Why Small App Portfolios Can Be More Profitable Than One Large App
In IT investing, there is a paradox that many people on Wall Street do not notice: in the App Store, being small can be mathematically more profitable than being big.
Everyone knows that Apple takes a commission on every transaction. The standard rate is 30%. But there is an important nuance: developers who qualify for Apple’s Small Business Program can pay a reduced commission of 15% on paid apps and in-app purchases.
According to Apple, existing developers can qualify if they earned up to $1 million in proceeds during the previous calendar year across all their apps. If they pass the threshold, the standard commission applies to future sales.
The difference is massive.
Imagine two scenarios.
You have one large app with $1.1M in revenue. At a 30% commission, Apple takes about $330K.
You have a portfolio of 4 apps at $275K each across different eligible accounts. At a 15% commission, Apple takes about $165K.
Same top-line revenue, but in the second case, net profit is $165,000 higher.
That is why, when we build portfolios at AppRock, we are not looking for the next Uber. We are looking for strong mid-market apps that can sit in the 15% efficiency zone.
In the subscription world, “divide and conquer” is not just a phrase. It can add meaningful margin to invested capital.
Everyone knows that Apple takes a commission on every transaction. The standard rate is 30%. But there is an important nuance: developers who qualify for Apple’s Small Business Program can pay a reduced commission of 15% on paid apps and in-app purchases.
According to Apple, existing developers can qualify if they earned up to $1 million in proceeds during the previous calendar year across all their apps. If they pass the threshold, the standard commission applies to future sales.
The difference is massive.
Imagine two scenarios.
You have one large app with $1.1M in revenue. At a 30% commission, Apple takes about $330K.
You have a portfolio of 4 apps at $275K each across different eligible accounts. At a 15% commission, Apple takes about $165K.
Same top-line revenue, but in the second case, net profit is $165,000 higher.
That is why, when we build portfolios at AppRock, we are not looking for the next Uber. We are looking for strong mid-market apps that can sit in the 15% efficiency zone.
In the subscription world, “divide and conquer” is not just a phrase. It can add meaningful margin to invested capital.