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A Preliminary Analysis of Pricing by App Stores

By / 7.15.2019

Summary

How much do the Apple App Store and Google Play, the two major mobile application stores, charge? The short and obvious answer is that Apple and Google levy a fee of 30% of the revenue from downloading paid apps; 30% of revenue from in-app purchases of digital goods and services; and a lower charge of 15% for renewed subscriptions.

But this answer is at best incomplete, and perhaps wrong. The two major app stores also provide a distribution and download service for millions of “free” apps—including testing them for malware—while charging only a minimal fixed fee to each developer. These free apps can potentially generate a big benefit for consumers and a large return for their owners.

To put it more precisely, the app stores provide a distribution, search and validation service to all app developers and app owners for nearly nothing. This service is the equivalent of a major retailer like Walmart providing free shelf space to millions of different goods owned and sold by other companies.

The average price charged by Apple and Google is therefore much less than the face value of 30%, if we take into account the large number of free apps. Our preliminary scenario analysis suggests that the revenues collected by the app stores could be in the range of 4-7% of the value generated by all apps in the app stores, including both free and paid.

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