Despite its relatively modest global market share, Apple (AAPL 1.27%) raked in more money from app sales last year than Google (GOOG 0.54%) (GOOGL 0.42%).
As a matter of fact, the Apple app store has always brought in more revenue than Google Play, reinforcing the notion that iOS will remain a viable -- and even preferred -- platform for mobile developers.
Apple app revenue continues to surge
Last week, Apple announced that its app store enjoyed a record first week of January. In total, iOS users spent almost $500 million on app and in-app purchases. That comes on the heels of what was already a record-setting year: In 2014, Apple saw its app store billings rise 50% on an annual basis, swelling to $15 billion total.
Google has not yet released numbers for its rival app store, Google Play, but it's likely much lower. App Annie, a research firm that tracks app spending, found that Apple app store revenue exceeded Google Play by 60% in the third quarter last year.
Android is divided
In terms of size, Google Play is larger than the Apple app store, with tens of thousands more apps. At the same time, with nearly 85% of the global smartphone market, there are millions more Android users.
Yet Apple benefits from a wealthier customer base with a greater willingness to spend. Last summer, ComScore found that U.S. iPhone owners had median incomes 40% higher than their Android counterparts and often spent more time with their devices. On Black Friday last year, iOS users also spent more shopping online than Android users. If they're more willing to spend on physical goods, they may be willing to spend more on digital goods.
Google also faces a unique problem: Google Play is not the only Android app store. In fact, there are dozens of Android app stores, particularly in China, where Google Play is largely a nonfactor. Even at home, Google faces competition from the Amazon (AMZN 1.47%) app store, which is available for Android devices and comes pre-installed on Fire tablets. The Amazon store does not offer as many apps as Google Play but still introduces some competition.
Monument Valley, a popular mobile game, published a blog post last week breaking down its revenue. Although it benefited from a free promotion, Amazon generated almost twice as many sales as Google Play. Not surprisingly, Apple led the way, accounting for more than twice as many sales as Google Play and Amazon combined.
Can Google catch up?
Despite its current position, Google is likely to close the gap in the future. Last year, Radio Free Mobile's Richard Windsor (via Quartz) projected that Google Play revenue would exceed Apple app store revenue by 2018. The sheer size of Google's platform, particularly in emerging markets where smartphone shipments are still growing, should eventually prove overwhelming.
But there are several factors that prevent Windsor's projection from coming to fruition. China's Xiaomi, for example, is growing rapidly and expanding into emerging markets. Xiaomi's Mi smartphones use a modified version of Android -- dubbed MIUI -- that relies on Xiaomi's own app store, not Google Play. If Xiaomi can expand into, and capture, emerging markets like Brazil and India, it could severely limit Google Play's growth.
Ultimately, app revenue isn't the most vital of statistics for investors to watch -- at least not directly. On a percentage basis, the vast majority of Apple's revenue -- more than 80% -- still comes from its device sales.
However, app revenue does serve as a signal of developer engagement. If developers find Android more profitable, they could eventually devote less time towards iOS, making the iPhone itself a less desirable product to consumers.
But for now, everything is going fantastic for the iPhone maker.
