App Store may be a mere 1% of Apple’s gross profit

Apple’s App Store — which houses applications for the iPhone, iPod Touch, and iPad — may not be the huge moneymaker that some think. Just two weeks ago, Steve Jobs announced at the WorldWide Developer Convention that over 5 billion apps have been downloaded, and $1 billion has been paid to developers.

Using those figures, Piper Jeffray analyst Gene Munster created an independent model of the App Store’s business that confirms Apple’s previous claims about breaking even with the store, reports Fortune. His key finding: The App Store has grossed $189 million since its launch in 2008 — a mere 1 percent of the $33.7 billion total profit Apple has grossed since then.

If $1 billion was paid to developers since the App Store launched in July 2008, Munster figures that means it has earned a gross revenue of $1.4 billion. Apple keeps $429 million after paying the developers’ 70 percent cut. Using app pricing data, he also determines that 81 percent of apps are free, leaving the remaining 19 percent paid with an average selling price of $1.49.

The entire iTunes Store has generated $3.6 billion in revenue since the App Store launched. The App Store’s $429 million in revenue accounts for just 12 percent of that. The numbers also suggest that users download 16.6 million apps daily, nearly double the 8.9 million iTunes tracks downloaded every day.

At this point, it’s important to note that just because the App Store isn’t earning huge profits for Apple doesn’t make it a waste of time. It has become a major selling point for the iPhone, iPod Touch, and iPad, and it’s still the biggest mobile app store on the market. If Apple can barely break even with its store though, it’s definitely going to be much more difficult for Google, among other competitors, to do so with their own stores.

Above: Source: Piper Jaffrey

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