Estimated Total Value of App Store Market

AdMob has just issued a report with some very interesting data on the app store, and one of their claims is that the app store market is worth about US$200M per month.

This is disputed as being an unreasonably high estimate by some commentators. However, with data I have gathered from my own app sales, I am in a position to make my own estimate too. So what is it? Well there are four steps.

Step 1 – Sales Versus Rankings

In an earlier post I showed a graph of sales versus rankings for Oz Weather in the Australian app store during the first few months of 2009. Below is an updated graph covering the sales period July/August 2009.

Oz Weather Paid Rankings

Although Oz Weather hasn’t ranked highly enough to provide data points within the top 10, it does still allow a good estimate of the curve as a whole ie.

Daily Sales = 1800 * Ranking ^ -0.8

Note that this curve is substantially higher than the 6 month-old estimate, showing a large increase in the overall number of app sales per day – of the order of a factor of  2 or more.

Step 2 – Find area under the curve to give total daily app sales

The area under this curve is the integral of the curve formula. With some high-school calculus, we might know that this is:

Area under curve = 1800 * (Ranking^0.2 / 0.2)

Solving this for the range 0 to 50,000 apps (the approximate number of paid apps available) gives the result:

52,000 app sales per day in the Australian app store

Step 3 – Multiply by average app price

Assuming an average app price of US$1.80 (AUD$2.25) the total daily revenue for the Australian app store alone is

  • AUD$120k per day
  • AUD$3.6M per month
  • AUD $42.7M per year

Step 4 – Expand to whole Globe

I have previously estimated the Australian market to be about 1/30th of the global market size. However, the AdMob report indicates about 45M iPhone/iPod Touch devices worldwide, and previous research has implied about 1.1 million in Australia, implying a ratio of about 1/40. In that case, the corresponding global sales figures would be

  • US$3.9M per day
  • US$115M per month
  • US$1,370M per year

Conclusion

Although there are a number of estimates and assumptions involved in these calculations, the final monthly number of US$115M per month, although less than AdMob’s estimate, only differs by a factor of a 0.6.

A more accurate estimate would be possible with a wider range of app versus ranking data – especially from the larger app stores like the US. However, I did previously collate some data like this, and it also supported a rankings/sales tail off with a power factor close to -0.8.

I conclude that my own app’s sales figures imply that AdMob’s estimates are very plausible, and certainly likely to be in the correct ballpark.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s