Apple’s iCloud highlights success of recurring revenue model

Decision-makers at Apple understand the importance of recurring revenue and have since reported that expanding the iCloud user base is the company’s top priority, according to a Seeking Alpha report.

In assuming that each iCloud user has an iPhone and at least one other platform, including an iPad or Macbook, Seeking Alpha calculated the company generates approximately $70 billion in recurring revenue annually through replacing devices and upgrading subscriptions. By comparing these numbers to Apple’s fiscal 2012 sales of $162 billion, slightly more than 40 percent of Apple’s profits were generated from recurring customers.

While these numbers are most likely not exact, the bottom line is clear: recurring revenue is important for businesses in today’s economy. In most cases, consumers are loyal if they like a specific product or service and will return to the vendor for future purchases.

A separate report by Aria Systems echoed this concept, as roughly 47 percent of American companies either have, are in the process of creating or are evaluating the benefits of recurring revenue offerings. Companies neglecting recurring revenue models will likely be left behind in today’s highly competitive business landscape.