Apple customers' App Store spending jumped 40 per cent in 2016 – fuelled by games such as Pokémon Go and Super Mario Run – to provide a much-needed boost to services revenues, at a time when iPhone growth remains sluggish.
Payments to app developers, after Apple took its cut, rose to more than $20 billion (€19 billion) last year, the company said on Thursday, with growth accelerating in China.
"2016 was a record-shattering year for the App Store," said Phil Schiller, Apple's senior vice-president of worldwide marketing.
In recent months, Apple has put a spotlight on revenues from online services such as the App Store, iCloud and Apple Music, in order to counterbalance concerns on Wall Street about the iPhone, which saw its first ever drop in sales last year.
Yet even as its unit sales declined, the total number of people who own and use an Apple device has continued to grow, sustaining the App Store’s momentum.
Developers, who split app revenues 70:30 with Apple in most cases, have seen their overall income rise by at least 40 per cent in each of the past three years. App makers' total income from the App Store is now more than $60 billion since it was launched in 2008, which analysts say exceeds industry earnings from Google Play, the Android app store.
Outpacing the industry
"Apple's revenue at the App Store has outpaced the industry overall," said Danielle Levitas, analyst with App Annie, a mobile researcher.
Across both Android and iOS, the total app market grew about 24 per cent last year, Ms Levitas said, with consumers spending more than $50 billion. “When you factor in Google Play or China’s Android stores, Apple continues to get more revenue per user – and that gap just continues to grow,” she said.
New Year’s Day 2017 set a new record for the App Store as iPhone and iPad owners spent nearly $240 million on digital purchases, Apple said.
Apple opened up more of its iOS operating system to developers last year, allowing them to create apps for iMessage and Siri for the first time. The total number of apps available is up 20 per cent in the past year to 2.2 million.
Besides games, which remain the most lucrative app category, Ms Levitas said travel and entertainment apps have seen strong growth in the past year. Thanks in part to changes to Apple's terms of trade for subscription app pricing, which mean developers get 85 per cent of sales if a customer has paid for their app for more than a year, entertainment apps such as Netflix and Spotify have seen their revenues through iOS double, according to App Annie.
The growth in apps is also taking attention away from other screens, including PCs and televisions. Last year, App Annie recorded a 60 per cent increase in the time spent in apps compared with 2015.
“There is this behavioural shift,” Ms Levitas said. “Apple’s challenge is continuing to make sure they are able to expand their footprint globally.”
- Copyright The Financial Times Limited 2017
