Preston Gralla

Money rains on Microsoft from Office for iPad -- more is yet to come

March 31, 2014 10:48 AM EDT

Doubters who thought that Office for iPad would land with a big thud should doubt no more: It's already bringing Microsoft big revenue, and bigger things are yet to come.

Computerworld's Gregg Keizer reports that as of this Sunday, Word for the iPad was the number 6 top-grossing app on Apple's App Store "Top Grossing" chart, with Excel at number 11, and PowerPoint at number 32. Apple doesn't release revenue amounts, only relative standings, so there's no way to know how much money Microsoft is actually getting from Office. However, it's likely substantial. Apple says that in 2013, customers spent more than $10 billion in the App Store, and that in December alone, they spent $1 billion.

The Office iPad apps aren't standalone --- they're part of a $99.99 annual subscription to Office 365. So when you buy any one of the apps, you get the entire Office 365 package that lets you run Office on up to five different devices. Microsoft is pushing subscriptions to Office hard, hoping to eventually phase out one-time permanent licenses.

When someone purchases the subscription through the App Store, Microsoft gets 70% of the revenue, and Apple 30%. The $99.99 pricetag for an app in the App Store is an outlier -- typically apps run between $1.99 and $4.99.

By Monday, Keizer reports, the Office apps had dropped somewhat on the top-grossing list, with Word at number 8, Excel at number 16, and PowerPoint at number 40. But that's no matter. Since their release, the three apps have reigned at the top of the list of most-downloaded apps for the iPad. The more the free apps are downloaded, the more people will eventually upgrade.

And keep in mind that when people buy subscriptions to Office 365 in the App Store, they automatically self-renew after a year. So unless people actively cancel their subscriptions, Microsoft will be getting this revenue into perpetuity. So over yearsOffice will likely become the App Store's biggest revenue generator.

And all of this understates the revenue driven by the iPad version of Office. People can buy subscriptions to Office in many other ways, including directly from the Microsoft Web site, at retail, and through a variety of Microsoft partners. It's likely that many people will decide to buy a subscription based at least in part on the release of Microsoft releasing the iPad version of Office, but then buy a subscription through one of these channels instead of through Apple's App Store.

Some people have said that Microsoft released Office for iPad too late, that they should have done it two years ago, and by waiting this long, Microsoft has lost its chance to make big money with it. As the Office apps' presence on both the top free list and top grossing list shows, they're wrong. It's true that Microsoft should have released Office for iPad sooner -- but Microsoft hasn't lost the chance to win big with it. No other productivity suite is as good as Office on desktops, laptops, and now on the iPad. So Microsoft is cashing in today, and will do so even more in the future.