iPhone Customers More Willing to Pay for Quality Apps

Geordy Wang at Seeking Alpha:

Yeah, you get access to more raw users with Android, but the iPhone’s premium-oriented customers are more willing to pay for quality apps, which means there’s potentially more money to be made developing for iOS despite the smaller userbase.

Wang hit the spot: developers will focus on platforms, not on how big it is in terms of unit share, but on how big it is in terms of potential revenue from app sales. At the moment, despite having a considerably larger share of the U.S. smartphone market compared to the iPhone, Android pales in comparison to iOS. Yes, iOS is used on iPads and iPod touches, too. The iPad has been outselling Android tablets, by quite a margin, for over a year. But as you’ll see there is a huge gap between unit market share and potential app revenues.

On June 15 asymco’s Horace Dediu wrote:

By my estimate, Apple has paid out $16.6 billion to content owners. $2.5 billion to app developers and about $14 billion to music companies.

US$2.5 billion, cumulative, through June 2011. I don’t know why it is so difficult to find payout figures for Android. The only article I found is a year old. On June 21, 2010, John Watkinson at Larva Labs wrote:

Overall we estimate that $6,000,000 has been paid out to developers for games, and $15,000,000 has been paid out on apps. That is a total of $21,000,000, nearly 1/50th the amount paid out to devs on iPhone.

Of course that’s last year. Since then Android has grown rapidly, much faster than the iPhone. At the time of Watkinson’s writing Apple announced that it had paid out $1 billion to developers. Let’s lavish on Google a super duper exponential growth rate and assume the company paid out 10x the amount since June 2010. The cumulative payout to developers would total $231 million ($21 million + $210 million). That is less than 10% of Apple’s payout.

Developers will create apps for platforms that have the largest potential for revenues. And even if you assume Google has paid out 10x what it did up until June 2010, a developer is looking at a potential market, in terms of revenue, that is 10x larger with iOS.

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