December was a banner month for Apple’s App Store both in the U.S. and in China. When talking to Verge on Wednesday, Phil Schiller, Senior Vice President of Worldwide Marketing at Apple, noted the App Store has more than $3 billion in review in December alone. This total included subscription fees, in-app purchases, and paid downloads. 2016 was a big year for the App Store. Revenue for the year was up nearly 40 percent over 2015. But December’s tally of $3 billion total represented a big chunk of the $20 billion collected last year.
It turns out the U.S. was not the only growth market for the App Store in December. According to reports, the App Store for the mainland China market was up roughly 90 percent from December 2015. The growth highlights an important opportunity for Apple which has long sought to gain inroads in the fast-developing market with more than 1 billion potential users.
Apple’s path to success in China has been an arduous one and even with the App Store growth the company still has a way to go. One of the challenges has been battery issues which first popped up on Chinese social media last year. Another challenge is how Apple can supplant the dominance of local handset makers – many of whom are now beginning to compete with the company on a global stage.
In the end, the growth of App Store revenue has a tremendous impact on the company’s top, and bottom, lines. Analysts believe the App Store helped to add anywhere between $4 to $8.6 billion in revenue in 2016 alone – the variance is due to licensing fees, etc. This does not consider the carried interest which Apple generates from the massive overnight balances it carries on the fees it collects from users.
Granted, the clear majority of apps are free but in-app purchases have become increasingly commonplace. Another revenue generation opportunity are fees collected for subscriptions, such as the streaming of music and sports content among other things.
Looking back at 2016, it was not surprising that Pokémon Go was the most downloaded app of the year. The app took off like a rocket in June, breaking records for downloads. While it has set an interesting precedent for Augmented Reality (AR) app in gaming and in other categories, active daily users have waned in recent months.
In some ways, this is to be expected as the groundswell which propelled the app last summer was likely to burn out after a while. However, the game remains one of the most downloaded apps and is should remain popular for the foreseeable future.
Speaking on the future of the App Store, Mr. Schiller noted that the company is also focusing on targeted advertising and search suggestions. Not only will this help app developers to gain exposure, but it is a way to continue revenue growth.
Shares of Apple were up 0.44 percent in morning trade on Thursday at $116.54.