Almost a month after the launch of the iPhone 3G, it's clear that the most revolutionary aspect of the platform is the App Store. Combining a prominent means of distribution and a simple, frictionless payment system, App Store is driving application downloads and generating developer excitement like no other platform. At my company, Pinch Media, we monitor the App Store very carefully—both publicly-available information and information gleaned from iPhone applications using our analytics packages. While it's still very early, we've got some insights we'd like to share with you.
Applications are booming
The number of applications on the App Store is increasing rapidly and is limited only by the rate at which Apple releases them. On July 10th, the App Store had 552 applications. Less than a month later, there were almost 1,400. By the time you read this, that number will likely have more than doubled, giving iPhone owners access to an unprecedented amount of additional functionality.
Prices are dropping
When the App Store launched, the most common prices for paid applications were $9.99 or lower. However, newer applications are launching with lower prices and existing applications are cutting their prices to drive up sales volume. Competition in the App Store—and a desire to get on the lucrative "Top 25" list—is rapidly bringing prices down.
Position is everything
With so many applications in the App Store, iPhone owners have a lot of choices. Because of this, a spot on Apple's "Top 25" list is essential for driving traffic. Free applications on this top 25 list have hundreds of thousands of users, with Tap Tap Revenge and Facebook both breaking through the million user mark in under a month.
Paid applications predominate, but free is driving volume
Being able to tap into iTunes' payment mechanism is an extremely attractive proposition for developers. Currently, three-quarters of iPhone applications cost money, and the best sellers earn thousands of dollars a day. However, free applications are downloaded many more times than paid applications—in some categories, like Games, free apps are downloaded 20-30 times more often than paid versions.
Right now, the vast majority of developers are submitting their applications to Apple and seeing what happens. However, as the number of applications in the App Store steadily increases over the next few months, the iPhone application ecosystem will undoubtedly evolve. How will developers promote their applications in an increasingly crowded field? Will alternate revenue models like in-application advertising catch on? What enhancements will Apple make to the software developer kit? How will the management of the developer program change with time? We'll be addressing these questions n future months.