Apple uses the App Store to create a “value creation monopoly” for its hardware sales.

Quote: “When he checked his account with Apple to see how many copies the game had sold, Mr. Nicholas’s jaw dropped: On its first day, iShoot sold enough copies at $4.99 each to net him $1,000. He and Nicole were practically ‘dancing in the street,’ he said.” Wortham, Jenna. “The iPhone Gold Rush.” The New York Times. 5 Apr 2009.

There are hundreds of emerging stories about people who have struck it rich by designing applications for Apple’s iPhone and iPod. As I write this, the number of applications in the App Store exceeds 35,000 and is growing quickly.

The story I quote from features Ethan and Nicole Nicholas. Short of money, Ethan decided to design an artillery-based game called iShoot that people can purchase for $4.99 and play on their Apple devices. In its first three months, it was downloaded over two million times, with the Nicholases making $35,000 on a peak day.

A growing number of application designers have netted over a million dollars in their first 12 months. The total number of downloads on either iPhones or iPods is now in the billions and climbing fast. It’s interesting to note that Apple doesn’t actually make that much money from the App Store—only $45 million net after the first billion downloads.

Competitors are questioning why Apple keeps encouraging this strategy, not realizing that Steve Jobs and his team have a much bigger vision. The point of the App Store is to continually create a more powerful relationship with the customers of Apple hardware. Once you load up your hand-held device with 20 or so applications, use them every day and come to rely on them, you will never switch to another brand. Plus, there’s something new coming along all the time, so the Apple future is more exciting than that offered by competitors. That’s strategy one.

The second is to encourage people whose first Apple purchase is either an iPhone or iPod to switch their main computers at work and at home to Apple. Once you are inside the Apple “value creation monopoly,” it is unlikely you will look or go elsewhere.

Provided by Dan Sullivan, Strategic Coach