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19% of software on Apple's App Store is paid, with $1.49 average price

post #1 of 41
Thread Starter 
The App Store offers great a value to consumers with 4 billion free applications downloaded to date, but it is not hugely profitable for Apple, as paid-for applications carry an average selling price of $1.49, according to a new analysis.

Gene Munster, Wall Street analyst with Piper Jaffray, released new facts and figures on the App Store for iOS devices -- the iPhone, iPod touch and iPad -- on Wednesday. He said that app pricing data suggests that 81 percent of downloaded applications (totaling 4 billion) are free, while the top 50 paid applications have an average selling price of $1.49.

Applications on the iPad are a bit more expensive, with the average selling price of the top 30 amounting to $4.66. Munster said he expects the cost of App Store software to skew higher as the mix shifts slightly toward the iPad, which sold more than 3 million units in its first 80 days.

The numbers also suggest that iPhone, iPod touch and iPad users download over 16.6 million applications every day, which is nearly double the 8.9 million daily download rate of music on iTunes.

Using a straight average selling price for both free and paid applications combined, Apple receives roughly 29 cents for every application downloaded, Munster said. He said the data implies the App Store has a gross margin of 44 percent.



Apple revealed earlier this month that the App Store has earned developers more than $1 billion since it opened in 2008. Munster said he believes that Apple has earned about $428 million in revenue since the launch of the App Store. The company takes a 30 percent cut of all sales, but must give 20 cents plus 2 percent to the credit card company and 1 percent for per app processing, leaving the company with a figure of $189 million in gross profit on paid apps alone.

"This does not factor in the roughly $81m Apple has spent since launch to deliver the 4b free apps that have been downloaded," he wrote.

The figures put into perspective what a small part of Apple's business the App Store is. A contribution of $189 million amounts to just 1 percent of the $33.7 billion in gross profit the Cupertino, Calif., company has earned since the App Store launched.

"Over the same time period, the iTunes store has generated $3.6b in revenue, to which the App Store has contributed $429m, or 12%," he said.

Of course, Apple has long admitted that the App Store is not hugely profitable for the company. Officials with Apple have said that neither the App Store or iTunes create much revenue for the company, running "a bit over break even," Chief Financial Officer Peter Oppenheimer said in January. But the App Store isn't meant to be a profit generator as much as a means to attracting customers to the iPhone, iPad and iPod touch.

Munster noted that the Piper Jaffray analysis does not factor the effect the App Store has on sales of devices running iOS, but he believes the sale of devices is driven by the availability of applications within the ecosystem.

"We see a virtuous cycle of Apple's robust app ecosystem adding features and functionality to the iOS devices, which drives sales, which makes the ecosystem more robust, which encourages more developers to write apps, and the cycle repeats itself," he said.
post #2 of 41
Good analysis, but hardly surprising since this is exactly what Apple has been telling us at every quarterly conference call ("itunes store is designed break even or be slightly profitable," blah blah).

Gene should credit this report to his source material, "The Book of 'DUH!' (Chapter 8, Verses 12-18)"...
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post #3 of 41
Quote:
Originally Posted by AppleInsider View Post

The App Store offers great a value to consumers with 4 billion free applications

"4 billion" applications?
post #4 of 41
Quote:
Originally Posted by MyopiaRocks View Post

Good analysis, but hardly surprising since this is exactly what Apple has been telling us at every quarterly conference call ("itunes store is designed break even or be slightly profitable," blah blah).

Gene should credit this report to his source material, "The Book of 'DUH!' (Chapter 8, Verses 12-18)"...

Yes, but this is the first time I've seen Apple's costs broken out. The one that most people forget is that Apple keeps 30% - but then has to pay the credit card processor. On these small transactions, that's a killer - HALF of Apple's revenue goes out to the credit card processor.
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post #5 of 41
Apple sells iPods and phones for those apps to be downloaded on to. I'm sure they aren't complaining.
post #6 of 41
Quote:
Originally Posted by PersonMan View Post

"4 billion" applications?

