The App Store had its best year ever in 2013: Apple on Tuesday said customers spent $10 billion on apps over the last year, which was highlighted by a record-breaking December with over $1 billion in sales. In May, Apple celebrated 50 billion app downloads by rewarding the person who downloaded the 50 billionth app with a $10,000 gift card.
Though Android dwarfs iOS in devices and downloads, Apple rakes in an estimated $5.1 million in revenue from the App Store each day, while Google banks just $1.1 million per day. And Citigroup analyst Mark May believes Google Play pulled in only $1.3 billion in revenue last year—just 13% of Apple's haul—even though Android accounts for roughly 75% of all app downloads (the App Store's share was just 18%).
So to clarify: Google has a larger installed base than Apple, it has more products and properties than Apple, and it’s on more smartphones than Apple. So why is Apple’s App Store so much more lucrative than Google Play?
Here’s what the App Store has going for it: More apps, less malware, and more money for developers and advertisers than Android. Developers also seem to prefer iOS because it is significantly less fragmented—78% of iOS users are running the latest version, compared to the little more than half of Android users on all versions of Android Jelly Bean (all versions)—and they can charge more for apps on the App Store. (Apple’s $999 price cap is much more flexible than Google’s $200 limit.)
But Google’s little green robot is catching up. The Play Store is growing faster than the iOS App Store with more published and updated applications each day, and Android’s newer applications are generating a greater percentage of overall revenue than are the latest apps for iPhone and iPad.
Android is also getting cleaned up. Google recently defended its security protocols within Google Play, calling the threats of malware greatly exaggerated, and the company’s plan to de-frag the entire platform could be extremely beneficial for Android, but especially Google Play, if successful. If Android can become more unified, developers can take advantage of shorter update cycles and new APIs without waiting for the installed base to catch up.
With more than a million Android apps, Google Play has already begun stealing away app revenue from Apple’s App Store over the last six months. Given a larger installed base and a greater variety of Android devices, Google and its Play Store have plenty of room to grow.