applications

Apple users buying 61% more apps, paying 14% more per app

July 11, 2011: 6:42 AM ET

The appetite for cool software is increasing, and customers are willing to pay more for it

Estimates: Piper Jaffray. Chart: PED

Apple's (AAPL) business model is increasingly dependent on the health of its App Store, the rich breeding ground of the company's software ecosystem, and a report to clients issued Monday by Piper Jaffray's Gene Munster suggests that the ecosystem's vital signs are good.

Apple only releases data about the App Store when it serves its interest -- like last week's press release trumpeting the 15th billion download. So to take the store's temperature, Munster had to build his own model for how it works. We've pasted a copy his updated spreadsheet below the fold. The highlights:

  • More apps: The average iOS device owner will download 83 apps in 2011 vs. 51 in 2010, a 61% increase year over year. "Smartphone users are showing an increasing appetite to use apps to add features to their phones," Munster writes, "and iOS has the leading app ecosystem."
  • More expensive apps: The ASP (average selling price) per app is rebounding. ASPs are up 14% y/y in 20111 vs. an 18% decline in 2010. "After the initial race to the bottom in App Store pricing," says Munster, "we are seeing users pay up to add features and games to their iOS devices."
  • More apps than Android: Apple's App Store has more than 425,000 apps. The Android Market has 200,000. In May, Google (GOOG) announced its 4.5 billionth app download, compared with Apple's 15 billion as of July 7.
  • Plenty of free apps. 82% of the apps in Apple's store are free. The 18% that users have to pay for have an ASP of $1.44. According to Munster, the increase in ASP is driven by the more-expensive iPad apps that represent a growing percentage of app downloads.

Revenue from the App Store represents only about 1% of the company's total. But without the App Store, Apple wouldn't be able to sell iPhones and iPads as fast as it can make them.

Below: The Piper Jaffray App Store model.

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