After widespread unrest among startups in India, Google has decided to cut the commissions it charges developers selling products and services on its Play Store. While this has indeed been well received by some developers, some are still unhappy. Mint Explains:
What is Google’s Play Store commission?
Google charges companies a commission for selling products and services through Play Store. In fact, the tech giant also requires companies to use its built-in payment systems to make such sales. So far, Google charged companies 30% for the sales they made. From 1 July onwards though, the company said it will charge 15% for the first $1 million earned from in-app purchases (IAPs), with the 30% slab kept for earnings above $1 million. The company claims this will lead to a 50% reduction in fees for 99% of developers (globally) who sell digital goods and services via the Play Store.
Why did Google lower the commissions?
Companies like Google and Apple have been facing pressure from regulators and startups in terms of the power they wield over the global app ecosystem. Many startup founders feel the 30% fee levied by these firms is predatory and makes it hard for companies to make profits. In October last year, a group of 15 Indian startup founders held a meeting with the Competition Commission of India, to discuss this fee which they said was anti-competitive. An antitrust subcommittee of the US Congress also concluded, after a hearing in July 2020, that Big Tech firms like Google need to be broken up due to anti-competitive practices.
Can applications avoid paying fees to Google?
Technically, yes. Google doesn’t stop users from sideloading apps. Sideloading is the process of installing apps from other sources. Google also allows other app stores to be installed on Android phones. App makers can choose to not include a payment system on their platforms too. However, founders argue that this can make it difficult for apps to monetize users.
Are startups in India happy about fee cut?
Small game developers said this will help them hire more staff and build better products. But many aren’t convinced: Paytm said Google’s move is “absolute hogwash” and accused it of attempting to “divert attention” from how it is “taking money from the Indian app industry”. Experts said the move will help smaller startups, who can take as long as five years or more to reach the million-dollar mark from IAPs. However, large-scale firms will need to continue paying Google for sales made via Google Play.
How exactly do in-app purchases affect apps?
That depends on the type of apps. For instance, a majority of game developers in India choose to shun IAPs and earn from advertising. However, this affects the user experience. On the other hand, OTT platforms often choose to direct users to their own websites instead of selling subscription products through the Play Store. Some have also argued that this gives Google undue advantage where developers compete with its own apps. The argument is that it’s easier to have users pay for services when it’s done via the Play Store.