Apple’s Willing Sacrificial Lambs

Without the gazillion apps that run on them, the Apple iPhone, iPad and iPod touch devices would be just fancy pieces of glass and metal without any takers.

The countless apps – games, news, weather, music, coupons, sports, fitness, health etc – have turned the iPhone, iPad and iPod touch into magical, addictive devices for tens of millions of users around the world.

Such is the appeal of these Apple devices that even minimum wage workers at Walmart and McDonald’s are totting iPhones these days.

Apple App Store Snapshot - ©

Yet the majority of Apple developers for the iOS platform (powering iPhone, iPad and iPod touch) make very little money off their apps.

I’d wager that a big chunk of App Store developers make no money at all.

With stars in their eyes, the developers toil in vain believing in the mirage of handsome profits from their apps.

Apple App Store Developer Revenues - ©

Only a tiny set of developers are making good money off the Apple App Store and their well publicized success stories draws in more developers.

Four and half years after the Apple App Store launched, tens of thousands of developers have grossed a paltry $7 billion (cumulative revenues) for all their efforts in creating 775,000 apps.

Mind you, the $7 billion figure is not the total profit but App Store developers’ revenues (after Apple takes the mandatory 30% cut).

Grim Picture

Factor in the countless man-hours spent on researching, building, testing, launching, marketing and supporting the apps not to forget the cost of buying pricey Apple equipment (iPhones, iPads, iMacs, MacBook Pros etc) for building and testing the apps and the end result is very little profit, if any at all, for the developers.

Assuming a net profit margin of 30%, all of the app store developers combined have made a total profit of just $2.1 billion since July 2008.

That’s so pitiful.

When you consider that very few App Store developers make significant revenues or profits off their apps, you marvel at the hypnotic appeal Apple exercises over developers and feel angry at the developers’ foolishness in pursuing the will o’ the wisp of profits.

Apple – Raking in Billions

But Apple on the other hand is raking in money hand over fist from sales of the iPhones, iPads and iPod touches.

In the last four years, Apple’s revenues from just the iPhone and iPad have amounted to $223.47 billion.

Apple’s net profit in the last four years is $89.89 billion, the majority coming from sales of its iPhones, iPads and iPod touch devices that are useless without the apps.

Apple vs App Store Developers - ©

Who’s to Blame?

Of course, the starry-eyed App Store developers bear responsibility for their miserable plight.

They’re not victims, but fools and dreamers.

No one’s holding a gun to their head and commanding them to build apps for Apple’s iOS platform.

Second, Apple is culpable by taking 30% of every sale.

In a just world, Apple would hand over 100% of the app sales back to the developers.

Finally, consumers are no less responsible for the hapless plight of App Store developers.

Consumers are willing to fork out $500 for an iPad and $300 plus for an iPhone.

Yet, the bulk of consumers will not pay for an app even if it’s a mere 99-cents. Consumers have developed an obscene entitlement mentality that all apps must be free.

No Free App = No Download is the consumer mantra.

When future historians write the story of Apple, they’ll describe the majority of App Store developers as foolish victims who willingly placed their necks under the guillotine.

One Response to "Apple’s Willing Sacrificial Lambs"

  1. rmadasu   January 9, 2013 at 3:48 pm

    Excellent summary.

    I wonder how the Android developers are doing, not much better I guess. Responds:

    1. I suspect Android developers are not faring that well either given user abhorrence to downloading anything other than free apps.

    My understanding is that revenue share is similar (70% developers-30% for Google/Amazon) with Android apps.

    But the major issue is strong consumer reluctance to pay for apps.

    2. Android hardware vendors are not raking in as much moolah as Apple.

    My hypothesis is that 90% of App developers for iOS or Android make chicken-shit or, worse, nothing.

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