By Yukari Iwatani Kane

Apple has quietly introduced a new category on its iPhone App Store, in yet another acknowledgment of a shortcoming in its otherwise successful store.

AppleAn update to Apple’s iTunes shows the top-grossing iPhone apps.

The Cupertino, Calif., company had announced at an iPod event in San Francisco earlier Wednesday that it added a Genius feature to the App Store that would make app recommendations based on those that users already have. That was meant to solve a common complaint that it’shard to find good apps in the store, which some say is cluttered with over 65,000 apps divided in just 20 categories.

Another change, which was not formally announced, adds a “Top Grossing” category in addition to existing “Top Paid” and “Top Free” categories on the store. That change responds to developer complaints that expensive apps get buried in the “Top Paid” category because that ranking is based on the number of downloads, rather than total revenue generated from distribution of a piece of software.

That’s a problem because developers need to keep apps cheap to make sure that download levels are high enough to get on the top lists, which are the most popular way of reaching users. That also gives developers less incentive to invest a lot in terms of time and money on creating higher quality apps.

If developers suspected that the lists would look different, they were right. According to the “Top Grossing” category today, the No. 1 app wasSmule’s $2.99 I Am T-Pain auto-tuning app, followed by e2ndesign’s 99-cent AppBox Pro, a set of 18 convenient app tools such as a currency converter and tip calculator, and Electronic Arts’ $7.99 Madden NFL 10 football game.

In the plain “Top Paid” category, measured by download volume, the cheaper AppBox Pro was No. 1, followed by I Am T-Pain. EA’s Madden game–the most expensive app among the three–couldn’t be found anywhere in the top 50.

…or “So You Think You’ve Got a Million Dollar App Idea”

(this piece also appeared on Silicon Alley Insider)

As a number obsessed techie and ex-management consultant, market sizing and research were a big part of my launch preparations for Exit Strategy NYC. Since launch, I’ve received many questions from people struggling to estimate the market for their iPhone app ideas.

I’ve put together this document as a guide for entrepreneurs considering developing an app. Below, I’ve compiled some up-to-date numbers about Apple devices. I’ve also laid out a framework for estimating what kind of sales can be expected from a paid app.

The Basic Facts

• 45 million iPhone and iPod Touch devices [Apple Earnings Announcement]
• 54% of iPhone and iPod Touch users are in the US as of June 2009 [Admob Mobile Metrics Report]
• The iPhone comprises 68% of worldwide iPhone OS devices and the iPod Touch makes up the other 32% [Admob Mobile Metrics Report]
• Only 75% of users actually download apps [Pinch Media]
  • The most frequently downloaded free apps reach approximately 30% of devices [comScore]
  • The most frequently downloaded paid apps reach approximately 3% of devices [My calculations - explained later]

Right off the bat, there’s a few back of the envelope calculations to make: 54% of the 45M devices are in the US which means ~ 25M devices. The US has about 300M people.  That means about 8% of the general American population has one of these devices.

How To Use These Numbers

Combine this data with your own numbers about how large of a market your product is addressing. For Exit Strategy NYC, our addressable market consists of all subway riding New Yorkers. In 2008, there were about 5M weekday riders and about 3M Saturday riders [MTA's ridership numbers]. The Saturday number is the more relevant one as it better captures subway usage by NYC residents rather than regional commuters. Neither number counts unique riders though, and given that there are 8M residents of NYC our addressable market size is probably somewhere in between these numbers. Let’s say 6M subway riders.

New Yorkers probably skew more techie than average, so let’s assume 10% (rather than 8%) have an Apple device. Also, Exit Strategy NYC works on both iPhone and iPod Touch devices. If your app requires phone/gps/camera/internet to work well, exclude iPod Touch users from your calculations.

How many Apple device toting subway riding New Yorkers are there?  Well 6M subway riders with 10% penetration = 600,000 potential users.

“But How Many People Will Actually Buy My App!?”

Entrepreneurs are optimists by nature, and it’s tempting to think that 100% of people will buy your product. After all, your product is awesome, right? But reality is a quite different story. In fact, only about 3% of users have purchased the most popular paid apps. To determine that number, I used sales figures from one of the all time best selling paid apps, Firemint’s Flight Control game. According to Firemint’s Alexandra Peters, sales to date have been 1.4 million. As a percentage of the 45M Apple devices, this is ~ 3%.

You should expect a similar upper bound of 3% to apply to whatever market vertical you’re addressing. Of course it’s possible that your app meets some crucial compelling need and therefore achieves a higher penetration rate in your vertical. But don’t count on it — it’s equally possible that your app gets lost in the noise and can’t get traction. Flight control has held a constant spot on the top paid app list for months now. Few others have this advantage.

