App Store banking profits.

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    Posted: 26 April 2009 11:08 AM

    The app store for all of its success has not been a major profit center. Is that about to change now that there are in app financial transactions. If you can order your plane tickets, shoes and lattes by i-phone, seems there’s some real money made. Anyone know what percent apple gets of these transactions? How much should this add to the bottom line?

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    The more I learn the higher I go,
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  • Posted: 26 April 2009 02:28 PM #1

    I’m curious as to how much short term interest income can be generated by the money Apple collects in the App store.  It seems they pay out to the developers once a month but are collecting money daily.  Could the interest on this money become significant as the App store grows? Does it work the same as The iTunes store?

         
  • Posted: 26 April 2009 03:09 PM #2

    ma and pa kettle - 26 April 2009 05:28 PM

    I’m curious as to how much short term interest income can be generated by the money Apple collects in the App store.  It seems they pay out to the developers once a month but are collecting money daily.  Could the interest on this money become significant as the App store grows? Does it work the same as The iTunes store?

    Apple has close to $29 billion on its books now. Those cash and investments are handled by a subsidiary (Braeburn Capital), a Nevada corporation. The subsidiary was incorporated in Nevada to reduce exposure to California corporate income taxes.

    In the grand scheme of things considering the company’s large cash position and the historically low interest rates, the float on App store revenue will not have a material effect on the company’s performance. That might change as rates rise and store sales volume increases.

    Here’s an oversimplification to make the point:

    Let’s say Apple is currently generating $250 million a month in app store sales. Of that $250 million Apple keeps $75 million with the remaining $175 million due to developers. Because all apps are not sold the first of the month, let’s say the average float is half of that amount or $87.5 million per month. At 2% average interest per annum, that’s $1.75 million. One month’s interest on the average float would be $145,833 dollars. Assume a 30% tax on the gains, that leaves $102,083 per month in net earnings. Let’s apply that quarterly and we arrive at a net of $306,250 per quarter divided by 905 million shares outstanding and the result is materially insignificant.

    Obviously those numbers change should interest rates rise and store dollar volume increase substantially. But for now I’d suggest looking elsewhere for interest and interest revenue gains.

         
  • Posted: 26 April 2009 03:17 PM #3

    calebcar - 26 April 2009 02:08 PM

    The app store for all of its success has not been a major profit center. Is that about to change now that there are in app financial transactions. If you can order your plane tickets, shoes and lattes by i-phone, seems there’s some real money made. Anyone know what percent apple gets of these transactions? How much should this add to the bottom line?

    Please provide a working example of the transactions you mention.

         
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    Posted: 26 April 2009 03:39 PM #4

    DawnTreader - 26 April 2009 06:17 PM
    calebcar - 26 April 2009 02:08 PM

    The app store for all of its success has not been a major profit center. Is that about to change now that there are in app financial transactions. If you can order your plane tickets, shoes and lattes by i-phone, seems there’s some real money made. Anyone know what percent apple gets of these transactions? How much should this add to the bottom line?

    Please provide a working example of the transactions you mention.

    I think what he is describing refers back to a old patent application for wireless order processing from Apple.

    Wireless Order Processing

    Part of this discussion may be the result of in App purchases which will be allowed in Iphone OS 3.0.  This would allow you to buy content from an existing App.  Maybe like a live stream of a sports event or additional maps for a game ect.

         
  • Posted: 26 April 2009 04:06 PM #5

    I seem to remember magazine/newspaper subscription micro payments being mentioned during the iPhone OS 3 demo.  If this takes off at 99 cents a pop, maybe it becomes the new “news kiosk”, replaces the fading newsprint model, and gets the public used to the idea of paying with their phone.  I wonder, however, if apple could possibly review and approve this sort of update.

         
  • Posted: 26 April 2009 06:07 PM #6

    ma and pa kettle - 26 April 2009 07:06 PM

    I seem to remember magazine/newspaper subscription micro payments being mentioned during the iPhone OS 3 demo.  If this takes off at 99 cents a pop, maybe it becomes the new “news kiosk”, replaces the fading newsprint model, and gets the public used to the idea of paying with their phone.  I wonder, however, if apple could possibly review and approve this sort of update.

