Apple's App Store 'has lost $450 million' since opening

[p2p rules]

An analysis by technology analytics company 24/7 Wall St, has found that Apple and the developers which create and sell apps for the iPhone and iPod touch via the App Store, have lost over $450 million, (£277 million) since it opened in July 2008.

There have been over three billion apps downloaded to date but piracy has continued to cause problems for Apple and those developing apps which are not free.

telegraph.co.uk
$450 million iPhone piracy figure not grounded in reality

[GhostShip]

Whats not clear to a lot of people here is that most if not all of the apps that are offered at the apps store are made by third party developers and thus apple has not lost one cent and I'm sure the small cost of running that website for a year is pretty small beer say $2000 tops.

I wonder who paid this reporter to make up these purely guesswork figures ?


Can I suggest this is a ploy by a "friend" of a "friend " as last years figures show apples sales have dropped somewhat as shown here.

http://arstechnica.com/hardware/news/2010/01/while-pc-market-rebounds-apple-slips-into-5th-place-in-us.ars

[Pri]

I have a good insight into this as I do have apps on the app store including paid apps. The way it works is the developer gets 70% and Apple get 30% of every sale.

Apple use the 30% to pay for credit card transaction fees and hosting. There is over 3 Billion downloads from the App Store since its inception that is a lot of downloads and 2 out of every 3 downloads on the store are for free apps. That 3 Billion doesn't include application updates either which takes even more bandwidth and are always free.

Apples infrastructure for this is huge and they spend at-least 20% of the 30% they receive on infrastructure. The App Store isn't really a cash cow for Apple. It does make them money but in other less direct ways by pushing sales of the iPod Touch and iPhone which is where Apple is making their real money from this app-ecosystem.

Piracy wise all my apps on the store call home and I will say that there are a lot more people using my apps than there has been sales. But I don't see it as a negative. People download the paid apps they show them off to friends who may be more sheepish about rooting their device to pirate apps and instead buy it. Another thing working in the app creators favour is the level of burden to keep updating the software via pirate methods due to the infrastructure that has been delivered to device owners by pirates (It's slow and unstable compared to the official App Store).

So from a content providers perspective I'm fine with piracy on the device. I feel that Apple is doing enough to secure the device while enabling enough end users to be able to pirate who would never buy your app anyway. The real issue would be if the entire store was subverted and every user was pirating and it was made incredibly easy. At the moment it is not at that level and the consumers still have a sense that purchasing has its perks like automatic updates, notifications for new versions, safety from tampering of the apps (Which is rampant in the pirated versions) and speed. I mean if you are releasing an app that is more than 20MB it can take over 8 minutes to download via pirate means depending on what mirror has been employed by the individual who uploaded it but the official means would have that in 10-20 seconds depending on internet speed.

I'm all about empowering users and I hope that one day Apple will offer a 'Pay what you think its worth' transaction model for the store although I bet that won't be coming anytime soon. I think most of the hysteria around piracy and the app store is from greedy developers who see the money coming in by the truck load (And it really does) but then also see how heavily pirated their apps are and think about all that extra money they are potentially losing. Of course if these same people couldn't pirate it there is no guarantee they would buy it and I think most wouldn't, content creators need to realise that 1 download through piracy does not equal 1 lost sale.

[GhostShip]

What I find most amazing here is why anyone would purchase an app without being able to "test-drive" it , its like saying " folks this program is great but you will have to trust us", I know some developers have trail versions btw.

Btw according to this article  a $99 set-up fee is payable by developers, did you have to pay this ?

http://www.tuaw.com/2008/03/06/the-iphone-app-store/

If you did I think we can all agree 99 dollars buys a lot of hosting, from my own view I just dont see apple playing fair on this 30 percent from every developer transaction and at your estimate 3 billion downloads so thats 1 billion for apple, hey my maths is crap but I know hosting a web site and having an decent set of servers does not cost hundreds or even tens of millions of dollars, lets blame the banks then as their credit card fees seem to be the main cost here.  

[Pri]

I did have to pay the $99 to sign up.

Apple has invested over a billion dollars in a data centre they are building. And they pay millions of dollars for hosting currently. the 30/70 ratio is fine if anything its the best in the industry and has been used for the basis of other stores like the Android Store the Nokia Ovi Store and the Microsoft Marketplace, although Microsoft also charge you after you release your 5th paid app or something like that.

Some of the costs involved:

1. The SDK for Developers had to be designed, tested and released with Support (Charge to development house: $99)

2. Every app you submit must be vetted by Apple employees (Unknown salary charges but lets say 30K per employee per year as a conservative estimate, we know they employ 100 people to do this currently. 100x30,000 = 3 Million Dollars a year and this is conservative)

3. Bandwidth costs of delivering each application, make no mistake Apple is delivering data in the Zettabyte range (ZB) Which does cost Apple a lot of money as they currently pay 3 different companies to provide them with the storage and bandwidth. That is why they are invested in that multi-billion dollar data centre which will be completed in a few years time.

Seriously though this deal is amazing. You basically pay them $99 USD for your entire company and can have as many employees you want develop apps. You are never charged for anything else. The 30/70 split is taken from each individual sale so you have no other costs to Apple. And in exchange they handle all your payment fees, marketting on their app store is free, they handle delivery, they also give you unlimited access to their infrastructure for out-of-app push notifications, update notification servers, in-app purchasing and many other add-ons that are priceless in this industry.

