“Third-party applications will differentiate the iPhone from a growing number of its smartphone competitors, according to Goldman Sachs analyst David Bailey,” Jonathan Ratner reports for The Financial Post.
“‘We think that Apple’s use of Mac OS X on the iPhone, which is the same operating system used with Macs, combined with Apple’s software development toolkit (SDK) specifically designed for the iPhone, provides a more robust application development environment for developers,’ he told clients,” Ratner reports.
“The App Store’s layout and distribution system should result in a better user experience and drive higher adoption rates than existing platforms, Mr. Bailey said… He expects to see small ‘widget-like’ applications offered for free or at costs ranging from 99¢ to $2.99, along with large and more sophisticated applications likely between $19.99 and $29.99,” Ratner reports. “Apple retains 30% of this revenue, while developers get the other 70%.”
“The App Store will make a [significant] contribution to Apple’s earnings in 2009, with roughly US$120-million in incremental net revenue and US10¢ in earnings per share. He expects these numbers will climb to around US$280-million and US20¢ in 2010,” Ratner reports. “Goldman sees the active installed base for the iPhone climbing from around 2 million at the end of 2007 to roughly 9 million by the end of 2008, jumping to approximately 20 million and 30 million by the ends of 2009 and 2010, respectively.”
Full article here.
Wherever you see “iPhone,” add “iPod touch.” Then extrapolate. 
“Third-party apps, App Store to help drive Apple iPhone, iPod touch sales”
Like we hadn’t figured this out already !!!
He got this report out of the file marked “D”… for DUH.
Really, ya think?
Apple learned a lot from the iTunes Store…
Good thinking Apple!
I hear alot of talk about 3rd party apps, 3g, maybe even GPS, but seriously what about more storage space? 3g + 3rd Party + 32gig of storage = New iPhone for me
State the obvious! Become an analyst! Let us show you how! Click here now to order our audio book!
Yeah, this report should be titled, “Captain Obvious and the Kingdom of the Crystal Numbskull” but not everyone follows Apple as closely as we all do. It’s good for casual observers to read a bullish report on the company, especially since it mentions software as a differentiating factor that will help thwart all the “iPhone killer” wanna-bes.
The app store is a game changer. I will fall in love with the iPhone all over again. After a year I still find myself mesmerized by it, like yesterday when I performed an annual task that normally would’ve been incredibly boring had it not been for TV shows, movies and the web on my iPhone.
I don’t care about the 3G iPhone so much as the third party apps.
“Captain Obvious and the Kingdom of the Crystal Numbskull”
I thought Enderle had already snagged that for his memoirs. Wait, no. It’s Captain Oblivious.
My first response was “Yeah, tell us something we don’t know.” But, really folks, can this message be said too often? Each of these analysts have a different group readers. It sounds like an echo chamber here, but most people in each of the analysts’ direct audiences are hearing these predications for the first time.
I say LET THE MESSAGE RING OUT! ACROSS THE LAND! TO ALL PEOPLES!
Oh, sorry, lost my mind for a moment.
“The app store is a game changer.”
Changing on a whim from Electronic Arts to Glu Mobile to Namco to PopCap Games to Sega and then on to THQ and eventually back to EA?
Sweet.
In other news, water is wet, and the sky is blue. (in the daytime at least)
Still, it’s good to see what other publications are writing about the iPhone, that is the point of this site, isn’t it?
“But, really folks, can this message be said too often? Each of these analysts have a different group readers.”
Good point.
Wherever you see “iPhone,” add “iPod touch” and remember that development for either must be done on Macs which will drive sales and applications for all three. Now extrapolate.
“The app store is a game changer” – R2
Finally someone who gets the whole picture… it’s a whole new field now, beyond smartphone technology, 3G, GPS, etc.
It’s about the synergy of a wireless ecosystem. Experts will probably have to come with a new name to designate what iPhone/iPod Touch really are.
“Experts will probably have to come with a new name to designate what iPhone/iPod Touch really are.”
The first pawns of Skynet.
Goldman-Sachs consistently underestimates Apple’s performance. However in this instance, they have overstated the financial importance (as a revenue source) of the App Store. The App Store will carry products using prices set by the maker, not Apple. Apple will bear the cost of distribution, even if the maker decides to offer its product for free. Those that want to charge for their product will receive 70% of the sale price regardless of the cost of distribution.
To state that the App Store will throw off 10¢ EPS by itself, based on $120 million in sales, is ludicrous, because there is no analysis of unit sales (each requiring distribution costs and/or credit card fees). To make such a statement, Goldman-Sachs would have to know what the average price of each download, and that can’t be determined until the makers post their offerings, and the consumer has made their preferences known.
Anybody making an investment decision based on this pitiful statement should be denied access to their investment funds.
Hey, what about the Crackberry App Store?!?!? Isn’t that a game changer, too?
The Crackberry Store – specializing in butane torches and “stems”.
You think the importance of the App Store is obvious. First, just because it’s obvious does not mean that it should not be stated in an analysis. Second, it may not be obvious at all the the people reading the report. Not everyone obsesses over all things Apple. Third, perhaps this is not obvious at all. I keep seeing analysts, reporters, company CEO’s talking about competitors to the iPhone. Yet they completely ignore the impact that the App Store is going to have.
For a product to remain successful, it must be unique. Otherwise the only point of differentiation is price. And once you’re competing on price you’re in a death spiral.
The iPhone has several unique properties and they are all important. But the App Store is the one I’m most excited about. Apple’s unique delivery system (which has been oft criticized) is going to incentivize a tidal wave of development because it’ll be easy to buy software, easy to distribute software and guarantee payment to the developer.
Yes, the App Store is obvious. But the way it’s going to change the computer/smart phone landscape has yet to be fully grasped.
I wouldn’t write off Goldman’s statement about the App Store as quickly. It isn’t that difficult to use some widely accepted scientific methods and forecast the revenue. We begin by the reported number of downloads for the iPhone/iTouch SDK (Apple already published that). We continue on by looking at available data regarding registrations for App Store. Then, we look at the number of attendees registered for WWDC. After that, we survey the landscape of applications for portable devices, such as Palm OS and WinMobile. There are hundreds of thousands there, so this should give a pretty decent representative on pricing. Using an average pricing for those, we combine all the numbers obtained so far, make some assumptions based on the existing performance of the iPhone in the market, and come up with a number. As we can see, the number wasn’t pulled out of anyone’s @$$; it was derived using various data, collected from relevant sources.
How accurate this number is, we’ll have to see in a year or so.
Not to mention the number of devices sold (potential market), compared to number of devices on those other platforms (Palm, WinMobile). Not to mention the frequency at which iPhone users visit and shop from iTunes store (which will integrate the App store and advertise on the home page), compared to the lac of existence of a similar one-stop-shop equivalent for Palm/WinMob.
As was said earlier, Goldman-Sachs tends to forecast conservative for Apple. This one just might be conservative as well.
I’m looking forward to buying an iPod Touch, after the 2.0 update, as I’m to tight to buy a touch, then pay for the update.
I’m just worried that I will buy one in june/July, then Apple releases new iPod Touch hardware around the September time.
Wonder if the touch will get some sort of hardware update.
Yea, I doubt it too after all, at least not until September.