“In the latest Silicon Valley gold rush, scores of programmers have raced to perfect and sell their own wares through the App Store, spurred on by stories of overnight riches, including the $250,000 earned by makers of puzzle game Trism. But as the market gets crowded and prices plummet, many developers like Trainer are resetting growth and demand expectations,” Olga Kharif reports for BusinessWeek.
“Developers had reason to hope for an iPhone app bounty. In June, Piper Jaffray analyst Gene Munster predicted that if 91% of iPhone and iPod Touch users purchased $10 worth of applications a year, the App Store would generate as much as $1.2 billion in revenue in 2009. Today, a little over two months since the store’s launch, the App Store already rings up $1 million in purchases a day, indicating potential annual sales of $365 million,” Kharif reports.
Kharif reports, “But considering how fast iPhones are flying off shelves, Munster’s figure may prove conservative, says Richard Doherty, director of Envisioneering Group. ‘It’s safe to say that some time this fall, the App Store is going to surpass revenues of all mobile application stores in history,’ he says.”
“The Cupertino (Calif.) company takes a 30% cut of App Store sales. But even the most successful developers are seeing sales skyrocket and then plummet after a matter of weeks as other apps rush in,” Kharif reports.
“Long term, the money won’t be in the fees, but in advertising, subscriptions, and sales of virtual goods, says Matt Murphy, who runs the $100 million iFund at venture firm Kleiner Perkins Caufield, which funds iPhone-related startups, most of them in software,” Kharif reports. “For now, Apple does not take a revenue cut in those areas. AdMob advertising network already places ads on some 25 iPhone applications. “Some publishers make $6,000 or $10,000 a day,” from advertising, says Jason Spero, vice-president for marketing at AdMob.”
More in the full article here.
There were millions of “empty” iPhones and iPod touches out there on App Store launch day, so it’s no wonder that app sales skyrocketed and then settled as the devices were filled. As Apple sells devices and they routinely come online, developers should logically expect to see their sales (and prices) normalize and become more predictable. As with every healthy platform, good apps will always sell, but developers should not expect to see the massive sales of the App Store’s early days again. That was a one-time only gold rush.