Introducing Inquisitorial by Indianaut, a long-form newsletter where we explain and analyze important stories stemming out of the Indian entrepreneurial ecosystem & economy. New articles every Saturday & Sunday.
The most striking evidence of Google’s success is that it has become a verb. We Google information the same way we eat food or listen to music. It has now gone far beyond just a search engine through its effective and efficient business model and strategies, gradually establishing a presence in both PC and mobile software and hardware space.
Remember the last time you were in the middle of a storm, the sky darkening, and the ominous silence before the storm struck? Sit back and watch the state of the Internet today, you will see a lot of similarities. It’s a force that builds businesses and breaks them down, an unstoppable tsunami to conquer others with their unfathomed monopoly.
Google recently announced that it is updating its policies to now demand a 30% cut of all subscriptions and payments made to any digital content or services app published on the Google Play Store. The company currently takes a 30% cut of any paid app sold on the Play Store, for in-app transactions in, say, mobile games. The new policy is a departure from the old policy that allowed for an exception for “digital content that may be consumed outside of the app itself”. The exception let apps such as Netflix and Spotify off the hook.
Apps that may require technical work to integrate the new billing system have been given a year (until September 30, 2021) to complete any needed updates. This announcement wreaked havoc amongst various developers across the world, including India. Currently, Many apps currently bypass Google’s billing system and ask users to directly pay, such as via debit card or UPI.
The Gatekeeper’s Dilemma
The new policy is wider in its scope and does not exempt digital services/subscriptions. The 30% service fee applies to all in-app purchases including subscriptions, virtual coins, ad-free versions of apps, paid extra lives or characters, etc.
On a digital platform, a fee of 30% for just being an intermediary is a gargantuan hit on the profits of the developers. This ‘Gatekeeper’s Fee’ takes away a major portion of the app developer’s revenues. Many speculate that up to 50% of their income will be going to Google.
Murugavel Janakiraman, founder of Matrimony.com stated “The worst fear is coming true, we can’t stay idle anymore. It is a death knell for digital companies and payment companies in India. How can companies survive by paying 30% Google tax and Apple tax?”
In the same blog post announcing the payments policy update, Google also promised that it would make it easier for third-party app stores to work seamlessly on Android devices. Epic Games has its own Android app store, as do smartphone makers Samsung and Xiaomi. (Note, third-party and manufacturer-owned app stores are the norm in China, where Google services are blocked.) One implication is that developers unhappy with Google’s pricing can go elsewhere.
Google Play Store comes pre-loaded in every Android device. And the users have had no reason to look elsewhere. Not to mention the issue of trust, many users have become highly concerned about the security of apps if they are not available on Play Store. Even Google warns you about sideloading apps from the internet. Newer players will have to ensure that the apps listed on their stores conform to high cybersecurity standards. That doesn’t come cheap. Gatekeepers such as Google and Apple have made investments to develop mechanisms to identify badly behaving apps and keep malware and other threats off their app stores.
Another issue that developers have to face is that their apps have to comply with Google's terms and conditions before listing their apps on the Google Play Store. Last month, Google delisted Paytm for violating its App Store Guidelines, it also delisted Fortnite, which has now sued Apple and Google citing the 30% fee is an abuse of dominant power.
In response to Google’s move, Paytm launched a ‘Mini App Store’ on 5 October and asked startups to list their apps—or mobile websites—on the store, promising them the attention of its 150 million monthly active users (MAU). Paytm said its Mini App store was supporting local developers to take their innovative products to the masses.
In the face of mounting protests by Indian developers, Google has decided to defer the enforcement of a 30% commission on in-app purchases of digital goods from its Play Store in India to April 2022 while globally the fee comes into effect in September next year. The company is “listening” to the Indian startup and app developer community to understand its concerns and is ready to “find ways” to ensure both sides can be successful together, Sameer Samat, VP of product management at Google, told ET.
But the damage was already done, spawning a coalition of nearly 150 startups, a faction of which made a beeline for the Competition Commission of India (CCI) seeking an investigation into Google’s policies. The companies that attended Paytm’s conference are also a part of this coalition.