Realistic Unit Sales Calculations

Returning to the Exit Strategy NYC figures, we knew that if we had an effective marketing and press strategy, we could probably achieve something close to this 3% penetration figure — perhaps higher as many New Yorkers are very passionate about the subway (see? there’s that ever-present entrepreneurial optimism!). 3% of the 600,000 subway riding devices would mean 18,000 unit sales. Does this translate to $18,000 total sales? Our maximum penetration figure was based on a 99c app, but what effect would Exit Strategy NYC’s $1.99 or $2.99 price point have on total sales figures?

Factoring in price into market sizing is difficult. Based on our own informal market surveying, we estimated that the most profitable price point would be $2.99 or $1.99. Around 75% of people willing to pay 99c would also pay $1.99 or $2.99. So 75% of 18,000 units at those prices works out to an ballpark range of around $27k – $40k. Like all software, the app’s unit costs are zero, it’s important to focus on maximizing dollar sales rather than unit sales.

A Growing Platform

One thing to remember is that the user base for apps is growing by leaps and bounds. In their latest quarter, Apple sold 5 million iPhones and 3 million iPod Touches. This means that the potential market for an app grew by more than 20% in only 3 months!

Non-Apple Platforms

One last thing to note: The iPhone certainly dominates headlines, but it’s not the only game in town. In fact, Blackberry outsells the iPhone every day. And in a town dominated by Wall Street, it seems like everyone and their mother owns a Blackberry. Realizing this, we carefully designed Exit Strategy NYC to be easily portable across different mobile platforms. Our app is available for iPhone, iPod Touch, Blackberry Bold, Curve, and Storm, Android Phones, and even as an e-book on Amazon Kindle.  Combined, the Exit Strategy App reaches a significant portion of New Yorkers.

But are device sales a good indicator of a platform’s expected app sales?

by Mark Walsh, 3 hours ago

The iPhone is increasingly going global. That’s a key finding in the latest monthly metrics report from mobile ad network AdMob. An analysis by the company found that 54% of iPhone and iPod touch users worldwide in June were in the U.S., down from 61% in January. This signals that international adoption has picked up since then, although the U.S. still has by far the biggest proportion of users of any country.

The next-closest is the U.K., accounting for 7% of iPhone and touch users, followed by Germany (6%), France (5%), Canada (4%) and Australia (3%). Countries that represent huge potential markets include China, Russia and Brazil — each with at least 1% share. Regionally, North America had 58% of iPhone/touch users, followed by Western Europe with 26%, and Asia with 7%.

In terms of actual device totals, that translates into about 13 million iPhones in the U.S. and 1 million apiece in European countries such as the U.K. and Germany. Apple, which reported third-quarter earnings Tuesday, said it has sold 45 million devices using the iPhone OS globally to date.

The company posted a 15% profit gain for the quarter, in which it sold seven times as many iPhones — 5.2 million — as in the year-ago period.

Among other highlights from the AdMob report, Google’s Android in June for the first time surpassed Windows Mobile among smartphone operating systems in its share of ad impressions. Android increased its share to 5%, edging ahead of Windows Mobile’s 4%. The iPhone OS and Apple, as a manufacturer, continued to dominate with a 47% share of smartphone impressions.

AdMob says it serves more than 7.1 billion mobile banner and text ads per month across more than 7,000 mobile sites and 2,500 applications worldwide.

NYT iPhone App

In its ongoing quest to save itself from financial peril, it was reported Thursday that The New York Times is considering charging a monthly fee of $5 for online access to the paper. It sent out a survey to subscribers asking if they’d be willing to pay $2.50 a month, or a 50% discount for existing customers, to access NYTimes.com.

The newspaper previously experimented with charging for online content several years ago via its Times Select service, which put its columnists behind a pay wall and brought in about $10 million a year before being abandoned in 2007. Its Times Reader software offers an offline electronic version of the paper and is free to print subscribers but otherwise costs $14.95 a month.

What about The Times iPhone app? Free. That’s not surprising given that most iPhone apps are distributed free, and ad-supported like the Times‘ app, or simply as a promotional vehicle. But the App Store provides another digital platform for the newspaper to test new payment models if that’s the direction it’s headed.

USA Today Publisher David Hunke last month told the AP that he regrets the newspaper didn’t start by charging for it’s iPhone app. Like The Times and all other newspapers, USA Today is struggling with how to make up for rapidly declining print revenue. Hunke didn’t specify how many downloads the USA Today app has had, but added, “I’m not sure we realized what we had,” he said. “I think that’s a value readers will be willing to pay for.”

