Apple's Mobile Economy Is Bigger Than You Think

Earlier this week, Apple (AAPL 1.57%) released the results of a study conducted by economic consultants at the Analysis Group, providing new details around how much commerce is enabled by the company's platforms. In particular, this is the first time that investors have gotten any figures regarding physical goods and services, which are exempt from Apple's commission. 

Spoiler alert: It's a lot.

iPhone users spent around $500 on average on their phones last year. Image source: Apple.

Apple doesn't get a cut on the vast majority of sales and billings

An estimated $519 billion -- over half a trillion dollars -- of billings and sales were processed through the App Store last year, according to the study. Physical goods and services accounted for the vast majority of that spending, with sales of digital goods and services (which Apple does get a cut of) coming in far lower.

Data source: Apple.

Physical sales include when you buy something on the Amazon app on an iPhone, hail a ride using the Lyft app, or book a stay using Airbnb. Apple has never previously disclosed how much in physical sales it facilitates, as those sales and billings effectively bypass the income statement altogether since the Cupertino tech giant doesn't recognize any revenue from those transactions. Accordingly, over 85% of the total sales and billings go directly to third-party businesses.

Within the physical sales category, mobile commerce (m-commerce) apps offered by brick-and-mortar retailers represented the bulk of App Store spending in 2019.

Data source: Apple. 

Of course, the COVID-19 pandemic has since crushed many of these categories, particularly travel and ridesharing. 

iPhone users spent $500 on their phones last year

The news is Apple's latest defense of the App Store ecosystem, which has garnered considerable antitrust scrutiny. Apple has been criticized for both operating the App Store and competing within it against third-party developers and businesses.

The Mac maker set up a site a little over a year ago to argue that competition within the platform is thriving. It noted that 84% of all apps are free, so Apple makes no money from them, despite having to support those apps with hosting and distribution infrastructure. The new figures are a clear effort to further quantify economic activity that Apple helps create without directly profiting from it.

There's another angle. With roughly a billion iPhones in active use, that means iPhone users spent around $500 buying physical and digital stuff on their phones last year on average (not including the purchase price of the device itself or a cellular data plan). That's an unrivaled level of post-purchase monetization that underscores why developers flock to Apple's platforms, despite anticompetitive concerns.