Average iPhone App Prices Rising But Not By Much

Fortune’s Philip Elmer-DeWitt reports on data from Piper Jaffray with an interpretation that:

Apple users buying 61% more apps, paying 14% more per app

The Piper Jaffray report stated that iOS (iPhone/iPad) owners downloaded an average of 51 apps in 2010 and will download 83 this year. It also reported that 82% of the apps in Apple’s app store are free apps. These figures sound about right and shouldn’t generate much argument. However, the information about average app price (based on the 18% of apps that are not free) is open for interpretation.

I used Piper Jaffray’s data to create the chart here. The first part of the chart shows the average price of apps collected each quarter since September 2008 (the app store started in July 2008). You can see that average app prices fell dramatically each quarter and apparently bottomed out at the end of 2010. Piper Jaffrays notes that the year-over-year average selling price (ASP) for iOS apps are up 14% compared to the 18% downtick in 2010. Their projections (second part of the chart in red) shows a slow increase in ASP through 2012. At this point they project that the ASP will be about the same as it was in June 2009 ($1.67).

If true, this may be a big problem for Microsoft which is trying to artificially create higher app prices for its Windows Phone. Angry Birds, for example, is 99 cents for iPhone but $2.99 for Windows Phone. If some significant percentage of smartphone buyers may consider app prices part of the Total Cost of Ownership, they may choose iPhone or Android devices based on price and the availability of more apps.