Google backs down on app store cut in India

Google backs down on app store cut in India
Source: Sankalp Phartiyal, Reuters
Despite couching its new policies as a “clarification,” some observers have been less than impressed.

Facing a coalition of Indian startups and tech firms, Google LLC has announced that it is delaying the roll out of new Play Store in-app purchase policies until at least 2022.

The move comes as the American multinational tech giant has faced resistance from a large group of Indian startups and tech firms who have criticized the company for engaging in what they view as “monopolistic” practices. The Indian tech firm coalition has also explored the possibility of creating its own “app store,” one that could rival Google’s dominant Play Store.

Google’s backing down comes as American multinational tech giants are facing “monopoly” concerns and antitrust scrutiny around the world.

But Google’s approach is the opposite of that taken by rival American big tech firm Apple Inc., which has so far resisted all pressure to part with its controversial 30% App Store commission on in-app purchases.

Apple, unlike Google, has so far resisted escalating pressure from developers and App Store partners alike. With “monopoly” concerns and critiques of prevailing app store models rising around the world, however, it is uncertain whether Apple and Google are fighting a losing battle.

Startup resistance

In late September, Google announced new Play Store policies that extended the 30% commission on in-app purchases the company takes. Google stated the update was a “clarification” on existing guidelines.

Google’s blog post announcing the changes stated the company wanted to be “sure our policies are clear and up to date so that they can be applied consistently and fairly to all developers.” It also announced the clarifications weren’t “new” and that they would “not affect the vast majority of developers with apps on Google Play.”

The company stated that its current billing policies – where Google will take a 30% commission on in-app purchases – only applied to a minority of some 3% of apps hosted on the Play Store. Google said that 97% of this minority are already billed Google’s commission.

Consequently, the new guidelines would only apply to a small percentage of apps that will now be covered by Google’s Play Store commission.

Despite couching its new policies as a “clarification,” some observers have been less than impressed.

In India, where Google commands a 99% hold on the nation’s smartphone market, a group of Indian startups and tech firms made clear their displeasure with Google by creating an informal coalition to oppose the multinational giant.

The group includes some of India’s most high-profile tech firms and executives, including Vijay Shekhar Sharma, whose Paytm app was recently at the center of controversy.

Paytm was briefly pulled from the Play Store by Google for policy “violations” in the wake of a promotion campaign started by Paytm. This prompted Sharma to decry what he alleged was Google’s overpowering “monopoly” through its Play Store.

Google is also set to face an antitrust lawsuit in the United States, focusing on its search engine dominance and whether the Mountain View, California based company used this to gain an advantage over its rivals.

Following reports of the coalition formed by Indian tech firms, Sharma, Paytm’s co-founder and chief executive officer, stated that “we, the country’s digital startups, need to have a joint voice so that the government and the people will listen … we can’t let all of India’s digital dreams get controlled by one or two global companies.”

The coalition met via a video conference and reached an unanimous agreement that paying a 30% commission to Google was unfeasible. Those who joined the conference also discussed the potential of creating their own app store platform to rival Google’s.

Sharma’s Paytm has already launched its own “Mini App Store,” which, while not a full rival to Google’s Play Store, nonetheless displays a willingness to provide alternatives to the current leader in the field

Almost immediately, the coalition garnered a reaction. Google announced at the beginning of October that it was postponing enforcement of the new Play Store billing rules in India until April 2022. The company announced it would set up “listening sessions” with Indian startups to “understand their concerns more deeply.”

Challenging “monopolies"

This is not the first time in recent months that developers have banded together to challenge what they view as app store “monopolies.”

In September, a group of global brand names, including Epic Games, Deezer, Basecamp, Tile, Spotify and others banded together to launch the “Coalition for App Fairness.”

The group was launched in the wake of the dispute between Apple and Epic Games, which saw Epic’s popular video game Fortnite removed from Apple’s App Store following the institution of an unauthorized non-Apple payments system.

Similar to the Indian pressure group, the American app developer coalition has taken issue with practices it claims are “anti-competitive,” including the 30% commission structure on the dominant app stores and the inability to distribute software on Apple devices through any other means than the App Store itself.

So far, however, Apple has proved more resilient in defending its App Store commission structure and with good reason. Apple derives a huge amount of revenue from its App Store, with the store facilitating nearly half a trillion dollars worth of sales in 2019 alone.

In its dispute with Epic, Apple has argued that Epic’s creation of a payment system designed to avoid the 30% commission was deliberately designed to undermine Apple’s App Store ecosystem and provoke Fortnite’s banning, painting itself as the aggrieved party in the dispute.

Yet the two largest app store vendors, Google and Apple, are undeniably facing pressure around the world. Though Google has caved, for now, to the demands of Indian tech firms, Apple’s lawsuit with Epic remains in court. For the time being, the future of the prevailing app store structure remains in limbo.

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