New Distimo Report: The 4-Year Anniversary of the App Store

The Apple App Store turns four this month, and Distimo has been taking a look back at the trends that have shaped its development into a fiercely competitive and massive global marketplace.

The Apple App Store was launched in July 2008, one year after the first iPhone was released.  At that time, only 500 applications were available for download, but that number started to grow rapidly as people began to realize the value of third-party apps for meeting the needs of a wide variety of consumers.  Today, there  are more than 650K applications available in over 150 countries.

However, the increase in the number of apps has been accompanied by a decline in average downloads per app in the United States.  The number of downloads among the 200 most popular apps per available app in the App Store decreased from 15.4 at its height in June 2010 to 8.4 in June 2012, likely due to competition as the number of available apps increased.

Unsurprisingly, total revenues are on the rise as the App Store grows, tripling over the past two years among the top 100 highest grossing applications in all countries.  What may surprise you is that paid apps actually suffered as the figures for paid downloads only increased by 13 percent while the average selling price declined by 16 percent, resulting in a  lower net revenue of 5 percent.

So where is all the extra revenue coming from?  The increase can be attributed solely to in-app purchases.  In June 2010, just seven percent of the revenue was generated from free applications featuring in-app purchase.  In June 2012 that figure increased to 68 percent, making it one of the largest shifts in App Store trends over the last two years. Paid applications with in-app purchases have seen a slight decline in market share, but overall the revenue from in-app purchases has increased from 29 percent to 84 percent.

There are apps in every category featuring in-app purchases, but the increase in revenue is mostly from Games and Newsstand.  Games have on average the most in-app purchase options.  Only about 21 percent of all free games offer in-app purchases, but that proportion significantly increases to 77 percent when the pool is narrowed to the 300 most popular free apps.  The in-app purchase proportion is even higher among free Apps in the Newsstand category, where there are fewer applications but 91 percent of the top 300 most popular ones offer in-app purchase.

The App Store is the perfect example of a successful global market, and while the United States has been a major driving force behind its vast popularity, it has lost some ground in terms of its distribution importance to developers.  This shift is making localization an extremely important factor for developers who wish to succeed in other countries, where the top 200 most popular and highest grossing applications lists mainly consist of localized applications.

The progress of Apple’s App Store has been incredible as new markets emerge and the number of apps available has grown exponentially and revenues have continued to rise thanks to the evolution of in-app purchases.

[via Distimo]

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About Jenni: Jenni is a healthy-living food blogger who rarely lets her iPad leave her side. Find her on Twitter @spoonfulatatime.