The App Store's performance and Microsoft's Laptop Hunters ads

Jeremy Liew at Lightspeed Venture Partners released an estimate this week of just how much Apple's made from the iPhone App Store -- between $20 and $45 million. While that sounds like a pretty sweet revenue stream to a non-millionaire such myself, the numbers roiled the Apple rumor community because they were lower than expected (oh, to be in position someday of putting the word "just" in front of $45 million). TechCrunch's MG Siegler released a corrective to those numbers today, working from a different set of assumptions to come up with substantially higher figures; even these numbers, though, are a relatively small percentage of Apple's total iPhone earnings.

None of these estimates are being taken by anyone to mean that the App Store is a failure, it should be noted. Apple has cheerfully admitted that the App Store has the exact same relationship to the iPhone and iPod touch that the iTunes store has to Macs and iPods: it exists as a handy feature to get you to buy the hardware. The "There's an app for that" ad campaign makes a few developers rich, but that's irrelevant to Apple's purpose; they want you to see the iPhone as something that has all these apps on it, so you'll buy the iPhone. The App Store's structure mainly exists to create the economic incentives to call these apps into being without any cost on Apple's part.

Apple is, after all, a hardware company, in the sense that the bulk of its profits come from hardware sales. Of course, it's invested billions over the years in software, particularly in OS X; but the real purpose of doing that is to ensure that its hardware doesn't become commodity hardware, like the stuff from all the other computer makers that sprung up in Silicon Valley the same time that Apple did. OS X exists to make it worth your while to buy an Apple laptop for $1,400 instead of a Dell for $900; the App Store's offerings exist to make it worth your while to buy an iPhone rather than a G1.

This is an interesting lens with which to view Microsoft's ongoing Laptop Hunter ads. Just as Apple doesn't really care about the software you buy from the App Store except to the extent that it makes you fall or stay in love with your iPhone, Microsoft doesn't really care if you buy a Dell or an HP or a Lenovo or whatever, except to the extent that you'll then be firmly in the Windows software ecosystem, which, as a software company, is where they make their money. In that sense, Apple and Microsoft, despite being locked in an increasingly public battle, are selling entirely different things. This may help explain why the iPhone has succeeded where Windows Mobile has failed: the cell phone business is still firmly tilted towards hardware manufacturers, as mobile phones haven't been abstracted into standardized platforms for software the way PCs have.

ITWorld DealPost: The best in tech deals and discounts.
Shop Tech Products at Amazon