Yeah, the imprecisions and conflicting info in this report are bizarre. Basically, the headline is completely wrong.
post #7 of 41
Quote:
Originally Posted by AppleInsider View Post

He said the data implies the App Store has a gross margin of 44 percent.


Officials with Apple have said that ... the App Store ..., running "a bit over break even,"


Gross margin: 44 Percent.

That is, in Applespeak, "a bit over break-even".
post #8 of 41
But the future projection of this model of marketing is where the real money will be made. Consider the upward profit projection due to Ipad apps added to mix, and apply to the Mac line (imagine computer applications as the logical extension), throw in a cloud computer and its potential services, and the margins look sweet.
post #9 of 41
Quote:
Originally Posted by jragosta View Post

Yes, but this is the first time I've seen Apple's costs broken out. The one that most people forget is that Apple keeps 30% - but then has to pay the credit card processor. On these small transactions, that's a killer - HALF of Apple's revenue goes out to the credit card processor.

I suspect that is so high because with credit cards you have interchange fee composed of two parts: a per transaction fee of about 10 cents with a percentage fee of 1 to 2% on the total (that may after tax ). So those 99 cent singles Apple was giving us a minimum of 20 cents went to the credit card companies.
post #10 of 41
Quote:
Originally Posted by 801 View Post

But the future projection of this model of marketing is where the real money will be made. Consider the upward profit projection due to Ipad apps added to mix, and apply to the Mac line (imagine computer applications as the logical extension), throw in a cloud computer and its potential services, and the margins look sweet.

I don't know how true this is.

How many cloud computing services make money at the moment? Salesforce.com is the only one I can think of. Nearly every other cloud computing service (including all of Google's) loses money and is running on the hopes and dreams of VCs.

Youtube, arguably the most successful cloud computing service, is still to turn a profit.
post #11 of 41
I seem to remember reading basically the same story about music downloads soon after the iTunes Music Store was created. Over time, though, the sheer scale of the beast has made it progressively more profitable. Despite the huge number of free offerings, the App Store is likely to follow the same path. Five years from now, it'll generate a tidy sum.
post #12 of 41
It's about the bigger picture for Apple ... the eco system. This is why it is so hard for others to compete as they look for profit based models whereas Apple see this as a marketing tool.
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post #13 of 41
Quote:
Originally Posted by digitalclips View Post

This is why it is so hard for others to compete as they look for profit based models whereas Apple see this as a marketing tool.

Yeah, but even as a marketing tool, they are NOT losing any money. Meanwhile, Microsoft is sinking massive amounts into various product lines (Zune, X-Box, MSN, Bing), hoping to some day break even, and then some day even longer into the future, begin making profit.

Apple will NOT release a product or service if it will not break even within a very short period of time. No wonder there's over $42B in the bank...
post #14 of 41
Quote:
Originally Posted by Predrag View Post

Yeah, but even as a marketing tool, they are NOT losing any money. Meanwhile, Microsoft is sinking massive amounts into various product lines (Zune, X-Box, MSN, Bing), hoping to some day break even, and then some day even longer into the future, begin making profit.

Apple will NOT release a product or service if it will not break even within a very short period of time. No wonder there's over $42B in the bank...

Oh, agreed. A marketing tool that doesn't only NOT lose money it helps propel massive profits in iPods, iPhones and Macs. Hence I said it is all about the eco system.
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post #15 of 41
Quote:
Originally Posted by Maximara View Post

I suspect that is so high because with credit cards you have interchange fee composed of two parts: a per transaction fee of about 10 cents with a percentage fee of 1 to 2% on the total (that may after tax ). So those 99 cent singles Apple was giving us a minimum of 20 cents went to the credit card companies.

Anyone that believes that Apple is paying those kind of fee for credit card transactions will probably go on fishing trip to the Gulf this summer.

As big as Apple is an the number of transactions they process per day throughout there entire operations, online store, retail stores, itunes music, itunes apps, etc etc they are not paying fees like that. I would not doubt that Apple has its own bankiing system in place to handle this. I would say there fees are only 1/3 or maybe as high as 1/2 of what a typical business would pay.
post #16 of 41
I'm pretty sure they could shut out Google if they moved onto 20/80 pricing And it looks like they have the margins to do so.
post #17 of 41
Quote:
Originally Posted by Stevie View Post

Gross margin: 44 Percent.