Interestingly, the App Store offers both USA Today and New York Times branded crossword puzzle apps, at $4.99 and $5.99 respectively. USA Today also offers a separate puzzle game for 99 cents. It wouldn’t be surprising to see The Times use that as a starting point to sell other types of specialized content, like an app version of Times Select or other material not offered in the free edition.

Unlike the Web, the App Store and other mobile storefronts aren’t places where people are expecting everything to be free. So getting consumers to start paying for apps might not be as hard as convincing them to pay $5 a month for the Times online.

Ian Paul, PC World

Apple iPhone 3GS

The iPhone 3GS is hot according to AT&T. No, I’m not talking about the overheating issues, but a alleged leaked memo from the iPhone’s exclusive U.S. carrier. In the memo, AT&T reports the iPhone 3GS launch day on June 6 was the best-ever sales day for AT&T retail stores, according to MacDaily News. June 6 was also the second largest traffic day for AT&T stores, and the most upgrade eligibility checks in a single day were performed during the iPhone 3GS launch day. The 3GS debut was so huge, for AT&T retail stores anyway, that sales for the device surpassed launch day sales for the iPhone 3G by noon Central Time.

After the iPhone 3GS initial launch weekend, Apple also reported a successful launch of its latest smart phone reporting that it had sold more than one million iPhone 3GS devices at Apple retail locations. That’s the same number Apple used to describe the iPhone 3G launch weekend last year.

What’s surprising, however, is a growing consensus that the iPhone 3GS debut may have been far bigger than the launch of the iPhone 3G. Last summer, the iPhone 3G debut was lauded as the most successful launch of any tech product in history. For days after its initial availability, fans were lining up around the block at Apple Stores across the United States and the world to get their hands on the iPhone 3G. Device shortages were a regular occurrence, and customers in less populated areas were left waiting for months to get their own wonder gadget from Apple.

This year, the lines were not as long for the iPhone 3GS, and the frenzy that accompanied the 2008 iPhone 3G launch was not present. This could have been for a number of reasons including better inventory supplies on Apple’s part, and a public less willing to line up for days on end just to get their hands on a smartphone. But if suspicison are correct, then relative customer apathy was not an issue for Apple this year, and the recession may not have made much of an impact on iPhone 3GS sales either.

Other signs of the iPhone 3GS’ popularity are also starting to crop up. Earlier this month, Apple resurrected its iPhone availability tool to help you find the Apple Store with the best 3GS supplies near you. Customers in the United Kingdom and Canada may find it harder to get the iPhone 3GS in the coming weeks. The World of Apple is reporting that two carriers–O2 in Britain and Fido in Canada–have run out of their iPhone inventories; however, Apple Stores in both countries are still stocked up with inventory.

So the iPhone 3GS is shaping up to be the hottest iPhone ever, but we may not know how hot until Apple releases its quarterly earnings report later this month.

According to an AT&T company memo, the launch of the iPhone 3GS wasn’t just a banner sales day for the carrier this year but broke records for any single day of retail sales in the company’s history — including for already stellar iPhone sales.

The leaked e-mail characterizes “iLaunch Day 2009,” its nickname for the June 19th iPhone 3GS release date, as the “best-ever sales day” and just second in terms of actual floor traffic. Many of its other sales-related records were also shattered at the same time, ranging from the number of upgrade eligibility checks made in a day to the sheer volume of orders taken through AT&T’s website.

The notice obtained by multiple anonymous MacDailyNews readers also illustrates just how quickly the seemingly more modest iPhone update outpaced the already large-scale iPhone 3G launch last year. 3GS sales not only exceeded the first days after both Thanksgiving and Christmas, either of which have always been popular shopping days, but were so brisk as to overtake the iPhone 3G’s launch day count by just noon in Texas time.

Interest in the stores was so high that AT&T stores were considered at “peak” activity for 11 hours, or nearly half a day, despite the company accepting pre-orders online for day in advance.

As could be expected, the cellular company doesn’t provide a concrete sales number in the memo and, when contacted by AppleInsider for confirmation, only repeats its mantra that it accepted hundreds of thousands of pre-orders in the run-up to the iPhone 3GS going on sale less than two weeks ago.

“We have no further comment beyond that,” a company spokesman says.

Apple has been slightly more open on the subject and previously said it sold one million iPhone 3GS devices over the course of its launch weekend through all of its outlets. Although the same number as for last year, the California-based electronics firm reached this figure in 2009 with only eight countries onboard for the first day, or less than half the 21 that were ready on July 11th, 2008. The similar numbers, combined with a smaller-scale launch, indirectly confirm that US launch sales, including through AT&T, have spiked that much higher in 2009.