Super Mario Run Earnings Showcase Apple’s App Store Advantage

Nintendo’s hit mobile game generates the majority of its revenue on the Apple App Store

Source: Apple

With smartphone sales losing steam, Apple’s (NASDAQ:AAPL) long-term performance puts increased reliance on its Services division, led by revenue from the App Store. That may sound risky, given that Android smartphones represent 86% of the market — won’t developers bail on the iPhone to focus on the larger Android customer base? However, numbers released for Nintendo’s (OTCMKTS:NTDOY) “Super Mario Run” mobile game show why the Apple App Store will continue to mint money for Apple and provide the revenue to help drive AAPL stock, despite Android’s lead.

The App Store turns 10 on July 10, and it’s in a position to be more important than ever for Apple’s long-term success.

Super Mario Run Highlights the Apple App Store Advantage

Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google dominates the global smartphone market. In 2017, nearly 86% of all smartphones sold ran Android. It would only seem logical then that Google Play would be cleaning the App Store’s clock. But that isn’t the case. In fact, it’s the opposite and new data from Nintendo’s hit mobile game “Super Mario Run” shows why the App Store will continue to be important to AAPL stock — despite the dominance of Android.

Nintendo launched “Super Mario Run” in September 2016, and the game has now hit the $60 million earnings threshold. That’s not bad for a game that’s free to download and play, with no ads, no micro transactions and a $9.99 fee to unlock all levels.

And despite the fact that Android smartphones vastly outnumber iPhones, it is estimated that 77% of that revenue came from Apple’s App Store. There is a qualifier in there as Apple Insider points out, since the game was an iOS exclusive for three months before being released on Android. However, even in Q1 2018, 65% of “Super Mario Run” revenue was coming from the App Store, generated by a platform with a 14% share of the global smartphone market.

What Is Going On?

Android may have a massive numbers advantage, but its user base is fragmented. I’ve been writing about Google’s Android fragmentation problem for years, but it hasn’t improved much. In a nutshell, that seemingly massive 86% block is actually broken down into much smaller chunks because so many of the smartphones don’t get updated to new versions of Android. In addition, there are hundreds of different smartphone models in use, and many of them are low end devices — remember, this is a global market and that includes the smartphones sold in emerging markets.

As of June, 81% of all active iOS devices were running iOS 11 (the latest Apple operating system), while just 6% of active Android devices were running Oreo — the latest Android operating system. In addition, iOS users spend significantly more on apps than Android users. Last year in the U.S., that amounted to an average of $58-per-user for the App Store versus $38-per-user for Google Play. The difference is even larger in markets dominated by low-end Android smartphones that are incapable of running more demanding apps like “Super Mario Run.”

Put these factors together and an app developer releasing to the Apple App Store can count on iPhones that have the latest operating system, relatively high performance hardware (even in older models), relatively few different iPhone models to test on, and users that are more willing to spend money on apps. The user base on Google Play that meets similar qualifications is a tiny fraction of the Android market.

That’s why AAA titles like “Super Mario Run” are almost always available on the App Store, frequently launch there before hitting Google Play, and sometimes remain App Store exclusives.

How the App Store Remains Important for AAPL Stock

On July 10, the App Store will be 10 years old. It launched with just 500 apps, but it helped make the iPhone so popular that the smartphone drove AAPL stock to unprecedented levels. Apple says that as of June, it has paid out over $100 billion to app developers from App Store sales.

With a 30% cut of app sales, thriving demand and key advantages over Android (that Google can’t easily overcome), the App Store will continue to be a key contributor to Services revenue, the company’s second largest division. It will help offset any iPhone sales slack, keeping AAPL stock aloft — despite being completely outnumbered by all those Android smartphones.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


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Article printed from InvestorPlace Media, https://investorplace.com/2018/07/super-mario-run-earnings-showcase-apples-app-store-advantage/.

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