Apple: Wow, thanks for the $10bn-a-year App Store. We'll be on the beach with our 30%

Apple claims its App Store racked up $10bn in sales in 2013. And in December alone, the online shop brought in $1bn in revenue and dished out three billion downloads, we're told. "We’d like to thank our customers for making 2013 the best year ever for the App Store,” Eddy Cue, Apple's senior vice-president of internet …

[Anonymous Coward]

Seems only Apple and Samsung are making any profit and Samsung are having to spend more and more on advertising as people realise they are just another Android handset - things like the S3/S4 are decent handsets but HTC and Motorola make as good ones.

[ThomH]

I'd dare imagine Samsung can spend a little less on advertising now that it's accelerated away from the pack. It now just needs to make sure it isn't being outdone. I also don't think the "just another Android handset" necessarily applies as people show strong brand loyalty following positive experiences even in markets where the products are essentially interchangeable — think of things like food, clothing, etc.

I feel quite sad for HTC. The One should have been the hit of last year but ended up not even reaching HTC's expectations.

[Anonymous Coward]

Well I've never heard anyone say they would definitely buy another Samsung next time - their loyalty is to Android. Most I do know would rather go for a Nexus or the Moto G which seems well priced and of course Moto are owned by Google.

[Turtle]

Disintermediation

What impresses me is how erroneous were all the predictions about the internet facilitating "disintermediation" and allowing creatives and in fact businesses of all types to connect directly with their fans, customers, clients, etc, without having middlemen sucking out large portions of the profits.

[Anonymous Coward]

Re: Disintermediation

If you think 30% is excessive, you might want to learn how much markup there was on packaged software sold in stores like Best Buy.

If you want to get 100% of your sales you can develop Android apps and have them on your own website (which you pay for, and do your own payment processing for) The fact that isn't done much demonstrates that getting "shelf space" even on a virtual store like the App Store or Google Play store is worth the 30% cut both Apple and Google take.

[Michael Thibault]

Re: Disintermediation

>If you want to get 100% of your sales you can develop Android apps and have them on your own website...

>The fact that isn't done much demonstrates that getting "shelf space" even on a virtual store... is worth the 30% cut both Apple and Google take.

It's also an indication that software developers are missing out on an opportunity to mint money out of... an app, or suite, that disintermediates and allow other developers to run their own whole show. It's mostly software, after all. Unless software is, you know, hard.

[Anonymous Coward]

Re: Disintermediation

30% doesn't equate to "large portions of the profits." in anyway. It's equivalent to overheads; distribution and aggregation, hosting, payment processing etc. and a small service charge. Go and look at how much handango used to charge, then stop your gum flapping, this is getting old.

Only the Reg could publish this as a bad thing. Your Stafford Somerfield approach to churnalism is tiresome.

[Anonymous Coward]

Re: Disintermediation

It's a great deal if you sell $100 worth of software every month. In that case, your overhead might be more than 30%. I run a small Mac software company and we sell in excess of $40K worth of software every month. When we sell through our web site we pay about 4% for credit card processing and our server costs us about $400/month. There aren't any other costs to us that don't accrue through the App Store as well, so you can see that our costs to sell on the web are substantially less than 30% (more like 5-6%). The App Store is a crappy deal for us and it's been driving the prices for software down. That may be a good deal for consumers in the short term but in the long term it leaves little incentive to invest in creating applications.

[localzuk]

Re: Disintermediation

How do people know about your website? How do you get sales from your site? Do you advertise? Do you have people who deal with sales?

The whole point with the App Store is that they handle all the selling and advertising. The App Store is massively advertised and well known, and the iOS market is pretty darn huge. The market available to a website without advertising/marketing is basically nill.

[Anonymous Coward]

Re: Disintermediation

Have you heard of search engines? That's how people find things. The App Store does NOT handle advertising. They provide you little more than a website.

How much software do you sell? What makes you such an expert in how wonderful the App Store is?

[localzuk]

Re: Disintermediation

Hahaha, search engines. Cute. A normal website, appearing in the first page of results, if someone doesn't know the specifics of your product? (How would they know them, if you were entering the market fresh?) Not to mention, how much time, effort and money did it take to develop your sales website, and maintain it? I know from experience it does take some effort, especially dealing with things like sales problems/refunds etc...

The point is entry into the market is difficult for new applications. Doing it via the app store is easy - you create your app, and add it to the app store, providing detail in your blurb and categorising it properly.

Creating a properly SEO friendly website is a lot more work, getting it listed on search engines is not so easy - especially if its a competitive market.

The App store DOES handle some marketing. They sell handsets, those handsets are advertised as having access to the App store (which is prominent in their adverts). So much so, that they made $10bn in sales! If your app is popular within $random time period (this week, this month, whatever), it gets prominence in a top X list on there etc... (Which is advertising).

If you were starting fresh, the App store is a very attractive option.

[localzuk]

Re: Disintermediation

30% to get your product onto shelves in a store that sells billions of apps? Not a bad deal. Especially as they don't charge more for your app to be become 'popular' and get highlighted as a top 10 app etc...

If you want your product to get extra highlighting like that in a brick and mortar store, you pay through the nose for that privilege.

Not to mention, it cuts out a lot of the complexities of software distribution of the past - there's no need for publishers and the like as the company can do it itself, lowering the barrier to entry to the market.

On the other hand, it does mean that any muppet can produce a 'BEST FLASHLIGHT' app...

[jai]

But i thought it was a rubbish Xmas for app devs?

Previous article on El Reg suggests that downloads from app stores is slowing down because people aren't buying hardware as quickly :

http://theregister.co.uk/2014/01/03/christmas_app_downloads/

This article and Apple's figures seem to suggest that, contrary to last Friday's article, in fact there's no correlation between hardware activation and app store downloads, no?

[Forget It]

$10bn - enough to pay their tax bills now, like normal companies?

[chr0m4t1c]

"Normal" companies don't pay their tax bills judging by the stories of the last few years.

Show me a global company that's paying the taxes that people think they should be paying and I'll show you a global company that's not managing its finances properly.

None of these companies are acting illegally, they're playing the rules to maximise profit and the situation will continue as long as you continue to have a situation where companies can be global but taxes are only national.

[Richard 22]

Profit?

I wonder how much of this works out as a profit for Apple? I imagine that there's a fairly large cost associated with running an app store (storage, bandwidth etc) - and the majority of apps are free and therefore don't contribute to that cost.

Even if the App store was run at a loss I guess it would still be worthwhile for Apple to have it, as it drives hardware sales. I doubt it's run at a loss though.

[Loyal Commenter]

"$1.16bn every 12 months – minus the costs of hosting and managing the service." which works out as... $1.16bn every 12 months...

There's probably a significant number of developers out there who pay more in tax to Apple than they do in income tax, and I don't see Apple investing any of it into public services, as our income tax (supposedly) is...