    The business model for the distribution of news is fast moving away from print. I received free six months subscription to MacWorld with the purchase of a new Mac last year and I renewed the subscription for a year. I don’t think I’ll do that again. Many of the reviews refer to online articles and the news in print is decidedly old.

    The costs of printing and distribution work against paper copies of news and it’s inevitable news distribution will move to electronic means for primary consumption. How much consumers are willing to pay for online news or news delivered to handheld devices remains to be seen. This is where the ad-supported model may continue to thrive.

    Most of what I see in newspapers in terms of news content was available for free the day before print publication. Visiting the news gathering and distribution services such as Reuters, AP, BBC etc. provides a direct link to the news sources. Why bother paying for information that can be obtained quickly via of a Safari bookmark on an iPhone?

         
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    Posted: 26 April 2009 07:04 PM #7

    In a way this borders on Schizophrenia.

    Let me explain…

    As “Fake Steve Jobs” said, the premium on Apple HARDWARE is justified, because each and every product is BATHED IN UNICORN TEARS.

    Thus the stratospheric prices vis-a-vis the competition. A ROLLS-ROYCE ONLY mentality.

    Then….

    On the OTHER HAND, you got your new kid on the block, where you “buy your application” for about the same cost as a cheap CUP OF COFFEE at the KWIKIE-MART. Anywhere between 99 pennies and 300 pennies { which today, are not even worth the price of the COPPER they are NOT MADE OUT OF }

    So, you got your UNICORN TEARS division, and your STREET VENDORS all claiming to be in the same family of believers and vendors.

    Sort of like having the McCoys and the Rothschilds over for dinner, do you serve MOONSHINE or CHATEAU BORDEAUX VINTAGE with the main course?

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  • Posted: 26 April 2009 07:36 PM #8

    TanToday - 26 April 2009 10:04 PM

    Sort of like having the McCoys and the Rothschilds over for dinner, do you serve MOONSHINE or CHATEAU BORDEAUX VINTAGE with the main course?

    You serve both. smile

    Out of curiosity the Rothschilds might like a shot of moonshine while the McCoys might just give the fancy French stuff a try provided it’s available by the bottle.

         
  • Posted: 26 April 2009 08:09 PM #9

    Most of what I see in newspapers in terms of news content was available for free the day before print publication. Visiting the news gathering and distribution services such as Reuters, AP, BBC etc. provides a direct link to the news sources. Why bother paying for information that can be obtained quickly via of a Safari bookmark on an iPhone?

    What if the news gathering organizations said, screw the web, we can’t make money here, and our labors are being lifted by bloggers for nothing.
    What if they offer it first, fresh, edited, and fact checked, on a closed mobile platform for a nominal price? Let the rest see it stale and day old on the web. 

    Someone is going to have to pay for reliable news gathering or we’re gonna get tweeted to death.

         
  • Posted: 26 April 2009 08:43 PM #10

    ma and pa kettle - 26 April 2009 11:09 PM

    Most of what I see in newspapers in terms of news content was available for free the day before print publication. Visiting the news gathering and distribution services such as Reuters, AP, BBC etc. provides a direct link to the news sources. Why bother paying for information that can be obtained quickly via of a Safari bookmark on an iPhone?

    What if the news gathering organizations said, screw the web, we can’t make money here, and our labors are being lifted by bloggers for nothing.
    What if they offer it first, fresh, edited, and fact checked, on a closed mobile platform for a nominal price? Let the rest see it stale and day old on the web. 

    Someone is going to have to pay for reliable news gathering or we’re gonna get tweeted to death.

    As long as enterprises need to reach consumers, ad supported news outlets will survive and thanks to enterprises such as Google, advertising is alive and well in America. I have much higher tolerance for ads than I do for subscription services. News is a commodity for which I won’t pay for a subscription. As a consumer, subscription news isn’t worth the price. There are two major news radio stations in my area.  A half of radio news (with ads) is how I’d spend my time if online news required a subscription.