Enter Paytm’s Mini App Store
While Paytm’s announcement of the Mini App Store was largely understood to be taking on Google’s app store monopoly in the country. The Paytm Mini App Store is essentially a bundle of apps that are launched inside a specific app. For example, the Paytm Mini Store has platforms such as 1mg and Domino’s Pizza, essentially opens the mobile website of those apps inside Paytm. It is somewhat similar to availing of services through mobile websites instead of having to download individual apps. The only difference is that users were accessing it through Paytm instead of a web browser, and the users’ details were auto-filled.
(Credits: ET)
It is also important to note that while Paytm may have taken out full-page ads across publications for its new product, the idea isn’t new. Justdial already has something similar, and so does Paytm’s competitor PhonePe., PhonePe Switch was launched back in March 2018 and currently has over 220 apps on it.
Dominance or Betterment?
Google wields enormous power—it doesn’t just own the ecosystem, it is the ecosystem. Between 2012 and 2018, India accounted for 36.9 billion downloads on Google’s Play Store, the highest in the world. Android OS powers nearly 97% of India’s smartphones; it has a widely popular suite of apps from search and browser and maps to video streaming and productivity apps; its payments app Google Pay holds the largest UPI payments market share—40%—in the country. Paytm is a distant third, with just a 13% market share.
Google has been accused of not providing a level playing field multiple times. In 2018, Europe’s Antitrust Authorities focused on the subtle but important factors that solidified Google’s grip on the region’s mobile search market, leading to a backlash. In India, information Matrimony.com Ltd. and Consumer Unity and Trust Society (CUTS) approached CCI alleging abuse of dominant position by Google in the markets for “online search” and “online search advertising” reflected in terms of search bias, manipulation of results, promotion of Google’s own vertical search sites by blending of its verticals’ results in the organic search results, etc
Google has essentially tamed the sea of information and created an environment wherein if you can’t get your apps published by Play, you are out of the picture, losing out on your market coverage and growth.
Google owns the Android OS, the most popular marketplace for Android apps, and also competes in the app store against apps of independent developers. The move to demand a 30% cut and forcing developers to channel payments through its proprietary billing system only consolidates the view that Google’s Play Store is not just a search engine for apps, acting as an intermediary providing the service of the discovery of apps but a platform for Google to further consolidate its dominance in the mobile phone space.
To be fair to Google, operating a marketplace the size of Google Play Store isn’t easy. With developers listing new apps and updating existing ones every day, it takes tremendous investments on Google’s part to keep it alive. The success of its App Store is essential for the success of its Android ecosystem. Easy availability of apps is what makes Android devices so popular around the world. Google provides developers the platform to reach billions of users, interact with them, collect user feedback, and even enhance the end-user experience. Denying it the right to monetize the platform would be unjust and would even take away the incentive to moderate, curate, and develop the platform. However, developments like demanding a steep 30% cut while not having any role in developing or ideating the app force us to question whether Google is using its ecosystem to establish and exploit its supremacy.
With Google backtracking the implementation of its new Billing Policy in India till September 2022, the collective furor over Google led to the floating of myriad ideas to end the dominance. Google’s decision to allow a choice to its users in downloading apps from other platforms, has paved a way for to develop new App Stores, similar to what China has done. Control of Tech Giants over app stores have indeed led to a better end-user experience. However, it may also be the case that the alleged anti-competitive conduct and arbitrary implementation of rules & regulations by giants such as Apple and Google in the app markets where they clearly hold dominance is restricting their competitors’ and developers’ growth.
Will there soon be a new marketplace for developers to showcase their apps, free from the supremacy of Google Play? The answer to this question is a hard one, we might get it in the future or else - Let’s Google it!
Khyati Dahiya is a second-year undergraduate student pursuing B.A.(Hons.) Economics at Hansraj College, University of Delhi. She is an avid reader and is currently heading the Media and Communications Department of the Strategy Consulting Society at her college.