In a clearly overly simplistic analysis to drive home a point - if you estimate that it costs on $25,000 on average to develop a paid iPhone app, given there are over 45,000 paid apps in the store - that represents over $1 BN in investment costs. However, assuming a generous 10% of all the apps downloaded are paid for - at 1 billion downloads with an average revenue of around $2.99 revenues in the order of $300MM will be generated, of which 30% goes to Apple.
While there are some good solutions, in app advertising is not making up the gap between costs and revenue. Of course. there may be other, harder to quantify benefits, for creating a iPhone app. While there are exceptions the reality is that for most aspiring iPhone App millionaires, it's a tough road ahead.
Unless you make the top 25 lists, it's difficult to be found and stand out in the store among 60,000+ apps, the expectations for an app from the user base are high and the willingness to pay for a good app is low.
7/14 Updated: Apple has just announced that downloads have reached 1.5B and 100,000 developers are working on Apps. See article at VentureBeat
It is however a great business for Apple and helps sell a lot of iPhones and iPod touches. Some of my current apps favorites include: