The phrase “app economy” describes the entire commercial ecosystem that grew up around mobile app stores after Apple opened the App Store in 2008 and Google launched its Android Market the same year. Before app stores, distributing software to phones was difficult and fragmented. The stores gave any developer, from a single hobbyist to a large studio, a single channel to reach hundreds of millions of devices, handle payment, and get paid automatically. That low barrier to entry turned app development into a global business that did not exist a few years earlier.
The financial engine of this economy is a revenue split. The platform hosts, distributes, and processes payment for an app, and in exchange takes a commission on digital sales, historically 30 percent, with the developer keeping the remaining 70 percent. Over time the platforms added reduced rates, such as 15 percent for many small developers and for the second year of a subscription, but the basic arrangement of a platform cut on top of developer revenue defines how money flows through the system.
The scale is large. In its May 2023 report on the prior year, Apple stated that the App Store ecosystem generated “$1.1 trillion in developer billings and sales” in 2022, and that “more than 90 percent of the billings and sales accrued solely to developers and businesses of all sizes, without any commission paid to Apple.” Most of that total came from physical goods and services and from advertising, which Apple does not take a commission on; the directly commissionable digital goods and services accounted for $104 billion of the total.
Apple also reported cumulative payouts to developers. The same announcement stated that “iOS developers have earned more than $320 billion on the App Store from 2008 to 2022.” That figure is the developers’ share after Apple’s commission, and it illustrates how a marketplace built on a simple revenue split scaled into one of the largest software distribution businesses in history.
The app economy reshaped how software is made and sold. It created new categories of work, from independent game studios to subscription media apps, and it made the smartphone the dominant computing platform for most people. It also concentrated enormous power in the two companies that run the dominant stores, since the terms of the revenue split, the review rules, and the payment systems are all set by the platform rather than the developer. That tension, between an ecosystem that creates real opportunity and platforms that control its terms, runs through the rest of the mobile software story.