8 out of 10 top apps make no money through the app stores

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Medium

Just before the new year, Nielsen published a list of the top smartphone apps of 2016. The list is based on average unique users which is a way of measuring, although it would have a hard time scaling to a longer list due to the lack of data (the sample is 9,000 panelists).

Nielsen image, with my highlighting on the right.

More interesting is the ownership of the apps and their respective business models. There are only four companies represented on the list: Facebook, Google, Apple and Amazon. Two of which own their own app ecosystems (Also, Google Play is for some reason listed as an app in this chart, whereas Apple’s App Store is not). This highlights the difficulty of distribution in the app stores and what scale on other platforms — web primarily — can do for you in terms of mobile discovery.

The business models of mobile, in this context, are simple. You either:

  1. Sell apps, subscriptions or in-app purchases through the app stores. This counts towards the Top Grossing lists. You utilize the billing and payment mechanisms in the app stores.
  2. Sell advertising or other products or services with separate billing. This does not show up on the Top Grossing lists.

Out of the 10 apps on the list, only two of them actually make money through the app stores themselves — category 1 above. Apple Music runs their subscriptions through the App Store (not through Google Play), but it doesn’t rank on Apple’s grossing lists. Not for the lack of subscribers though. I’m assuming Apple don’t want to share that data publicly. The second one is YouTube that sells some of their YouTube Red subscriptions through the app stores. This revenue is of course dwarfed by their ad revenues, so I’m being generous by including them here.

The rest of the list make money from mobile — lots of money from mobile even — but the billing is elsewhere. It is either advertising (Facebook, Google) or purchases with credit cards stored separately (Amazon). This is very significant and often overlooked. There’s a common misconception that the app stores are the main way of monetizing this potential. Generally speaking, it’s not (I’ll list some exceptions in my next post). The app stores are, however, a great way of gaining distribution on mobile. And that, in turn, can make you a lot of money if you play your cards right.

Apps in red boxes make money outside of the app stores.

The snapshot above is the US iPhone Top 20 Free as of January 4th, 2017. I marked the icons with red boxes that don’t bill a single dime though the app stores themselves. Big companies like Uber, Snapchat and Pinterest. They make millions of revenue from mobile, but not in the way you might think.

This wasn’t always the case. In the early days of the App Store, the three lists — Top Paid, Top Free, and Top Grossing — had many more similarities than they do today. I’ll do a deeper dive into these three distinctively different top lists in my next post.

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