacrifices on the expectations of making it back through ecosystem spending.

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  • Report this Comment On June 12, 2013, at 8:50 PM, rfischer314 wrote:

    Rick-

    I think you have drawn the exact wrong conclusion here....

    1. $26/customer is fantastic for basically running servers, when multiplied by 575 million people. How much money does Google make off of someone that doesn't click their links? Someone that's installed AdBlockPlus? Moreover, this number should only increase as the abilities of apps increase. If Apple can pull an incremental $10/user (average) that's $57 billion! The App Store is a LONG tail business.

    2. The App Store has doubled every year. $5B of payout last June, $10B of payout this June. Apple's cut of that is $2.14B of almost pure margin outside running the AppStore servers and approval process. Put a 10 PE multiple on that and it's $20B. If the App Store doubles again and Apple is taking $4.28B annually and levels off...that's still around $40B of value.

    3. iTunes - the AppStore isn't the same as people buying mp3s, movies, books, and magazines. All that is incremental.

    You're making an analogous argument as saying that since a lot of people go to the mall and don't buy anything, the concept of malls is a bad one. Same with Google searches - most searches are zero-revenue events. Tech is about scale. The AppStore is the biggest single software store in existence with near-zero working capital needs or real estate costs.

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