There is income and then there is income - Margins in the App Store of Apple

John Paczkowski in All Things Digital published an estimate of the net revenue from the App Store to Apple's bottom line.  The result on first glance is not that impressive about $189 million on almost $34 billion of revenue over the same period.  The estimates came from Piper Jaffrey analyst Gene Munster.  But Munster points out that the paltry direct revenue is only part of the story.   The App store has two purposes. First, as Munster points out, it drives hardware sales.  With all those applications on the site, the iPad or iPhone buy becomes a lot more compelling.  The joke "there is an App for that" is really a statement about the utility of the devices sold by Apple.  Munster points out that energy creates a "virtuous  circle" which aids developers and ultimately Apple. From my perspective there is a second benefit to the App store.  It might be called the "7-11 effect."  I find that when I am on the Application Store site I will often drift into music, or books or movies even though I entered the site to look for an App.   In some of the other categories Apple is making a higher margin and at the same time boosting its stickiness.   There is also a third benefit from the App store to the bottom line.  Once a person has used an iPhone they are more likely to consider an iPad. (or vice versa)  I understand the utility of being able to have all my digital devices synch - and even though it is possible to do that with different devices, it is just easier to consider Apple first.   Ultimately all three functions contribute to the bottom line.