There is an open secret among iPhone app developers right now: compared to one year ago, there is less money being generated in the app store. I don’t mean for the long tail, I mean for apps in general – for example, an app that is at position 50 in the American App Store charts, in the Lifestyle category, is earning LESS now, than last year. The same trend is mirrored across most other categories.

So why is less money being made, even though there are a lot more iPhones out there? I have an explanation:

When are most iPhone apps sold? Answer: At Christmas. Every Christmas, most developers sell about 3 time as many apps as normal. Over the course of the year, the people who got new iPhones for Christmas are not throwing away their iPhones, they are simply buying less apps. What this means is that over time, the number of apps a user buys declines. This makes sense intuitively – as a user satisfies his needs for apps, the less he will go hunting for new apps.

Now, imagine a scenario where Apple stops selling any new iPhones. All the people who already own iPhones will buy less and less apps the longer they own the phone, and the number of apps being sold will decline.

What this implies logically, is that the total number of apps being sold is dependent on the number of NEW iPhones being sold. So for the same number of apps to be sold, growth in total number of iPhones has to be constant. If 7% more iPhones were sold in 2010 compared to 2009, then 7% more iPhones have to be sold in 2011 compared to 2010, for THE SAME number of apps to be sold. If growth drops to 6%, then less apps will be sold. And that is exactly what has happened.

Via Max Klein