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Comment by Retric | Hacker News Reader

Apple makes peanuts from the App Store relative to phone sales. After they upped the cut for developers to between 70% and 85% and CC companies still get their cut, add customer service and app reviews and it simply isn’t that profitable.

What they benefit from is selling 1,000$ phones at a 30+% profit margin, because for the average consumer they simply work better. Which actually aligns incentives between customers and Apple quite well.

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Apple's App store revenue is very substantial and likely has very low overall costs and microscopic per-unit costs relative to a hardware business like iPhone or Mac. Apple paid out $45 billion to developers in 2020 with $64 billion gross, which means they had as high as $19 billion in revenue from the app store commission alone.[1]

Unfortunately Apple doesn't break out profit per category but we know that their net income for 2020 was $58 billion [2]. As far as I'm aware we don't know operating costs for the App store, but I think its fair to say that the portion of the ~$19 billion that is profit is far from being "peanuts".

[1] https://www.cnbc.com/2021/01/08/apples-app-store-had-gross-s...

[2] https://www.macrotrends.net/stocks/charts/AAPL/apple/net-inc...

Apple annual gross profit for 2021 was $152 billion.

That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense.

Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020. So sure they might make 3-5 billion from the App Store in 2021, but that’s like 2% of total profits.

at 5%, cc fees would result 2.9 billion. So more like 16B in profit

> at 5%, cc fees would result 2.9 billion. So more like 16B in profit

So you assume they can do all the stuff I just mentioned for 0$ and changing their fee structure had no long term impacts on profits.

Also your math doesn’t work out if 5% of 64B = 3.2B, though 25% or 64B is 16B. Not that actual CC fees are 5%, or that their old revenue model is relevant any longer.

It strikes me as hard to be believe it's that much - surely Apple does not pay 5% in CC fees. They _must_ have managed a better deal than that...

There is no way that Apple is paying 5% on credit card fees. Average fees paid by merchants are 1.3% to 3.5%[1].

You can bet Apple negotiates hard on that fee. It wouldn't surprise me to learn they are paying 0.1%.

[1] https://www.fool.com/the-ascent/research/average-credit-card...

If transactions are small, like 99 cents, transaction fees can exceed 29%.

And you think Apple can't negotiate that?

Not much, Apple can negotiate with the payment processor but but the minimums are still quite high.

https://usa.visa.com/content/dam/VCOM/download/merchants/vis...

Net income is, imo, a better number to use given the sheer amount of R&D that goes into developing Apple hardware that is necessary but unaccounted for in gross profit. further, if we are looking at 2021 their App Store gross revenue went to $85 billion.

> That ~19B in 2020 is before CC fees on 64B or internal expenses. App stores have a lot of customer service and charge backs on relatively tiny purchases. Actually reviewing apps isn’t cheap either, and all the relevant IT adds even more expense.

I don't disagree with any of that, but I don't think its anywhere near 2/3 of revenue after developer split. I don't have any evidence for that because Apple is very secretive about those numbers, but I think level with which they protect that information is evidence on its own. if Apple were making a piddly 3-5 billion on $65 billion in gross revenue they would be screaming it from the rooftops to (rightfully) justify their 30% cut as being reasonable.

> Further they upped the developers cut to between 70% and 85% from the flat 70% in 2020.

the app store is extremely top heavy with top devs being responsible for a huge amount of the revenue. The policy is great for small devs but the aggregate split is probably still much closer to 30% than it is to 15%.

Defending their cut based on expenses is a losing strategy because if they 2 billion dollars or 20 Billion anyone would love to have that income stream. Further stating their actual costs simply invite the idea of competition lowering prices.

Apple clearly wants to profit from the App Store, but just as important to them is maintaining the ecosystem and the mountains of cash iOS provides when change means risk.

Apple makes peanuts from app sales.

It’s those stupid game ISPs they make all the money off. Smurfberries and pseudo-gambling and such.

Ruined the App Store and iOS gaming, but it’s so insanely profitable it will never go away.

A quick Google suggests Apple made 64 billion from the App Store in 2021 of the 378 billion in total revenue.

Some fairly large peanuts!

And that revenue is basically pure profit as it doesn’t require the creation of any actual physical hardware either.

Is this pre 30% or after? Also: how much does it cost to run the App Store globally? Do have the numbers?

Edit: Yep, I misread this

> how much does it cost to run the App Store globally? Do have the numbers?

I think that anyone who thought about this for even a second would come to the conclusion of "It almost certainly doesn't cost anywhere near the amount of revenue that comes from it".

So the answer is, probably not a lot, compared to revenue.

I dunno… I figure just the bandwidth costs, not to mention data center/cloud costs, for the constant stream of apps being deployed/updated is pretty significant.

I could expect them to be moving multiple terabytes of data per hour.

Its nothing compared to the piratebay.

Hosting torrents takes minimal bandwidth. Apple can’t offload bandwidth peer to peer to phones when people are on limited cellular plans.

Interesting plot twist you have there. No one at Apple ever actually said that of course but if it was true the distribution was made more expensive by preventing the use of apps on desktop computers.

However, anyone can seed from any system and that lots of people have unlimited plans and/or good wifi.

You could have a static store app with the phone manufacturer providing a feed with names, descriptions, pictures and checksums. Everything else could be distributed over a p2p network. Unpopular apps could be slow to download with the developers server having to patch holes to keep the file alive. Popular apps would have usable numbers to hint at their popularity.

Most apps need internet anyway. (Billing wouldn't be a problem.) I see a thousand pages arguing hosting for an app costs between 70 and 320 per month. I have no idea how true that is or how far apps can live from the average.

It does seem logical to assume with a reasonably smart distribution scheme p2p could also reduce that bill for somewhat more dynamic content.

I'm really impressed by how many useful and fun mobile apps were created. In the 90's I thought nothing was worth using on a mobile device. I was very wrong about that.

I now think it is equally wrong to think the 30% is not dramatically reducing interest in mobile development. Personally I wouldn't touch it with a 6 foot pole. I do web apps that are like websites, they have very limited access to the features of the device.

While I applaud these new regulations it is kinda lame it took them this long.

Remember the uproar when Apple wanted to decentralize CSAM detection?

Imagine how loud the screams would be if they tried to decentralize app distribution.

Ya, maybe they meant this article[0]? If so, then it's 60B going to developers, and some quick math there indicates Apple only made 15B from their cut.

> Apple said Monday that it paid developers $60 billion in 2021, a figure that suggests that App Store sales continue to grow at a rapid clip.

0: https://www.cnbc.com/2022/01/10/apple-implies-it-generated-r...

15ish billion isn’t profit. They still need to pay credit card fees, do customer service on low value transactions, actually review apps, run data centers etc.

If not stopped it might eventually get tempting or even logical to phase out making things and focus on rent seeking alone.

The profit is more important than revenue.

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