Estimating Apple’s App Store Revenue

It is a good time to be building mobile apps: Apple App Store apps are going to generate at least $9.3 billion of direct revenue  in 2013 – that is, revenue from app sales or through in-app purchases, not counting ad revenue. This figure can be as high as $11.4 billion.

Apple regularly releases numbers of the amount it has paid out to developers on its App Store. The difference between any two numbers will tell you how much additional revenue the App Store drove within that period. Keep in mind that these numbers are what Apple paid to developers after their 30% cut.

Here are the numbers they have announced as “paid to developers” since their first such announcement in June 2010:

Chart of how much money Apple has paid out to App Store developers

Sum of money Apple has paid out to App Store developers till that point in time in $ billions

The first iPhone was released in 2007. The first iPad in 2010. It took them 3 years to get to $1 billion in total revenue. After that, things started picking up – it took less and less time to add another $1B.

But look at 2013 closely:
Between January and February in 2013, Apple paid out an additional $1 billion. IN ONE MONTH! Likely because they sold a ton of iPhones and iPads during the holiday season the month prior. After that spike, the run rate has stayed high at $1B every 2 months – see the jumps from February to April, and from April to June.

Back-of-the-envelope calculation from all this data:

  • At a run rate of $1B per 2 months, February to December = $5.5B.
  • January was $1B. So 2013 total (“paid to developers”) = $6.5B.
  • Considering that the developers’ share is 70%, gross App Store revenue in 2013 = at least $9.3B.

Now, this is assuming no growth from first part of 2013 into the second part. This is a bad assumption because Apple released new iPhones in September which is bound to drive sales of both devices and apps even before the holiday season. Using 2012 as reference:

  • 2012 was $1B in the first 5 months, and $2B in the next 7 months.
  • That is, a growth of 43% from the first 5 months of the year to the next 7 months.
  • Assuming similar growth this year, July to December of 2013 could drive as much as $5B to developers (their 70% share).
  • Adding up the numbers, 2013 could be as high as $11.4 billion in gross revenue.

Apps have already become serious business, especially in-app purchases that are ~80% of this revenue. Android / Google Play store (not even counted here) is said to be at 40%of iOS app revenues, and growing even faster. It is a good time to be building mobile apps!