Apple Inc. (NASDAQ:AAPL) is expected to lose the crown for overall platform mobile app revenue to Android at some point this year, but no one bothered to tell iOS users. They’ve been paying for apps at a blistering pace in 2017.
AAPL started off 2017 with a single day record for App Store revenue. And just days away from WWDC 2017, the company just put out a press release touting cumulative Apple App Store revenue for developers has now passed $70 billion since its 2008 launch.
That’s great for iOS developers, and with a 30% cut of each app sale, it’s good for AAPL too.
AAPL Reveals Massive Download Growth
On June 1, AAPL sent out a press release where the company announced that developers have now earned over $70 billion in revenue from the Apple App Store. That’s a lot of money, but to add some perspective, consider that last August, Apple CEO Tim Cook tweeted that iOS developers had passed the $50 billion revenue level.
That’s an additional $20 billion in developer app revenue in the past 10 months, or 40% growth. Apple says that overall downloads from the App Store increased 70% in the past 12 months.
Considering that during the same one-year period, AAPL has seen its sales of iPhones stagnate (51.6 million sold in Q1 2017 and 51.2 million sold in Q1 2016), while iPad sales were down 15%, that massive increase in downloads is good news for Apple.
Among the highlights spiked out by Apple are active paid subscriptions for apps from services like Netflix, Inc. (NASDAQ:NFLX), which are up 58% over the past year. Lifestyle and Health & Fitness app downloads are up 70% and the Photo and Video category grew by close to 90%. When it comes to App Store revenue, Gaming and Entertainment remain the top-grossing app categories.
Mobile App Revenue
Several months ago, a report was released that predicted combined Android app stores will eclipse the Apple App Store for mobile app downloads at some point in 2017. That includes not just Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Play, but the entire collection of third-party Android app stores.
Considering that Android dominates smartphone sales, the fact that all those Android smartphone owners would collectively download more apps than iPhone owners isn’t surprising. If anything, the real surprise is that it took this long for app downloads to catch up to the hardware imbalance –Android smartphones have been outselling iPhones by an increasingly large margin since 2010.
However, that same report concluded that AAPL will continue to lead mobile app revenue this year, and it will remain the single most lucrative app store through 2021.
App Store Revenue Helps Drive Apple’s Services Division
App Store revenue is important to AAPL for two reasons.
First, the obvious. It’s revenue, and high margin revenue at that. Apple pays to run the App Store, and in return collects 30% of the revenue collected by app developers. Growing App Store revenue has been a big driver in the growth of Apple’s Services division itself, which is increasingly important as a buffer against cyclical hardware sales.
The second reason is even more important in the long run. Downloads are one thing, but robust App Store revenue growth means developers continue to look to Apple as their primary source of mobile app revenue. This means the App Store continues to get the high profile releases — often long before they reach Android. Nintendo Co., Ltd.’s (OTCMKTS:NTDOY) Super Mario Run is a prime example of this. In turn, the app leadership helps drive iPhone and iPad sales, and keep customers in the AAPL ecosystem through tie-ins to other devices like Apple Watch and Apple TV.
WWDC 2017 starts on June 5. You can expect to hear a lot more from APPL about App Store revenue when it pumps up its developers at this annual event.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
