Apple

In 2007, Apple released the iPhone. The hardware cost $300 to manufacture and sold for $600. Hardware margins were 36%, but Steve Jobs saw the real business was not the phone itself. The phone was the entry point into an ecosystem where customers would spend thousands over five years. Developers built apps on the iPhone. Apple charged 30% commission on every app sale and in-app purchase. A developer selling an app for $10 paid Apple $3. A user spending $20 on purchases paid Apple $6. Billions of transactions times 30% took billions to Apple yearly. Services revenue was hidden. A customer buying an iPhone for $1,000 spent an average of $2,000 over five years on services and accessories.