UPDATED: Developers Call BS On $2.4B iPhone App Store Number

sales

The typical App Store sales curve, according to one iPhone developer (http://www.appcubby.com/blog/files/app_store_pricing.html).

UPDATE: The Yankee Group also says the numbers are way high, and AdMob defends its estimates, kinda, sorta. See below.

Estimates that the iPhone App Store is worth $2.4 billion a year are utterly ridiculous, iPhone developers say.

Mobile advertising firm AdMob on Thursday got a ton of press for estimating that the iPhone App Store earns billions. The number was extrapolated from a survey of about 1,000 users — and is massively overstated, iPhone developers say.

Do the math and that’s a ridiculous claim,” wrote developer Layton Duncan of Polar Bear Farm, an iPhone developer based in New Zealand.

Duncan did the math: $2.4 billion divided by the 65,000 apps in the App Store is $37,000 per app, per year. And while some developers earn that, many do not. Long Tail anyone?

David Barnard of App Cubby, a developer based in Austin, Texas, says AdMob’s number is at least 5x too big. The iPhone App Store is worth $250 and $500 million per year, estimates Barnard, who keeps a close, professional eye on App Store sales.

Here’s what Barnard says are the average prices for Apps in the
Top 10 = $1.99
Top 50 = $2.23
Top 100 = $3.18

According to Barnard, it takes about 400 sales per day to break into the top 100; and about 10,000 sales per day to hit  the very top of the charts.

Assume the average sales in the top 100 to be about 1,000 per day. If the average price for an app in the top 100 is $3.18, that’s about $116 million per year for the top 100 apps.

Outside of the top 100, some apps sell in the hundreds per day, but the vast majority are in Long Tail land: they sell in single digit territory.

“Most apps sell in the single digits per day, and quite a few don’t sell at all,” Barnard says. “There is a long tail, but it’s a very skinny one. I wouldn’t be surprised at all to learn that the top 100 grosses as much as all other apps combined.”

Barnard talks from experience. Two of his apps have been bouncing around #30 in their respective categories (Trip Cubby in Finance, Gas Cubby in Utilities).

“I’ve spoken with other developers who have apps in the top 100 lists of various other categories,” he says. “My rough, but informed estimation: The App Store grosses between $250 and $500 million per year.”

He concludes: “I’m just floored that a company like AdMob would put out such glaringly flawed numbers.”

I’ve emailed AdMob for their take and will update if/when I get a reply.

UPDATE: Analyst Carl Howe of Yankee Group emailed to say he will soon be publishing a forecast of U.S. smartphone app store revenues, and AdMob’s $2.4 billion is much too high.

“Our numbers line up with the developers you cited, not the $2.4 billion number,” he wrote. “We don’t have numbers for publication yet. But we will really soon and they sure aren’t $2.4 billion.”

That said, the number gets really big by 2013, Howe says.

Meanwhile, AdMob emailed Om Malik to sorta defend it’s estimate. The data is publicly accessible and the methodology clearly explained, AdMob said, without putting up a spirited defense. “It is always difficult to size a fast growing market, and we view our survey results as just one of the many data points that can be used to do that,” the company said.

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About the author

Leander KahneyLeander Kahney is the editor and publisher of Cult of Mac. He is the NYT bestselling author of Jony Ive: The Genius Behind Apple's Greatest Products; Inside Steve’s Brain; Cult of Mac; and Cult of iPod. Leander has written for Wired, MacWeek, Scientific American, and The Guardian in London. Follow Leander on Twitter @lkahney and Facebook.

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