Just in time for the start of CES, Apple issues a press release:
Apple today announced that customers have downloaded over 40 billion apps [a footnote makes it clear that this is “40 billion unique downloads excluding re-downloads and updates”], with nearly 20 billion in 2012 alone. … Eddy Cue, Apple’s senior vice president of Internet Software and Services [said], “Developers have made over seven billion dollars on the App Store…”
That’s an average of 17.5 cents per download. And the number is decreasing. Back in 2011 it was more than 20 cents per download, leading GigaOm to conclude “The average iOS app publisher isn’t making much money.”
Apple’s PR trumpets a handful of success stories, but like so many digital content scenarios the real story is in the long tail.
If I were a software developer today, this would not make me feel good. In fact, it would probably send me out looking for a nice safe corporate gig where I could build free apps on behalf of some big brand.
Ed Bott 
Would that be due to an increase in “free” apps that are being downloaded?
I think it’s interesting how MS’s App Store has solved that issue with the “Try” feature and also free apps that require purchase of features later to become more robust or complete. I like that idea, but it is coming under a lot of fire. Google’s method of limited time refund is nice too. Hopefully all 3 will iron out issues like this in the future to make app purchases more seemless and less of a risk to consumers.
Yeah, I believe these numbers include free downloads, not just paid ones. Given that the article talks about “Freemium” devs, it’s clear they’re not excluding free downloads.
Where the real money is for developers is In-App Purchases. It’s appreciably changed how mobile game has developed (for the worse, IMO) but it’s undeniable that developers make more money going the F2P method.
I believe the biggest problem right now is the lack of a paid upgrade system, though some will argue that the way the system works right now is a feature, not a bug. I’d disagree, but I can see the opposite viewpoint.
Absolutely, the total includes free downloads. That’s kind of the problem right there: users are being conditioned to expect software to be free or dirt cheap, which makes it hard to make money. And in-app purchases aren’t really an option for very many developers, are they? What are the big categories I am missing?
These calculations don’t take into account that free apps are generating ad revenues besides iAd as well. Especially true for the gaming category, which is the most popular category anyway. Although we don’t have specific F2P games, only ‘lite’ versions, we still have significant ad revenue % compared to sold apps.
But it’s still true; it’s damn hard to earn a living like this.
IAPs are quite common today. Aside from extra gameplay content such as maps that you might also find in expansions for PC/console games, many freemium games sell in-game items and resources that you would otherwise have to spend a lot of time collecting. Sounds insane but it actually works. Asian PC MMOs make a ton of money with that system.