App Store Hits 500 Million Downloads

Posted by: Peter Burrows on January 16

Apple just announced that there are 15,000 applications available at its App Store section of iTunes and that they have been downloaded a total of 500 million times. This is up from 10,000 apps and 300 million downloads just a month ago.

This is truly astounding progress, and very bad news for Apple’s smart-phone rivals. Already, the iPhone/App Store ecosystem is getting so huge relative to other smart-phone markets that some smart developers—Tapulous and Pandora, to name two particularly hot ones—have decided that there’s no point in adapting their apps for new Google’s Android OS yet (NOTE: I had originally said that these developers had not supported any other platform, but it turns out Pandora did announce support for WIndows Mobile in December. Thanks to reader Mathiastck for pointing it out.)

This is also the view of Jeff Holden, CEO of Pelago Inc. When he created the social networking company, Jeff—who by the way was a pal of Jeff Bezo’s at DE Shaw, and was a member of the core team that built Amazon.com—fully intended to follow the conventional wisdom for how to build a sizeable, fast-growing software company: get your apps on as many platforms and devices as possible. But late last year, he crunched the numbers and came to a shocking conclusion: that the 13 million owners of iPhone owners had already downloaded as much software as—are you sitting down—1.1 billion other cell-phone owners. (FYI, he’s assuming that 25% of non-iPhone owners download anything at all, and that they download 2.5 apps on average). Now, using projected Q4 iPhone sales and Apple’s new download data, 17 million iPhone owners have downloaded as much software at 1.6 billion other cellphone owners! “Why would I ever build for anything but the iPhone,” he says.

UPDATE: In an e-mail today, he explained the reasoning based on the newest data from Apple:

To a developer, what this means is that if he launches an app for non-iPhones (assuming he has deals with all carriers and has ported to every handset in distribution on which people can download apps), he needs to have a reach 94 times as large as the reach he needs in the iPhone community (which does not require any carrier deals and is via single platform, so no porting) to achieve the same number of downloads. In other words, the 13MM iPhone audience is equivalent to 13MM * 94 = 1.6 *billion* non-iPhones. Of course, we know there are only 250MM non-iPhones in the U.S., so there is no way to achieve the same effective reach inside the U.S.

The implications for Apple are potentially monumental, as well. As we pointed out in our story on the App Store this week , many of my sources say they see little obstacles to slow Apple’s assault on the smart-phone market (it’s share has gone from zippo eighteen months ago to No. 2 in the third quarter, the most recent data available). These sources, which include various market researchers, a former telecom industry CEO and a number of software developers who built their companies writing for Symbian, Microsoft and RIM, see no reason why Apple couldn’t win up to 40% of this lucrative market, and 20% of the overall $187 billion cell-phone business.

Such predictions would have been totally unthinkable even six months ago—and it’s got far more to do with the App Store than all the iPhone stories would suggest. Sure, having the coolest gadget is important to winning in the mobile device business. But cool gadgets come and go (Just ask Motorola, about its Razr). Indeed, analysts think iPhone sales fell significantly in the fourth quarter from the previous one, when the economy was healthier and consumers were snapping up the brand new iPhone 3G.

But if the App Store becomes the place shoppers go to get the most, and the best, software, Apple may well have a platform of historic power on its hands. “The one with the most apps wins,” says the former telecom CEO. “The most important thing with Apple isn’t the iPhone. It’s the App Store.”

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