Apple Inc. (NASDAQ:AAPL) may have missed the mark with 2016’s iPhone 7 and new MacBook Pro laptops, but there was one area where the company was firing on all cylinders.
AAPL announced that it absolutely blew past its previous records related to the App Store, notching $240 million in customer purchases on New Year’s Day alone, and paying out over $20 billion to app developers in 2016.
Apple’s App Store Records
Apple’s press release was quick and to the point. The heading was “App Store shatters records on New Year’s Day,” and instead of a preamble there were two bullet points:
- $240 million in customer purchases makes January 1, 2017 the App Store’s busiest day ever.
- App developers earned $20 billion in 2016 — up 40 percent from 2015.
Those two points say a lot; $240 million in revenue in a single day is huge. To put that number in some perspective, it equals the revenue that GoPro Inc. (NASDAQ:GPRO) collected in its entire third quarter. Snap Inc. — the company behind the wildly popular Snapchat app that’s prepping for an IPO that could be worth $25 billion — is expected to have generated between $250 million and $350 million in ad revenue in 2016. The whole year.
In other words, the revenue that AAPL generated from App Store sales alone in a single day hit the level that some of the best-known technology companies take an entire quarter (or longer) to reach.
A single-day sales record (especially one set during the holidays) should naturally be taken with a grain of salt. However, the Apple App Store has been on fire for all of 2016.
Apple says App Store revenue for December topped $3 billion. A 40% increase in the amount of money paid out to app developers compared to 2015 indicates strong growth. That’s even when accounting for changes to AAPL’s App Store terms last summer that saw in-app subscription fees collected by the company drop from 30% to 15% for long-term subscriptions — putting more of the App Store revenue in developers’ pockets.
Super Mario Run Helped Drive App Store Revenue
Nintendo Co., Ltd. (OTCMKTS:NTDOY) certainly helped the Apple App Store’s numbers. According to AAPL, its Super Mario Run game was the No. 1 app for downloads globally on both Christmas Day and New Year’s Day.
The game was downloaded over 40 million times within just four days of release, and despite only being available in December, it placed in the top 10 most downloaded apps for all of 2016.
App Store Popularity Helps Drive iPhone and iPad Sales
App Store revenue was a big reason why Apple’s Services division revenue grew 24% last quarter to hit a record $6.3 billion, making it the second biggest source of revenue for the company after the iPhone. That alone makes the App Store important to AAPL.
The fact that Services was the only division to see growth in the last quarter also underscores its importance.
Super Mario Run helps to illustrate another importance of the App Store. It may have been eclipsed by Alphabet Inc’s (NASDAQ:GOOGL) Google Play in sheer number of apps, but the Apple App Store still leads when it comes to access to premium apps. Super Mario Run is a perfect example of this effect in action — it’s still not available for Android, and Nintendo is only saying that it will hit Google Play sometime in 2017.
The success of the App Store in continuing to attract the best apps (many of them exclusives) helps Apple to sell the iPhone, iPad, Apple Watch and even Apple TV. Outside of any hardware or operating system preferences, iOS is the platform that gets the best apps.
At a time when Apple has been struggling with sliding sales in its hardware divisions and criticism over new product releases, the App Store is a bright light.
And with record-setting $240 million in app revenue on the first day of 2017, you can bet AAPL hopes the App Store sets the tone for the rest of this year.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
