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Monopolistic practices, impact on end-user: The key issues with Google's new Play Store policy
Considering how young and nascent digital segments in India are, such heavy fees will have a chilling impact on innovation and growth.
Let’s look at the main issues that arise out of the imposition and enforcement of Google’s native billing system and the 30% Google commission.
High Fees: A developer making an app has to part with 30% of every digital sale they make – that is a steep fee. Most Indian digital startups don’t have such a high margin. In fact, many startups have negative margins as they are focused on market building and their hope is to start making money once they have gained market recognition and share.
Adding 30% to their cost will be disastrous.
Impact on end-consumers: Companies will have to pass on this 30% increase in cost – either wholly or partly – to end-users. Indian customers are still not entirely open to paying for digital goods and services. Most are only now opening up to the idea of subscriptions and in-app purchases.
A 30% rise in cost could drive such hesitant customers away.
Impact on fledgling sectors: This 30% commission isn’t a one-time fee. This recurring fee is applied for every single transaction. This is not justified, especially at such a high rate.
For firms in spaces like ed-tech or for SaaS companies, where recurring payments are a necessity, such a steep fee will have an impact on their revenue model.
SMBs constitute the main customer base for startups in SaaS and a 30% increase in prices will mean higher costs for small businesses, who are just now beginning to embrace tech.
Every single sector and digital business that has an app and intends to monetise it will now be impacted by this steep recurring fee.
Considering how young and nascent these digital segments are, such heavy fees will have a chilling impact on innovation and growth.
Limited payment options: Google’s native billing system does not cover all payment options in India. For instance, RuPay cards are not covered, and net banking and UPI cannot be used for subscriptions.
This is limiting.
Monopolistic practices: Forcing the Google billing system is monopolistic and does not foster competition. Other billing systems and providers – particularly, Indian startups – will be adversely impacted. This is not good for companies and customers, especially when these billing services charge only around 2% as a service fee per transaction.
India was the most significant contributor to Google Play downloads during the second quarter of 2021. The number of Google Play app downloads in India has increased from 6.7 billion in Q2 2020 to 7.23 billion in Q2 2021, representing an appreciable increase of 7.9% YoY (Source: Sensor Tower).
Google is heavily entrenched within the tech and digital ecosystem in India as its platform is the de facto gatekeeper to much of the internet for most Indians. In India, Android has 95% market share and most app downloads happen on Google Play.
This is a clear abuse of its dominant position.
Suppression of competition: By insisting on the usage of only its billing system, Google is ensuring it has an unfair advantage over other payment and billing systems as it is is the distributor of apps and the owner of the billing system.
While Google claims that it allows apps to be sideloaded, unlike Apple, the fact is that sideloading needs a setting change on the phone and it is shown as an unofficial install, thus putting off many Android mobile phone users.
A sideloaded install is also cumbersome. Plus, most customers are wary of doing such an install, especially of lesser-known apps. While there are other app stores on Android, none of them has the kind of reach that the Play Store does.
It is effectively creating a walled garden.
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