The 30% app store tax is collapsing
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The 30% app store tax is collapsing

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Good morning! This Friday, Google goes rogue when it comes to app store commissions, Twitter's algorithms amplify right-wing content, and Stripe is all in on the creator economy.

Google breaks stride with Apple

Google made a major announcement yesterday regarding its Play Store commission, and in doing so it dealt what may be a major blow to the standard 30% cut the company and its rival Apple have struggled to defend in recent years.

While both companies compete for developer talent and mobile app revenue, both Apple and Google have always agreed on one important point: a flat 30% commission on all digital goods, with only a few exceptions. Google is now breaking stride with Apple, and it may leave the iPhone maker without an important ally in the many app store regulatory battles on the horizon.

Google will now charge a flat 15% for certain apps. Qualifying will be those that rely on subscription billing, as well as some media apps like music streaming services and e-book sellers. The new rate takes effect Jan. 1.

  • Both companies have charged subscription apps 15% since 2017, but only when customers sign up through the app and stay subscribed for one year. That's partly why companies like Netflix and Spotify no longer let you subscribe on an Android or iOS device.
  • Google said it recognizes "that customer churn makes it challenging for subscription businesses to benefit from that reduced rate," because many customers don't stick around for a full year. For certain media apps, Google said the new flat rates of 15% from day one "recognize industry economics of media content verticals and make Google Play work better for developers and the communities of artists, musicians and authors they represent."
  • Google had already introduced a 15% flat rate for media apps earlier this year if developers met a series of conditions to make their apps multi-platform across various Google platforms like Android Auto, Chromecast and Wear OS.

This is just the latest knock against the 30% cut. Apple and Google have fought for years to maintain the arrangement, knowing that many developers, especially mobile gaming and media firms, were growing disgruntled. Yet the last few years have seen that once-standard commission rate under full-blown assault.

  • It all began in 2016 when Apple lowered its commission to 15% for subscription apps with the one-year caveat. Google followed in 2017.
  • In 2020, Apple lowered the rate to 15% for developers making less than $1 million, and Google months later did the same (although notably, Google's policy change was more generous and applied to all developers' first $1 million in revenue). This applies to a vast majority of developers, considering most money on Android and iOS is generated by a small number of app makers.
  • All the while, both companies used the 30% cut as a bargaining chip, for instance when Apple agreed to lower and then waive it for Amazon and when Google used fee reductions to convince game makers to stick around.

Now, the writing may be on the wall. Epic Games sued both Apple and Google last year, and the events since have seen both tech giants backed into a corner over their defenses of the 30% cut. These legal battles, combined with intense regulatory scrutiny and legislation in the U.S. and abroad, have created a hostile atmosphere for the app store status quo.

  • Apple went to bat for its business practices in the Fortnite case this past summer, but it ultimately made a number of concessions after the trial ended to loosen its App Store policies. The judge in the case also knocked down Apple's anti-steering provisions, though the case is now tied up in appeals.
  • Google is in an arguably more vulnerable position considering how many federal and state investigations it's under over the Play Store and its broader business.
  • A landmark South Korean app store law passed in August, combined with similar proposed laws in the U.S., now has Google playing defense.

It's no wonder then that yesterday's announcement is the first time Google has instituted a major Android revenue split change without Apple, seemingly breaking the lockstep strategy both have used for years.

Of course, these changes don't affect the most lucrative app sector — the mobile gaming market — and it's likely both companies will continue fighting tooth and nail to protect those revenues. But yet another carve-out covering some of the largest app categories on Android is more evidence the 30% cut can't last forever. And the bad news for Apple is that it seems even Google now agrees.

— Nick Statt (email | twitter)

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People are talking

Apple's ad-tracking changes caused big problems for Snap's business, Jeremi Gorman said:

  • "We grappled with industry changes to the way advertising is targeted, optimized and measured on iOS that created a more significant impact on our business than we had expected."

On Protocol: Alex Vogenthaler said Stripe is all in on the creator economy now:

  • "Stripe, since its founding, has been for business founders. Now there's this new class of founder that's emerging."

On Protocol | Policy: Twitter's algorithms amplify right-wing content, but Rumman Chowdhury said it's hard to figure out why:

  • "To be clear, some of it could be user-driven, people's actions on the platform, we are not sure what it is."

Self-driving taxis aren't hitting the road anytime soon, Lucid's Peter Rawlinson said:

  • "There is a mountain to climb — an intellectual mountain to climb in terms of software."

Making moves

Everyone can have a Twitter Space. The platform now allows anyone on iOS and Android to use the feature, rather than people who have 600 or more followers, as it required previously.

Intel CFO George Davis is retiring in May. He'll stay in his role until the company finds a successor.

Vatsal Bhardwaj is joining Skillz as chief product officer. He most recently served as the general manager and director of game tech for AWS.

Amit Fernandes is joining Fairmarkit as VP of product management. Fernandes last served as senior director of product management at MuleSoft.

In other news

Facebook could've done better with its cross-check system, the Oversight Board said in its quarterly report. The group plans to examine the cross-check process and make suggestions for how the system can be changed.

On Protocol: Tech is messing with Texas' vaccine mandate ban. The state's executive order doesn't seem to carry much weight for tech companies with a presence there; five of the biggest ones said they're keeping their requirement in place.

1,807 sexual assaults occurred in Lyfts in 2019, according to the company's first community safety report. Lyft says those are small numbers in the scheme of things; activists think the company should do more.

Some WarnerMedia execs don't like HBO Max's name. It's not the first time the company has weighed a name change, but as the incoming CEO steps into the role, he could get an earful from employees asking for a switch.

Amazon workers in New York are unionizing. Employees at Staten Island facilities plan to petition for an election before the NLRB next week. If there's a successful vote, they'd be the first in the U.S. to unionize against Amazon.

Governments are pressing Google to remove more content than ever. Google's latest transparency report shows an uptick in requests from countries around the world, and warned that it will continue to spike as more countries pass content-filtering laws.

On Protocol: Ecuador wants to call Ola Bini a cyber criminal, but he says he's not the one the government should want. While Bini's trial drags on, international human rights advocates have questioned why Ecuador prosecuted him with no real evidence.

China asked Didi to consider a Hong Kong IPO, sources told The Wall Street Journal. Authorities also floated the idea to U.S.-listed Full Truck Alliance and Kanzhun as it finalizes probes into the companies.

A bot for your moral plights

Is lying to a parent morally wrong? Should you really kill that annoying bug buzzing around your kitchen? There's an AI bot that can answer questions like these, because of course there is.

"Ask Delphi" was introduced earlier this month as a demo of an AI machine for all the ethical dilemmas in the world. All you have to do is plug in an ethical question like the ones above, and Delphi will let you know whether it's the right thing to do. It is, very obviously, far from perfect, not least because some of the training data is ... interesting, to put it generously? But in case you were wondering, it says lying to a parent is frowned upon, but bug killing is OK.

A MESSAGE FROM PROEDGE, A PWC PRODUCT

Target critical skill gaps and close them with engaging and personalized employee learning. Empower your people with ProEdge, the single solution that can upskill entire organizations and help keep them ahead of the ever-changing demands of the digital world.

Learn more

Thoughts, questions, tips? Send them to sourcecode@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you Sunday.

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