Mint Explainer: Who’s winning the app war – Google or Indian startups?

Last week, Google said more than 200,000 apps from India were not paying it a service fee. Photo: Reuters
Last week, Google said more than 200,000 apps from India were not paying it a service fee. Photo: Reuters

Summary

  • Last week Google removed a number of Indian startups’ apps from its Play Store over unpaid service fees, but began restoring them on Saturday after the Indian government intervened. Mint explains who’s winning and who’s losing after the latest skirmish in this long-running app war.

New Delhi: On Friday, Google sent notices to a number of startups and published a blog post on its Play Store payments policy. Subsequently, a number of popular Indian startups’ apps, including those of Bharat Matrimony, Shaadi.com, Naukri and 99acres were temporarily removed from the Play Store.

Google’s notice to startups said their apps would be restored if and when they started paying a ‘service fee’ to be listed on the store. The move caused a furore in India’s startup community, and after the union government intervened on Saturday, Google reportedly started restoring the apps.

This debate, however, did not originate in India. Since 2021, regulators in both the US and the European Union have been in talks with Google about its Play Store charges. Chief executive Sundar Pichai has been approached by several regulators, who have spoken about Google’s overall influence on the internet and, in turn, major global economies.

Mint explains where things stand in India, and what the immediate future holds.

What is Google’s Play Store service fee?

It’s a charge that Google levies on companies that sell services through apps listed on its Play Store. Under the current rules, apps that earn up to $1 million from subscriptions or in-app purchases are charged 15% of the revenue as service fee, and those that earn more than that are charged 30%.

After global litigation pushed Google to also offer third-party billing services, it offered a 4% reduction in service fees for those using these. This means companies that don’t use Google’s own billing system pay 11% or 26% of their app revenue to the tech major.

What did Google’s notice say?

In notices sent to more than 10 Indian startups, Google said it was enforcing a rule under which entities that did not pay the service fee would not be listed on the Play Store. It said more than 200,000 apps from India were not paying a service fee. In a blog post, it said nearly 97% of all apps on the Play Store do not pay a fee, and that a majority of the rest pay 15%.

“For years, no court or regulator has denied Google Play’s right to charge for the value and services we provide. On 9 February, the Supreme Court also refused to interfere with our right to do so. While some of the developers that were refused interim protection have started fairly participating in our business model and ecosystem, others choose to find ways to not do so," Google wrote in the blog post on Friday.

It also highlighted a ‘consumption model’ in its blog post, saying startups that do not intend to pay the fee will have to remove payment options from their mobile apps and use browsers to accept subscriptions from users instead. This means that startups will have to redesign their interface, and will also disrupt the user experience.

“Given that a significant portion of our revenue depends on subscriptions, removing the ability to accept payments seamlessly through our apps will have a major impact on our entire business," said People Group founder Anupam Mittal. He Apple's App Store charges a similar fee, but this is less important because of Apple's small market share in India.

How did this affect startups?

On Friday, several startups said their apps had been removed from the Play Store. Murugavel Janakiraman, founder and chief executive of Bharat Matrimony, told Mint that more than 100 of his company’s apps, with more than 20 million downloaded in total, were removed from the Play Store. Mittal said the same happened with People Group’s app.

Others affected included realty platform 99acres, owned by Sanjeev Bhikchandani’s Info Edge, and job-search platform Naukri. However, Bhikchandani confirmed late on Friday that his company’s apps had been restored after it responded to Google’s notice, saying it had already paid all relevant invoices that were due. In all, Google’s suspensions affected apps that have been downloaded more than 100 million times from the Play Store.

On Saturday, IT minister Ashwini Vaishnaw said he had spoken to executives at Google on the issue and that the tech giant had begun restoring the apps it had removed.

Google’s Play Store powers more than 85% of smartphones in India, meaning more than 600 million internet users use its Android operating system. The Android ecosystem is vital for numerous entities in India and around the world. This is why startups are up in arms, accusing Google of using its dominant market position to force startups to pay up.

Do the startups have a point?

Google has been repeatedly held accountable for monopolistic market practices around the world. In 2020, the company banned Paytm for violating several Play Store policies, including advertising of games of chance (Google did not allow fantasy sports on its platform back then). This ban generated considerable noise in India’s startup community on the importance of building a homegrown alternative to the Play Store.

Google has also faced criticism for restricting the spread of alternative app stores using security warnings, a practice that many regulators have said is unfair. The Indian government has long had an alternative app marketplace called ‘Mobile Seva’. However, a decade into its existence, the platform still has only a tiny fraction of the Play Store’s traction.

Startups are using all of these points to argue that Google should not be allowed to suspend apps at will. They have also cited the Competition Commission of India’s 2022 order against Google to claim that the tech giant has violated CCI’s orders. The CCI had said in its order that Google must not engage in anti-competitive behaviour.

Has the Indian judiciary been in favour of startups so far?

Not entirely. The CCI is currently examining its orders against Google, which startups are relying on to combat the company. An appeal filed against Google by a number of startups (including the ones mentioned above) at the Madras High Court last year failed to win an injunction against the Play Store service fee. On 9 February, the Supreme Court refused to halt the implementation of Google’s service, but agreed to hear the matter at a later date.

What is Google’s stance?

Two executives close to the company, and a legal consultant privy to the matter, told Mint that Google is offering startups several alternatives, including the ability to set up a payment gateway outside the mobile app that is marketed through the Play Store. As such, Google’s actions are seen as compliant with both the CCI’s orders, as well as India’s competition law.

Google has so far maintained that it has offered the alternatives that regulators have asked for, and is allowed to charge a fee for the vast distribution network it offers to apps. “After giving these developers more than three years to prepare, including three weeks after the Supreme Court’s order, we are taking necessary steps to ensure our policies are applied consistently across the ecosystem, as we do for any form of policy violation globally. Enforcement of our policy, when necessary, can include removal of non-compliant apps from Google Play," the company wrote in a blog post.

The legal consultant cited above said that Google, as a commercial entity, can charge a fee for its services. While startups are hoping for a positive verdict from the CCI, the competition watchdog had said in 2022 that it should not be seen as a pricing regulator, and that it has no basis to tell companies what they should charge.

What’s next for Google and startups?

Talks on the matter will resume on 4 March, when representatives of Google and the startups will meet with IT minister Ashini Vaishnaw. While Google has reportedly agreed to temporarily restore the suspended apps, the issue remains in suspended animation.

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