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Why App Store Spending Is Likely to Surge in the Coming Years

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Consumer App Store spending to reach $96 billion by 2023

Revenue growth from the App Store represents one of the fastest-growing pockets of Apple’s (AAPL) total revenue. Apple charges a healthy 15%–30% cut on in-app purchases made by users on its iOS apps.

According to the latest report by Sensor Tower, consumers spent an aggregate of $47 billion in the App Store last year. This amount is expected to grow 19.1% to $56 billion in 2019. Sensor Tower predicts that consumer spending in the App Store will increase to $96 billion by 2023, representing a CAGR (compound annual growth rate) of 15.6% from 2018.

China is a massive market not only for Apple’s iPhone but also for its App Store. One concern for Apple is that a slowdown in the Chinese economy could affect spending on the App Store in the short term.

Apple’s Services revenue growth has slowed

Revenue from the App Store represents a good chunk of Apple’s revenue from its Services segment. During the first quarter of fiscal 2019, its Services segment generated a record $10.9 billion, a 19.1% rise from the corresponding quarter of the previous year.

In the coming years, Apple’s newest services—its streaming service, its news subscription service, and Apple Arcade—could meaningfully boost its Services revenue.

Meanwhile, despite more Android devices, Android users spent only $25 billion in the Google (GOOGL) Play Store. According to Sensor Tower’s estimates, consumers are expected to spend $60 billion in the Play Store by 2023, reflecting faster growth than the spending in Apple’s App Store.

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