That is, in Applespeak, "a bit over break-even".

Considering that you have no idea what their overheads are, you're obviously clueless. Let me try once again to explain simple business 101.

Revenues - the amount of money received for a product or service. In this case, that would be Apple's 30% of the sale price (average $1.49 in this example).

Cost of sales - the direct cost of the item being sold. If it's a physical device, this is the component and material cost, direct labor cost, etc. Selling commissions are sometime included in cost of goods because they're tied to a specific product. When manufacturing overheads can be allocated (such as machine maintenance costs), they may be included, as well. In this case, the largest component of direct cost is credit card fees ($0.23 average). Also, processing costs of $0.02 are a direct cost. So, total cost of sales is $0.25

Gross margin is the amount of margin left after subtracting cost of sales from revenues. In this case, Apple's gross margin is $0.23 (44% of revenues).

Gross margin is not profit. Gross margin is the money you have left to pay the overheads. Things like R&D costs, administration, marketing, site overheads, etc. Overheads can be anywhere from a few percent of sales to 70 or 80% of sales, depending on the business.

Profit (also called net income) is what's left after you subtract the overheads from the gross margin. Since Apple is claiming that the apps store operates just over break-even, the overheads must be in the 40% range. There's nothing inconsistent in the facts being presented. The problem is that you're apparently completely lacking even basic business finance knowledge.

Quote:
Originally Posted by bartfat View Post

I'm pretty sure they could shut out Google if they moved onto 20/80 pricing And it looks like they have the margins to do so.

Another one who should stop commenting on things he doesn't understand.

Average selling price is $1.49. If Apple took 20%, that gives them $0.298 per sale. From that, they subtract the credit card costs ($0.23) and processing costs ($0.02) and would have less than $0.05 left to cover all their overheads. Based on the fact that Apple says they're only slightly above break-even even at 30%, that clearly is insufficient margin to do what you're suggesting.
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post #18 of 41
Quote:
Originally Posted by macdanboy View Post

Anyone that believes that Apple is paying those kind of fee for credit card transactions will probably go on fishing trip to the Gulf this summer.

As big as Apple is an the number of transactions they process per day throughout there entire operations, online store, retail stores, itunes music, itunes apps, etc etc they are not paying fees like that. I would not doubt that Apple has its own bankiing system in place to handle this. I would say there fees are only 1/3 or maybe as high as 1/2 of what a typical business would pay.

Best deal I can find on any credit card processing nets out at 1.8% fees on an average transaction size of $50,000. The only thing that saves Apple is that they combine several sales into one transaction whenever possible.

Throw in gift cards and the very small transaction sizes, and Apple is paying an ungodly sum to the credit card companies.
post #19 of 41
The Apps alone are still above break even. The hardware and volume of units is where the money is.

Not to mention iAd...Millions of devices capable of delivering Ads around the world...
post #20 of 41
Quote:
Originally Posted by jragosta View Post

Considering that you have no idea what their overheads are, you're obviously clueless. Let me try once again to explain simple business 101.

Revenues - the amount of money received for a product or service. In this case, that would be Apple's 30% of the sale price (average $1.49 in this example).

Cost of sales - the direct cost of the item being sold. If it's a physical device, this is the component and material cost, direct labor cost, etc. Selling commissions are sometime included in cost of goods because they're tied to a specific product. When manufacturing overheads can be allocated (such as machine maintenance costs), they may be included, as well. In this case, the largest component of direct cost is credit card fees ($0.23 average). Also, processing costs of $0.02 are a direct cost. So, total cost of sales is $0.25

Gross margin is the amount of margin left after subtracting cost of sales from revenues. In this case, Apple's gross margin is $0.23 (44% of revenues).

Gross margin is not profit. Gross margin is the money you have left to pay the overheads. Things like R&D costs, administration, marketing, site overheads, etc. Overheads can be anywhere from a few percent of sales to 70 or 80% of sales, depending on the business.

