Steve Jobs pitching the App Store
Steve Jobs was interviewed by Nick Wingfield in early August 2008 about the iOS App Store. At the time the marketplace for iPhone apps was just one month old.
Today (2018) — ten years later — it’s obvious how big of a winner the App Store is. It is more interesting though to realize that Jobs was already very aware of the hit he had in his hands. I believe he was able to grasp it at such early stage because of a product-market fit sense he had developed.
For anyone intending to build successful consumer products, it seems wise to hone in our abilities and pay close attention to his train of thought.
He starts the interview by explaining how the App Store was built on top of iTunes:
Jobs: The way we think about this is that the App Store is to iPhone like iTunes is to iPod. Just like with the iPod, where we enhanced it with an internet service to bring content to it, we’re doing the same thing with the iPhone. We’re enhancing it with an internet service to deliver content right to the phone.
It’s built on the same iTunes infrastructure, including all the storage and all the billing and getting email receipts and all of that kind of stuff. The downloads are fast and reliable because it’s the same system as iTunes. Customer reviews, buying with one tap, just like one click on music and stuff. No one’s ever duplicated iTunes in over five years. This’ll be even harder because it’s built on top of it.
He then talks about the early numbers of the App Store:
Jobs: We have over 1,500 applications on the App Store today. We thought that the input would start to slow down from developers, but it’s accelerating.
My gut is that we’re seeing around 50 new apps a day coming in. As I mentioned, over 1,500 apps, 27% of them are free, leaving 73% paid. Of the paid apps, over 90% are under $10.
What you really want to know is how many apps have been downloaded. I’m going to put everything in terms of next Monday because we can project very accurately, over 60 million apps. Users have downloaded over 60 million apps from the App Store in the first 30 days.
Wingfield: What’s the installed base of iPhones? The last publicly released figure was six million.
Jobs: I can’t give you a number because we’re in the middle of the quarter.
I’ll tell you. The total revenue has been $30 million in the first 30 days. Developers get 70% of that. Developers get $21 million. Nine of that $21 million is going to the top 10 developers. A lot of small developers are making a lot of money. This is just in the first month.
We actually were putting the number of downloads on every app initially, if you went and look but we were asked to take that down [by the developers].
He talks next about how app downloads were growing much faster than music downloads (recall that the iTunes Store was a big success in the 2000s):
Jobs: I can tell you an interesting fact in just a second. That is 30% as big as iTunes for music downloads. Let me say that again. App downloads equal 30% of all iTunes song downloads during the last 30 days.
Wingfield: What does that number say to you?
Jobs: It says the App Store is much larger than we ever imagined, iTunes has been out for over five years. In 30 days, users downloaded 30% as many apps as everybody in the world downloaded songs from iTunes. We didn’t expect it to be this big. The mobile industry’s never seen anything like this. To be honest, neither has the computer industry. [laughs] 60 million downloaded applications in the first 30 days. 30% as big as iTunes song downloads during the last 30 days, this is off the charts.
He then foresees the huge growth that would come from the expansion of the iPhone user base. He also mentions that small developers were already seizing the opportunity:
Wingfield: Is it concentrated to a percentage of your user base, would you say, or…
Jobs: It appears to be very wide, yeah. I have met a few people who had bought 30 apps. Everybody I know that has an iPhone has bought a handful and enjoys it.
Music is a $2.5 billion dollar business a year for us. I think we’re not quite in the same league as music, but I think this is really significant. Who knows, in the fullness of time? I don’t know.
Remember, we’re on a ramp. There’s going to be even a lot more iPhones out there in the future and a lot more iPod touches. We’re already at a $360 million a year run rate. This thing is going to crest to half a billion soon. Who knows? 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 in the first 30 days, I’ve never seen anything like this in my career for software.
Let me characterize what I’ve seen with my own eyes that’s happened in the last 90 days. I’ve seen one- or two-person teams develop amazing applications and they’re ready to go in less than 90 days, and that are up on the App Store—we’re running an average of 48 hours after submission and they’re up in the store. 48 hours after they submit, they are in front of millions and millions of customers.
Being at the epicenter of the mobile explosion, Jobs was even able to foresee the potential of mobile games:
Jobs: There’s only one other thing that’s interesting to me, the largest category of apps, by no means the majority, but the largest category of apps is games. You’ve got everything from games to medical software to business analytics software to all sorts of stuff on it, but games is the single biggest category.
I did dig up some information on the mobile gaming market for myself. I’ll share it with you. 20 million handheld gaming players are expected to be sold this holiday season, for about $3 billion in revenues.
This is the No. 1 and 2 are the Nintendo DS and the Sony PSP. We’ve got two contenders for that. We’ve got the iPhone, which costs zero if you have it as a phone, zero incremental to have it as a game player. Then we’ve got the iPod touch, which currently sells for $299, but who knows what could happen over time there.
On the Nintendo and Sony, the average game title, at the street level, costs $30. Our average game title’s less than 10, some are free. It’s delivered instantly right on your device, which of course is not the case with these other guys.
I actually think the iPhone and the iPod touch may emerge as really viable devices in this mobile gaming market this holiday season.
Wingfield: Do you think we should look for advertising that stresses this message?
Jobs: I don’t know. I just find it very interesting.
Wingfield: Is gaming something that Apple has a lot of experience with, do you think?
Jobs: No, I don’t, except that we sure delivered a lot of games in the last 30 days.
No, we thought games would be a part of it, but I’ve always been excited about Epocrates and some of the medical apps. There are people that are excited about this category, that category.
He also pointed out that mobile was a serious contender to desktop — which was the major software platform at the time:
Wingfield: Facebook is doing an app for BlackBerry.
Jobs: Yeah, but if you go talk to them, the best one by far is on the iPhone, so I’ll take that.
Wingfield: How much of the traffic to a site like Facebook might come from iPhone? [Ask] any of these guys… because I know Google I think has talked about iPhone being the No. 1, by far, mobile search product.
Jobs: By far. And bought mobile maps and everything, Facebook would tell you. I believe if you talked to Facebook they would also tell you some statistics that are similar to that on the iPhone Facebook app.
Wingfield: If you looked at overall traffic…
Jobs: How serious will mobile be relative to desktop is your question. I think there are a lot of people and I’m one of them who believe that mobile’s going to get quite serious because there are things you can do… Obviously, mobile’s with you all the time, but there are services you can provide with mobile that obviously are not relevant on a desktop, such as location-based services integrated into your application.
They can be mighty useful and we’re just at the tip of that. That’s going to be huge, I think.
Finally, it is kind of comforting to see that he did get some things wrong. Predicting the future is very hard, after all:
Wingfield: I think you guys have said that you see the iPod that’s sort of stand-alone MP3 player evolving into a wireless-enabled device.
Jobs: 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 an occasional movie, but they really want it for music.
That would be a device that just keeps evolving, getting better.
As we all know today, there is no such a thing as a “pure evolved music device”, the iPhone has eaten them all.