Apple’s App Store could lead revenues soon—over iTunes Store

Puneet Sikka

Apple's App Store could surpass iTunes Store revenues soon (Part 1 of 4)

Apple’s App Store revenues to surpass iTunes Store revenues before the end of this year

According to a report by AppleInsider quoting Morgan Stanley as the source, Apple’s (AAPL) App Store revenues could surpass iTunes Store revenues before the end of this year. The App Store allows users to download free and paid apps and also purchase the in-app content. The iTunes Store is the place where users can purchase and download music, movies, and TV shows. As shown in the chart below, the App Store contributed only 11% of Apple’s online services revenues in 1Q11, while the rest 89% was contributed by iTunes Store. However, the report expects this ratio to change such that by 1Q15, the App Store will contribute about 56% of Apple’s Online Services Revenue, surpassing the revenues from iTunes Store.

Apple’s apps ecosystem is showing strong growth

During the conference call to announce March, 2014, ending quarter earnings, Apple mentioned that the App Store is showing strong momentum with cumulative app downloads to date touching 70 billion. Apple specifically hailed Microsoft’s (MSFT) decision of launching Office app on iPad, and also agreed that it is helping Apple in terms of its App Store revenue growth. Apple also mentioned that in the March quarter, quoting App Annie as the source, the App Store generated 85% more revenues than Google (GOOGL) Play despite a huge difference of market share between Android and iOS based devices.

According to a report from International Data Corporation (or IDC), Android dominates the global smartphone operating system market with a share of 81%, while Apple’s iOS is second at 15% share. Windows Phone and BlackBerry (BBRY) are struggling in this market with a share of less than 3% share each. Apple’s continued growth from the App Store would help ETFs such as  iShares Dow Jones U.S. Technology ETF (IYW) , the Technology Select Sector SPDR ETF (XLK) , and the Vanguard Information Technology ETF (VGT) , which have high exposure to Apple.

Continue to Part 2

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