Profit (also called net income) is what's left after you subtract the overheads from the gross margin. Since Apple is claiming that the apps store operates just over break-even, the overheads must be in the 40% range. There's nothing inconsistent in the facts being presented. The problem is that you're apparently completely lacking even basic business finance knowledge.

Good job: this thread made it through 16 posts before resorting to wanton personal attacks. This may be a record for the AI forums.

That the AppStore is contributing 1% of total profit for a company that makes most of its money on hardware is not insignificant. The AppStore is far more profitable than many of the software products the company sells, definitely a strong ROI.

Moreover, it's a scalable investment: it's a content machine, the code is already written, so from this point on it can handle an ever-growing number of transactions with minimal enhancement investment, making its already high ROI higher and higher every month.

Don't be surprised if this software investment becomes 2% of gross profits by this time next year. And like I said, for a hardware company this is nothing to sneeze at.
post #21 of 41
Quote:
Originally Posted by macdanboy View Post

Anyone that believes that Apple is paying those kind of fee for credit card transactions will probably go on fishing trip to the Gulf this summer.

As big as Apple is an the number of transactions they process per day throughout there entire operations, online store, retail stores, itunes music, itunes apps, etc etc they are not paying fees like that. I would not doubt that Apple has its own bankiing system in place to handle this. I would say there fees are only 1/3 or maybe as high as 1/2 of what a typical business would pay.

Quote:
Originally Posted by aaarrrgggh View Post

Best deal I can find on any credit card processing nets out at 1.8% fees on an average transaction size of $50,000. The only thing that saves Apple is that they combine several sales into one transaction whenever possible.

Throw in gift cards and the very small transaction sizes, and Apple is paying an ungodly sum to the credit card companies.

Typically, transaction fees for business are in a charge per transaction PLUS a percentage of the transaction price. For example, the credit card company we use is $0.20 per transaction plus 1.8% of the transaction amount. For big transactions, it's the percentage that matters. For small transactions, the fixed fee becomes important (which is why so many stores have a minimum credit card charge).

One would think that Apple could do better than my $0.20 plus 1.8%. I'm not so sure, though. The credit card company would assume that for most businesses, the transaction would be large enough to generate significant revenue. For the average iTunes transaction, the price is low enough that almost all of the revenue comes from the fixed 'per transaction' fee, so the credit card company may be less willing to budge than they would be if the average transaction is higher. I doubt if anyone outside of Apple or the credit card processor has any direct knowledge.
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post #22 of 41
You know, I really want to get one of these iphones, but the thing doesn't even play fart sounds? That's why I'm sticking to windows mobile for now. I have about 3 different fart apps I use daily, but the app store doesn't have a single one! In my line of work, this is unacceptable.
post #23 of 41
Quote:
Originally Posted by jragosta View Post

Typically, transaction fees for business are in a charge per transaction PLUS a percentage of the transaction price. For example, the credit card company we use is $0.20 per transaction plus 1.8% of the transaction amount. For big transactions, it's the percentage that matters. For small transactions, the fixed fee becomes important (which is why so many stores have a minimum credit card charge).

One would think that Apple could do better than my $0.20 plus 1.8%. I'm not so sure, though. The credit card company would assume that for most businesses, the transaction would be large enough to generate significant revenue. For the average iTunes transaction, the price is low enough that almost all of the revenue comes from the fixed 'per transaction' fee, so the credit card company may be less willing to budge than they would be if the average transaction is higher. I doubt if anyone outside of Apple or the credit card processor has any direct knowledge.

I agree that no one outside likely knows.

But we do know that Apple groups credit card transactions from a single account as much as possible. I''ve had a single receipt with purchases made as far as two days apart.

I've also seen other analysts state that they think Apple has negotiated special micropayment rates with the credit card companies for iTunes/App Store purchases.
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post #24 of 41
Quote:
Originally Posted by RationalTroll View Post

Good job: this thread made it through 16 posts before resorting to wanton personal attacks. This may be a record for the AI forums.

That the AppStore is contributing 1% of total profit for a company that makes most of its money on hardware is not insignificant. The AppStore is far more profitable than many of the software products the company sells, definitely a strong ROI.

