Paid iPhone apps deliver money, but only for the top few

About 30% of Apple's App Store downloads are paid applications, and about half of all iPhone and iPod touch users have downloaded at least once. These downloads have reaped close to 1 billion dollars in overall developer revenue since the online iPhone catalog was launched.

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Those numbers are from a recent analysis of Apple's App Store by Pinch Media, which offers to iPhone developers software that collects anonymous data from client applications, shows how they're being used and how developers could improve them. According to a blog post on the company's Web site, Pinch's data pool covers about 10% of all downloaded applications.

By titles, paid applications are about 77% of the 100,000 applications in the online catalog. And though paid applications clearly drive most App Store revenue, the influx of funds is heavily skewed to a relatively few developers, according to Greg Yardley, Pinch Media's co-founder and CEO.

Yardley estimates that the average number of downloads for a paid application is 9,300, compared to about 71,000 for the average free application. That number translates into an average revenue of $12,100, with a net to the application's author of $8,500.

"That's not to say this is a common result!" Yardley writes. "The arithmetic mean can be misleading. App Store sales and distribution are 'top-heavy', with the most popular applications receiving a very disproportionate amount of sales. A small segment of developers do dramatically better than this average. Most do much worse."

Even that's an understatement.

Pinch Media divided the paid applications into tenths, and then looked at how the downloads distributed among them. The top 10% of paid applications average nearly 75,000 downloads. The second 10% of applications fell to a mere 9,232, slightly less than the overall average cited above. The third 10% fell by more than half that, to 3,849. A full 50% of all paid applications have an average download of less than 1,000.

Within a certain range, users are not price sensitive. Pinch Media found that the average 99 cents application "is not downloaded substantially more often than the average $4.99 application." Yardley speculates that the performance of these more expensive applications is a "reflection of their quality, and a sign that the App Store [users] will support higher prices for an engaging experience." Most costly applications trigger much stronger price sensitivity among users, according to Pinch Media.

Paid applications overall are used slightly more often and for somewhat longer periods than free software, the survey found. The average number of user for all free applications is about eight or nine; for all paid applications just over 10. Yardley suggests that difference could reflect application quality or increased user "attachment" to something that actually cost them money.

According to the Pinch figures, 99 cents applications have an average of about eight or nine uses, the lowest number for all paid application categories. The $4.99 programs have an average of nearly 20 uses. But when application's price doubles to $9.99, the average number of uses nearly halves, to about 11.