iPhone Audience, Part I: How large is the iPhone Application Market?

A good place to start an iPhone Development Blog is with the audience. For this post, we will focus on the simple question of the size of the iPhone application market, which we will follow up with a post on demographics.

Reading through Apple's financial results, I came up with a summary for iPhone sales through second fiscal quarter 2008 captured in the figure to the left. It would be nice to have monthly data to have a closer look at the nature of the growth curve but you get the general idea.

With the launch of the iPhone 3G, we expect to see a significant surge in quarterly and total sales although it will be interesting to see how much of those sales are to first time iPhone owners and how many will be iPhone classic upgrades. For the initial launch of the classic iPhone, Apple reportedly sold 270,000 units in the first 30 hours. The fact that iPhone activation will be exclusively in store may also contribute to more gradual numbers.

In a conference call on December 30, 2006, Tim Cook stated that Steve Jobs had set a goal of shipping 10 million units by the end of calendar year 2008 to capture 1% of an approximately 1 billion handset market worldwide. Strategy Analytics published a report that projects Apple will sell 6.3 million iPhone units this year. That would put the total year-end units right at the promised 10 million mark.

So now we know... There are certainly in excess of 5 million units shipped and it seems reasonable that there could be something like 10 million units sold worldwide by the end of 2008. This is validated by an article on MoneyCentral that states, "Apple has sold 6 million iPhones... American Technology Research analyst Shaw Wu told MarketWatch.com." It is also reasonble that the market will exceed 10 million by year end.

The graphic to the right illustrates projections of how iPhone units shipped can reach approximately 10 million by year end based solely on prior quarterly numbers, i.e. historical performance. We would expect a stronger lift from introduction of the 3G model than I have used in this projection. Now we some sense as to the size of our iPhone audience. For most applications, we need to add in iTouch users, which can run both the web and native applications. I have not been able to find an official source for iTouch sales as a percentage of iPod sales; however, Apple sold ten times as many iPods as iPhones according to the latest quarterly financial results so it is very likely iTouch users represent the larger audience for what is being branded "iPhone applications". Next time, we will investigate some of the demographics of this audience and its growth potential.

If you are already jumping ahead mentally to monetary considerations, please see this excellent post on iPhone App Entrepreneur, which summarizes revenue potential at difference price points. In addition, read through a writeup by PMP Today of the price distribution by category of 652 applications found within the iTunes App Store.

By the way, if you are starting to get nervous that this isn't a technology blog, don't. We will get to the technology shortly... Technology solutions always occur in a larger context and we just needed to get some basic facts and figures out there before we jump to the fun stuff!