The App Store is a nascent and promising field. I came across a good analysis of the App Store economics from Sanneblad:

It means that you need to market your application like crazy to make it stand out from all the other 10 000 applications in the AppStore. Otherwise end-users will not be able to find your application. Just browsing the AppStore in itself is not really useful when applications like Call Mike are flooding the lists.

You have to reach the list of top most downloaded applications. Think hard about what application it is that you are creating. If you do not see your application reaching the top downloaded list worldwide, think again, because users will not find it unless you put huge amount of resources into marketing. Look at what is currently appealing to end-users in the top-25 list, and make something with a similar appeal. And then go market it like crazy.

Thanks to Oz Weather and Joel Comm you can now actually calculate what number in the Top 25 list you need to hit to break even in your project budget. For example, say you aim to be in the top-10 list for at least two weeks. A number 10 slot equals around 3000 daily downloads, meaning you will sell at least 40 000 units during these two weeks. If you aim to be in the top-5 for two weeks you will sell at least 70 000 units. With a unit price of one dollar, an application in the top-5 list of the iPhone will make around $50 000 during these two peak weeks of sales (after Apple’s 30% cut). If you have a premium application costing $10, you will make $280 000 if you make it into the top-10 list for two weeks. The key to making really good money out of the AppStore seems to be hitting the #1 or #2 slot in the most downloaded applications list. And today it’s very clear that succeeding in reaching that goal requires a good combination of application appeal, marketing and timing (Joel Comm also likes to mention application quality here, but that is such a subjective matter so I have chosen to not include it). Investing heavy money into an application and then having to rely on the timing factor I guess is what makes the game industry what it is, and I believe it’s even more visible on the iPhone platform than on stationary computers.

So getting into the Top 100 on App Store isn’t very easy. Here’s how iFart did it:

We promoted iFart Mobile a number of ways. Press releases, direct contact with publications like TechCrunch, networking with associates to get Twitter action, etc. You can’t just make an app and expect it to go viral. There is too much competition now. Joel

More reading:

How To Estimate App Sales from iTunes Ranking (Ajnaware’s Weblog – author of Oz Weather)
More exciting app store news (Joel Comm – author of iFart)
iPhone AppStore numbers revealed: Ranks-to-Sales connection (Mobile Game Developer)
Rank and sales data could help figure out App Store popularity algorithm (TUAW)
App Store Pricing (It’s not a free market!) (AppCubby)
The App Store: First Comes Power (Deal Range)
The Hack Store (Polar Bear Farm)

I believe there’s so much room for improving the App Store. It’s impossible to find an app you want. The primary way to discover a good app these days is to just look at news sources, from friends, and the top lists. There should be Google App Search. If Bing could do this, I think they’ll have an advantage over Google. The algorithm would be so cool to build. Interesting times. More to follow.