Based on what? Where are the figures saying that the App Store generates 1% of Apple's PROFITS?

Quote:
Originally Posted by RationalTroll View Post

Moreover, it's a scalable investment: it's a content machine, the code is already written, so from this point on it can handle an ever-growing number of transactions with minimal enhancement investment, making its already high ROI higher and higher every month.

Don't be surprised if this software investment becomes 2% of gross profits by this time next year. And like I said, for a hardware company this is nothing to sneeze at.

Gross margin is not all that big a deal. As I explained in the section you apparently ignored, you still have to subtract overheads. And don't assume that overheads are fixed. Just because the code has been written doesn't mean that you're done. There's always maintenance, support, upgrades, etc.
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post #25 of 41
Quote:
Originally Posted by jragosta View Post

Yes, but this is the first time I've seen Apple's costs broken out. The one that most people forget is that Apple keeps 30% - but then has to pay the credit card processor. On these small transactions, that's a killer - HALF of Apple's revenue goes out to the credit card processor.

the trouble with that figure is that we don't know that all of those folks are using standard credit cards. Some could be using paypal or even itunes gift cards. That skews the numbers.

but yes it is likely that said fees is the actual reason behind the 30%, to cover costs. Not to make a profit. Because any analyst worth his weight knows that the app store is NOT about making money. It is about encouraging hardware sales and discouraging jailbreaking, which would be way way more common if there was no sanctioned apps store

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post #26 of 41
Quote:
Originally Posted by chronster View Post

You know, I really want to get one of these iphones, but the thing doesn't even play fart sounds? That's why I'm sticking to windows mobile for now. I have about 3 different fart apps I use daily, but the app store doesn't have a single one! In my line of work, this is unacceptable.

Good news: Apple's maintaining the high quality of wares available in the App Store by offering more than 700 variants of iFart:

http://www.uquery.com/search?q=fart
post #27 of 41
The monitization of a cloud computer has not been done yet, but I am confident that Apple could pull it off, sort of like a ramped up Mobile Me, with video content, Itunes, applications that time out or need updating, protection services, etc.

I am also intrigued by the amount of monies siphoned off by the credit card companies. It seems that a company sitting on a a few billion could reform this system to make a thinner profit, but driven by the horsepower of the cloud. Sort of like the next level of paypal.
post #28 of 41
Quote:
Originally Posted by charlituna View Post

the trouble with that figure is that we don't know that all of those folks are using standard credit cards. Some could be using paypal or even itunes gift cards. That skews the numbers.

Absolutely. The whole analysis is dependent on how good the analyst's figures are. Given historical experience, that may not be something worth betting on.

However, the figures presented would not be inconsistent with what we know - that the app store operates just a bit above break-even.
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post #29 of 41
Quote:
Originally Posted by jragosta View Post

Based on what? Where are the figures saying that the App Store generates 1% of Apple's PROFITS?

Those who read the article before diving into this discussion may have noticed this:

Quote:
A contribution of $189 million amounts to just 1 percent of the $33.7 billion in gross profit the Cupertino, Calif., company has earned since the App Store launched.
post #30 of 41
> Apple receives roughly 29 cents for every application downloaded, Munster said. He said the data implies the App Store has a gross margin of 44 percent.

I'm a bit confused by this. If Apple pays out 70% off the top to the Developer how does that leave them with a gross margin of 44%?

I'm missing something.

Or, is the gross margin 44% of the 30% they receive?
post #31 of 41
The fact that Apple as much as breaks even on the App Store is a strategic accomplishment that should be the envy of every competitor. Leveraging the existing iTunes store to create a meritocracy for developers was a stroke of genius. They put the world of developers to work on a new platform adding to the value of that platform. They also can control the quality of apps offered and ensure compliance with Apple's own development guidelines. The 30% take was probably based on break-even pricing models to just cover costs. No existing or threatening competitor (e.g., Google) had anything close to this kind of infrastructure in place, so they all now have to build these facilities just to compete with the Apple ecosystem. Imagine what competitors' net margins are going to be after their store development and incremental operational costs are considered. Chumping Apple's competitors for free is exceptional, but profiting from the effort is all icing on a delicious cake. This is yet another reason Apple enjoys higher capitalization than any of its competitors.
post #32 of 41
Quote:
Originally Posted by jragosta View Post

Typically, transaction fees for business are in a charge per transaction PLUS a percentage of the transaction price. For example, the credit card company we use is $0.20 per transaction plus 1.8% of the transaction amount. For big transactions, it's the percentage that matters. For small transactions, the fixed fee becomes important (which is why so many stores have a minimum credit card charge).

