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iTunes App Store  (Source: Apple)
Three scenarios for App Store add between 1 and 3% to Apple's operating income

With the announcement this week of the new iPhone 3G and the pending launch of the much anticipated App Store, analysts are saying that the Apple App Store could balloon into a $1.2 billion business by 2009.

The App Store holds so much promise that AppleInsider reports investment bank Piper Jaffray is telling investors to give the Apple software announcement as much attention as they give Apple hardware announcements.

Analyst Gene Munster devised three possible case scenarios for the App Store, with the $1.2 billion prediction being the best of the three. In total, the three scenarios have the App Store adding 1% to 3% more operating income to Apple by the end of 2009.

Munster came to his scenarios by making assumptions from the data Steve Jobs offered on iPhone usage from the WWDC keynote speech on Monday. According to Jobs, 98% of iPhone users use the web, 94% use email, 90% send text messages, and 80% of users take advantage of 10 or more of the iPhone’s features.

Munster says, “Mobile service adoption rates show that iPhone owners are more sophisticated mobile users, likely a result of both the user profile and the device itself. The bottom line is that we expect similar adoption of the App Store to other advanced services.”

The three scenarios are broken down into conservative, neutral and aggressive with the neutral scenario assuming that 77.7 million App Store users will buy and download at least two applications from the App Store each year at an average revenue per application of $10 (with one download being free). This amount of usage would generate sales of around $777 million with a profit of $163 million.

The most conservative of the cases would result in an additional $75 million in profits for Apple on $416 million in sales from the App Store. Use of the App Store could be much higher if apps are released that address the short coming of the iPhone like the lack of voice dialing or other features that the vast majority of iPhone users want.

The iPhone 3G and details of the App Store were announced at the WWDC keynote Monday.





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