How Amazon App Store Stacks Up Against the Competition

Amazon (AMZN 3.43%) has announced that the number of apps in its app store nearly tripled last year to 240,000. Amazon's app store is still relatively unknown, compared to top app stores by companies such as Apple (AAPL -0.35%), Google (GOOG 9.96%) (GOOGL 10.22%), Microsoft (MSFT 1.82%), and BlackBerry.

Perhaps it's not a coincidence that Amazon has released these figures just before the launch of its new smartphone on June 18. With the new phone, Amazon's all-encompassing ecosystem will be more complete, and the smartphone might play a crucial role in popularizing its app store.

The importance of app revenue
App revenue can be a surprisingly lucrative revenue source for large app stores. Apple made a whopping $10 billion from app downloads in fiscal 2013, nearly 6% of its overall revenue. Google Play, on the other hand, made half as much, or 9% of its total revenue, despite accounting for almost 75% of total app downloads.

But, the most important metric here is how much developers on each of these platforms earn, on average. The higher the income potential of a specific platform, the more developers will gravitate toward it and, consequently, increase revenue for the app store.

Vision Mobile reported that iOS is the most lucrative mobile development platform, with an average revenue per app per month that's five times the Google Play average.

Source: VisionMobile

Apple has 1.25 million apps in its app store, and about 235,000 developers. Google, on the other hand, has 800,000 apps and 150,000 developers. Meanwhile, Microsoft revealed that it has 160,000 apps and 45,000 developers.

Source: Author's calculations

The average Google Play app enjoys 50% more downloads than the average app on Apple's App Store, but Apple's App Store gets the lion's share of revenue per download.

Source: Author's calculations

Real impact on a developer's wallet
You can get a good sense of the amount of revenue an average developer makes on any of the three platforms by multiplying the average revenue per download by the number of downloads per app on each platform. Here's how it works out:

Source: Author's calculations

What About Amazon App Store?
According to Developer Economics, very few developers publish their work on only one app store; most prefer using a cross-platform approach. Very often, developers publish their works on less well-known platforms such as Amazon App Store after their apps have already gained traction on larger stores such as Apple App Store and Google Play. This can give a skewed impression of the real potential of smaller app stores.

Source: Developer Economics

Considering apps that are only published on a single platform, Amazon App Store gives the best returns for developers.

Source: Developer Economics

How much does Amazon App Store make?
Distimo, a private company that provides developer-specific information for mobile developers, revealed last year that Google Play was roughly 10 times larger than Amazon App Store. The company, however, pointed out that this disparity was caused by the unusually large number of free apps on Google Play, compared to those on Amazon's App Store. Considering only the number of paid apps, Google Play is only twice as large as Amazon's App Store.

However, this does not suggest that developers of free apps do not make money. A study done last year showed that 96% of top-grossing apps on Google Play were free apps, compared to 77% of iPhone apps and 69% of iPad apps.

But, keeping the focus on paid apps, Google Play made about $5 billion in fiscal 2013. Considering the ratio of paid apps on Google Play vs. Amazon's App Store (2:1), it's fair to say that Amazon's App Store generated revenue in the neighborhood of $2.5 billion last year.

The number of apps on Amazon's App Store grew almost 300% last year. If this figure grows by just 100% every year through 2018, the store will have about 3.84 million apps by 2018, and could grow revenue by 6-8 times the current value.

Conclusion
Amazon's App Store is still relatively unknown to mobile developers. The platform is, however, surprisingly lucrative and should have no problem continuing to grow at the same blistering pace it did last year.