One would think that Apple could do better than my $0.20 plus 1.8%. I'm not so sure, though. The credit card company would assume that for most businesses, the transaction would be large enough to generate significant revenue. For the average iTunes transaction, the price is low enough that almost all of the revenue comes from the fixed 'per transaction' fee, so the credit card company may be less willing to budge than they would be if the average transaction is higher. I doubt if anyone outside of Apple or the credit card processor has any direct knowledge.

Wow, you are getting ripped off, I have know people in small businesses that were only paying 1% on credit cards (as part of a business group), and in the UK there used to be ads giving general commission prices for CC transactions and they were around 1% for more than 1,000,000 STR per year. Unless the US has some pretty bad fee structures (and remember, not all Apples CC transactions go through the US) they will be paying less than 1%
post #33 of 41
Quote:
Originally Posted by jfanning View Post

Wow, you are getting ripped off, I have know people in small businesses that were only paying 1% on credit cards (as part of a business group), and in the UK there used to be ads giving general commission prices for CC transactions and they were around 1% for more than 1,000,000 STR per year. Unless the US has some pretty bad fee structures (and remember, not all Apples CC transactions go through the US) they will be paying less than 1%

Don't assume that fees are the same in the U.S. as in the UK. The fee I'm paying (1.8% plus $0.20 per transaction) is actually a pretty good fee in the U.S. Not the best, but better than average.

Quote:
Originally Posted by ltcompuser View Post

> Apple receives roughly 29 cents for every application downloaded, Munster said. He said the data implies the App Store has a gross margin of 44 percent.

I'm a bit confused by this. If Apple pays out 70% off the top to the Developer how does that leave them with a gross margin of 44%?

I'm missing something.

Or, is the gross margin 44% of the 30% they receive?

Please read the explanation I gave above - or a basic economics text. Apple's revenue is the 30% take (technically, that's not entirely true, but that's the way it's being reported and is not completely unreasonable). They're claiming that Apple's gross margin is 40% _of Apple's revenues_ (which would be the 30% they keep).

Note that the 44% figure is coming from an analyst. I have no way of knowing how Apple is actually reporting it. In normal reporting, Apple's revenues would be 100%. Cost of sales would be the 70% they pay the developer and the 16% that they pay for credit card fees and processing - leaving a 14% gross margin.

Quote:
Originally Posted by RationalTroll View Post

Those who read the article before diving into this discussion may have noticed this: :A contribution of $189 million amounts to just 1 percent of the $33.7 billion in gross profit the Cupertino, Calif., company has earned since the App Store launched."

Yep. As I thought - you aren't able to tell the difference between gross margin (contribution) and profit. Your original claim was that it contributed 1% of profit. Now you're saying it's 1% of gross margin (= gross profit). You really need to learn the difference between gross margin or gross profit and profit before embarrassing yourself further. I already gave you an explanation but you were too busy with your personal attacks to read it, I guess.
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post #34 of 41
Quote:
Originally Posted by jragosta View Post

Don't assume that fees are the same in the U.S. as in the UK. The fee I'm paying (1.8% plus $0.20 per transaction) is actually a pretty good fee in the U.S. Not the best, but better than average.

Ok, couple of things to remember though,

50% of Apples sales are outside the US, a lot of Apples CC transactions are handled in Ireland now.
How many $million does Apple sell per year??? Are you saying that place you work for equals Apple for sales so they will be paying the same as you???
post #35 of 41
Quote:
Originally Posted by jragosta View Post

Note that the 44% figure is coming from an analyst. I have no way of knowing how Apple is actually reporting it. In normal reporting, Apple's revenues would be 100%. Cost of sales would be the 70% they pay the developer and the 16% that they pay for credit card fees and processing - leaving a 14% gross margin.

