Why Apple doesn’t care about the Appstore

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$7 billion sounds like a lot of money. That’s how much Apple has paid out to developers making apps for the Apple Appstore since the Appstore was launched in 2008. Given that 30/70 split in the favour of developers, the Appstore has grossed $10 billion, making Apple a cool $3 billion.

In January 2012, Apple announced it had paid out $4 billion, so in the last twelve months, it has paid out $3 billion, and Apple has trousered $1.3bn. Which again sounds like a lot.

In Apple’s last financial year, ending September 29, 2012, Apple generated revenues of $156 billion. The iPhone division alone made $80 billon. iPad made £32 billion. The company as a whole made a net profit of $42 billion. The Appstore represents less than 1% of Apple’s business.

Apple doesn’t care about the Appstore as a source of revenue. It cares about the Appstore only as a mechanism of shifting more hardware. The initial decision by Steve Jobs to make free apps available completely for free – with Apple swallowing the credit card, hosting, bandwidth, customer service and limited curation costs – were all about getting lots more software onto the phone. Apple focuses on the revenue from the Appstore not because it cares about the revenue, but because it knows that developers care, and it wants lot of independent businesses vying to make the best possible products for its ecosystem.

All developers are competing for a prize, the prize of being a top-selling developer on iOS. That prize can be worth having. Apple announced that DragonVale from Backflip Studios and Clash of Clans from Supercell have between them grossed $100 million.

In Adapt, best-selling economist Tim Harford argues that prizes may be the best way of encouraging innovation. Prizes like the £20,000 prize offered for the first person to solve the problem of how to find longitude at sea or the $10 million X Prize for achieving economical space flight. To be fair, Harford argues that prizes should be deployed alongside traditional mechanics for innovating, not replacing them.

But it looks as if Apple had dangled, and keeps dangling the prize in front of devs. It doesn’t care about whether you make money. It doesn’t even care if the AppStore makes money. It cares about whether the Appstore is a place where companies keep looking for ways to do things that makes consumers happy, love their devices and want to recommend them to their friends.

It doesn’t mean you shouldn’t develop for the AppStore. It does mean that you shouldn’t expect Apple to care about you one bit.

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