The original iPhone, as innovative as it was, didn’t truly mature into the device we know it as today until July of 2008, when iPhone OS 2.0 was released. The free software update, compatible with the first generation iPhone and preinstalled on the iPhone 3G, added the App Store.
The new service provided developers with an avenue and the tools to build apps or games and sell them directly to users on Apple’s mobile platform. Which, at the time, was the iPhone and iPod touch.
Fast forward to today, and millions of iOS users visit Apple’s App Store to download apps and games every single day. The downloaded software has the power to completely change how a person uses the iPhone or iPad, and in some cases, it can change the person’s life. It’s hard to remember iOS without the App Store.
What’s even more stunning is Apple’s internal view of the App Store just 30 days after it launched. Around that time, Apple co-founder Steve Jobs invited Nick Wingfield, who at the time was a Wall Street Journal reporter to Apple’s Campus to talk about the App Store.
Jobs agreed to let Wingfield record the nearly 50-minute interview. On Wednesday, the Wall Street Journal and The Information published a transcript and the original audio of the interview for the first time.
The entire interview is full of interesting tidbits and insight into Jobs and Apple’s general approach to the App Store. At the end of the interview, it was clear to me that, while bullish on the future of mobile, even Jobs himself didn’t foresee just how much of an impact the App Store would have on not only Apple but the entire industry.
Apple built the App Store using the company’s experience and existing iTunes infrastructure. This, according to Jobs, was a competitive advantage. “No one’s ever duplicated iTunes in over five years. This’ll be even harder because it’s built on top of it,” he said.
Around the same time that Apple launched the App Store, Google was getting ready to release its first Android devices, and announced its Android Market, now the Google Play Store, at the same time. Android’s app store launched in October of 2008 and took years for Google’s store to catch up to Apple’s in terms of quality and app selection. Other phone makers at the time eventually tried to replicate the App Store, all of which failed.
At the 30 day mark, the App Store had $30 million in revenue, exceeding Apple’s internal forecast and expectations. When asked if the App Store’s first month had exceeded the company’s revenue expectations, Jobs speculated about its future. “Maybe it’ll be a billion-dollar marketplace at some point in time. This doesn’t happen very often. A whole new billion-dollar market opens up: 360 million [yearly run rate] in the first 30 days, I’ve never seen anything like this in my career for software,” Jobs said.
In June, just before its 10 year anniversary, Apple CEO Tim Cook announced the App Store has exceeded $100 billion in revenue for developers.
The demand for music over app
Jobs never came out and said it, but listening to the interview you get a sense that Jobs thought iTunes would always be more successful than the App Store.
When asked about the App Store’s revenue exceeding iTunes, Jobs downplayed the App Store’s growth, stating “Music is a two and a half billion-dollar business a year for us. I’m thrilled at $360 million a year run rate. We’ll be dancing on the ceiling if we cross a half a billion. Maybe someday we’ll get to a billion.”
Apple combines iTunes and App Store revenue under Services in its earnings reports, making it difficult to definitively compare the two revenue streams. However, with users spending $300 million on New Years Day 2018 alone, it’s safe to say the App Store has surpassed iTunes.
Part of this could be due to Jobs believing there was still a need for a dedicated music player, saying “I think there’s going to be two kinds of devices in the music space. One is going to be just the pure evolved music device. People want it for music, maybe music videos, maybe occasional movie, but they really want it for music.”
Software as a differentiator
The App Store was built as a means to differentiate the iPhone from the competition, with Jobs viewing software as the selling point for Apple products.
“Well, our theory on iPhone is that phone differentiation used to be about radios and antennas and things like that. We think, going forward, the phone of the future will be differentiated by software,” he said.
This statement was entirely true at the time. I remember reviewing BlackBerry phones and comparing the call quality and signal strength compared to older BlackBerry’s and imported Nokia phones, while software was hardly mentioned, if at all. In 2008, software truly was what set iOS (then iPhone OS) apart from Android, BlackBerry, or Nokia.
In 2018, however, we’ve come full circle. Software differences are now broken down into where app icons can be placed on the device’s home screen and how many apps can run at the same time. Instead of radios and antennas, we now compare cameras, display quality, and battery life.