These numbers are how I looked at it, hence the confusion over 44% gross margin. In all cases, I've seen gross margin was based on total revenue.
post #36 of 41
Quote:
Originally Posted by jfanning View Post

Ok, couple of things to remember though,

50% of Apples sales are outside the US, a lot of Apples CC transactions are handled in Ireland now.
How many $million does Apple sell per year??? Are you saying that place you work for equals Apple for sales so they will be paying the same as you???

As I said:

1. We don't know how much Apple is paying. All we have is an analyst's guess - and I don't put much faith in them.

2. The credit card companies may be less likely to discount for Apple because there will be so many small transactions and so few large ones. On smaller transactions, the 'per transaction' piece of the fee becomes dominant.

Quote:
Originally Posted by ltcompuser View Post

These numbers are how I looked at it, hence the confusion over 44% gross margin. In all cases, I've seen gross margin was based on total revenue.

That is correct. Gross margin is always Revenues minus Cost of Sales. However, I haven't seen the contracts so I don't know how they're set up.

If it's set up as Apple buying the software from the developer and then reselling it to you, then the revenue would be the total transaction value.

OTOH, if it's set up such that the transaction is actually between you and the developer and Apple is keeping its 30% as a commission, then Apple's revenue will be the 30% figure.
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post #37 of 41
Quote:
Originally Posted by Stevie View Post

I have the same question. ISTM that the gross margin is 30% maximum, due to the cost of goods sold being 70% of revenues.

Read the last 2 sentences of post #36.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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post #38 of 41
gene's figures may be correct for 99c apps ... but i am sure apple is retaining a much higher cut of their 30% on more expensive apps. There is no way the cc company is taking over $1 per $10 app.

apple is putting literally billions through their merchant account - you really think they haven't negotiated a good deal for themselves?

plus apple amalgamates app purchases over a period of time per purchaser to lower the transaction fees.

and finally when apple sells a gift card at an apple store the total credit card fee maybe pretty low - say between 1 and 3%.
post #39 of 41
Quote:
Originally Posted by jragosta View Post

Quote:
Originally Posted by RationalTroll View Post

Those who read the article before diving into this discussion may have noticed this:
Quote:
A contribution of $189 million amounts to just 1 percent of the $33.7 billion in gross profit the Cupertino, Calif., company has earned since the App Store launched.]

Yep. As I thought - you aren't able to tell the difference between gross margin (contribution) and profit. Your original claim was that it contributed 1% of profit. Now you're saying it's 1% of gross margin (= gross profit). You really need to learn the difference between gross margin or gross profit and profit before embarrassing yourself further. I already gave you an explanation but you were too busy with your personal attacks to read it, I guess.

The irony of your lecturing me on personal attacks is not lost on the readers here, who are astute enough to note that I made no such claim of my own but merely quoted the article that most of them read before entering this discussion.

If you feel the article is incorrect don't shoot the messenger. You can contact AppleInsider here:
http://www.appleinsider.com/contact.php
post #40 of 41
Quote:
Originally Posted by RationalTroll View Post

The irony of your lecturing me on personal attacks is not lost on the readers here, who are astute enough to note that I made no such claim of my own but merely quoted the article that most of them read before entering this discussion.

Nice dodge.

Let's go back through the thread.

#1. You stated that 1% of Apple's PROFIT came from app sales.

#2. I asked for evidence to support that claim

#3. You quoted the article claiming that 0.6% of GROSS PROFIT came from app sales. The article specifically says 'gross profit', not 'profit'.

#4. I pointed out to you that gross profit is not the same as profit-and give a detailed explanation of why you were incorrect in confusing profit and gross profit

#5. Instead of learning from your mistake, you pretend that it was the article that was in error. Clearly, you STILL don't understand the difference between profit and gross profit.

Some people are completely unwilling to learn anything. So sad.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
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