Theres currently 136,000 apps on the app store and the reason for that insane growth is the pricing scheme. If you had to pay a fee overtime you released an app it would die quickly. And lets not forget that Free apps get all of the above features just like the paid ones. And you'll find that on average an app on the store will get 10 to 20 software updates in its life time. Which means if you have a 10MB application (which is also quite average/usual for the smaller apps) you will be making a footprint of 200MB over the life of that app but you wont make any extra money (and neither will Apple). In-fact as time goes on and more and more apps arrive on the store it will become less and less profitable for Apple as they will have to spend more money delivering free software and free updates to paid software over time.

And yes 99 Dollars does get you a lot of hosting, but only for a shared host with 400 other websites. When talking about a dedicated box just for yourself that has to store TB's of data and make it accessible to millions of users per day the costs are incredibly high. That 99 Dollar price to be able to submit apps will get swallowed up pretty fast.

[GhostShip]

I can see your very enthusiastic Pri, I still dont believe hosting a half decent website costs anything near the amount your suggesting, havent they heard of one and one  

You,ll be pleased to hear that the wayback machine runs very very much cheaper than the apple site and stores considerably more as well as handling more traffic, 3 billion + is a lot of coin for having a few flash images on a web page and calling it marketing  but hey if folks want to part with hard earned who am I to say they shouldnt have a business partner who likes some cash up front.

Does anyone know how many developers there are as this would likely allow us to calculate the amount of $99 dollars they have received and thus why they need a hundred folks who are more than likely based in India and paid peanuts ?

[Pri]

I think you are confused. 3 Billion is not viewers 3 Billion is file downloads. 3 Billion downloads in 18 Months. I'm not enthusiastic I just know how much things really cost and it isn't cheap. I don't know how we even got in to this discussion about costs. Apple doesn't lose money that they never had in the first place. If someone pirates and doesn't buy they were unlikely to buy it anyway.

And I can tell you there are 28,000 developers. 28,000 x 99 = 2.77 Million aka 1 years wage for the employees that they pay to check the apps, and no the employees are no in india they are all in America inside Apples Campus in-fact. We know this as when the apps are run they call home from Apple owned IP's in California (where their campus is) and the App Store checkers communicate with developers directly after checking your application.

[]-[êll.Ôñ.ËÀR'][']-[.]

Perhaps they should employ the ones in india to maximise there profits then.. everyone else does 

[GhostShip]

We allow file downloads on this site from the archive, just why would I be confused  

I have to say you seen rather well informed about what apples does if you had not of stated your a developer I would be thinking you may perhaps work for them. Btw never heard of a VPN ?

[]-[êll.Ôñ.ËÀR'][']-[.]

VPN = Virtual Private Network

[Pri]

We allow file downloads on this site from the archive, just why would I be confused  

I have to say you seen rather well informed about what apples does if you had not of stated your a developer I would be thinking you may perhaps work for them. Btw never heard of a VPN ?

You said in your first message and I quote "I'm sure the small cost of running that website for a year is pretty small beer say $2000 tops." They are delivering 3 Billion downloads, of which only 1 Billion are paid. And that does not include app updates which would balloon that to 9-12 Billion downloads with still only 1 Billion being paid, of which Apple only get 30% of each sale.

The costs to run the App Store via Bandwidth alone is in the Million Dollar range. It is not only the mere fact that they need to deliver this many downloads but it is that they need to deliver it to anywhere on the planet at speeds which maximise the end-users connection (which is an Apple goal that they meet consistently).

I dunno if your aware of the pirates but the pirate site for iPhone/iPod Touch apps currently serves 1.4 Million to 2.5 Million users per day by their own admission. Their site is itself is spread across many servers and costs them thousands of dollars each month and they aren't even hosting any content. It's just a basic link site, no actual apps are on there server. Apple have to deal with 20 Million users per day (before anyone even downloads anything) and then they have to handle the downloads as-well which can range from 10MB (The average app size) to 250MB (GPS apps, large games which are the most popular on the store) to 1.4GB for niche apps.

These numbers are all pretty large its hard just to grasp the amount of data that has been delivered. And I know you operate the archive here on the site but it's impossible to compare the two. A single hour of the app stores bandwidth would be more than this sites entire bandwidth usage since its inception.

Also we know that Apple doesn't use VPN software and we know they don't employee people in India for App Store checks.

[GhostShip]

By "we" do you mean a company you work for ?

[GhostShip]

I think the claim of 100 folks looking these apps over is also extravagant given the fact that app piracy is rife.

http://arstechnica.com/apple/news/2009/02/the-case-of-the-app-store-ripoff.ars

What many ppl dont know about server hosting companies is that after paying their fees bandwidth is pretty freely available in fact last year there was a surplus among the internet backbone companies leading the cost of bandwidth to come down, at one stage some years ago we used to have 3 dedicated servers running this site and on hot standby in case of "attack", those servers had the option of unlimited bandwidth thus the costs suggested above just dont pan out when compared to real life.

[Pri]

How much do you think Apple pay? Because you need to start at 1 Billion Dollars as that is the amount they have already invested in the infrastructure for this service (From Apple themselves).

Also they do employ 100 people to check apps. I don't think you understand what the people are paid to check. They are not paid to check for pirated apps online. They are paid to check apps submitted to Apple to verify they are not malicious and do not use Apples private APIs. When you submit an application to apple it used to take up to 60 days before it would show up on the store. Now it takes 2-3 days. And that lag time has been improved because they employ a lot more people to do the job now. The developer forums alone are bristling with life where developers like myself can directly interact with Apple App-Store representatives.

Also I don't work for a company. When I said 'we' that was a general term meaning anyone informed about Apples App Store review process.

[Bluey_412]

mebbe its expensive cos they are using all macs, costed at Apple's normal retail pricing?

That alone would account for the massive setup costs...