Home/ Opinion / Views/  The Schrodingër’s Cat approach to Google’s 30% cut

Through both my work and personal digital habits, I have surely contributed to the whopping $50 billion Apple grossed from its App Store last year alone. This year, as Apple trotted towards an unprecedented $2 trillion market cap, US regulators intensified their scrutiny of Big Tech for antitrust violations. Apple, along with Alphabet, Amazon and Facebook, were declared monopolies by a US House judiciary subcommittee on anti-trust. This week, it filed a landmark lawsuit against Google for alleged anti-competitive practices. Even in the EU, French anti-trust authorities have fined Apple $1.2 billion for restrictions it placed on wholesalers.

So, when Google recently announced that it would soon start forcing every app on its Play Store to exclusively use its billing system, it caused quite a stir. It means Google will take a 30% cut on almost every transaction done through Android apps. While Apple has been doing this for years, this particular revised policy announcement caused an expected amount of noise in India on the eve of the Indian Premier League 2020, when Paytm’s Android app was taken down from Google Play Store for policy violations. While it was quickly restored after changes were made to the app, it brought into focus Google’s policy framework that goes beyond India’s legal requirements. Many of the country’s digital entrepreneurs came out against Google’s “heavy handed" action. Calls to create an alternative app store grew louder. Globally, Android’s market share will hit 87% by 2022 and app developers might have just woken up to the menace of monopolies.

Samsung, Amazon, LG, Huawei and a bunch of others have already created alternative Android app stores. Android being an open-source operating system means that device manufacturers can create their own version of Android—each slightly different from the other. Therefore, developing your own app store that bypasses Google is not difficult. But attracting the world’s best developers and publishers to populate your app store is. When Google blocked Huawei from providing services as part of Donald Trump’s trade war with China, Huawei was forced to create its own app ecosystem. Since then, lots of Asia’s digital services have boarded the Huawei bandwagon. Many popular social media apps, entertainment apps, and banking and e-commerce services are now available at the Huawei AppGallery. Microsoft Office boasts over 54 million downloads on the gallery. My company’s video-on-demand and EdTech services will also be available on Huawei’s gallery from next month. The popularity of Huawei phones will continue to drive this shift.

What stopped others from doing this before? The answer lies in the developer ecosystem that Google has created around Android. The development of its native programming language, Kotlin, its analytics platform, content licence protection, digital rights management, ad-serving infrastructure, etc, are incomparable support systems. This ecosystem has taken a long time and a lot of resources to develop, and is unlikely to have significant competition soon. The ideal scenario would be to model developer relationships with Google along the lines of Schrodingër’s imaginary cat—dead and alive at the same time.

Such hybrid relationships have already been demonstrated by the likes of Netflix and Spotify. Neither allows subscription to its services via its Apple iOS app. When you reach their subscription section, they kind of just say “I’m sorry for the inconvenience". This prompts users to look for other payment modes. For highly sought-after services, directing users to payment mechanisms outside of iOS and Android is easy. But for the rest, the needs of a free market will create workarounds.

My company is presented with a unique problem that would wreck our business if the only mode of payment we offered was through iOS’s and Google Play’s billing systems. The weakness lies in both these systems assuming that all users either own a credit/debit card or have enough credit stored in some sort of wallet that they can keep drawing down. If either of these were universally true, there would be no single-use pouch of consumables sold at sundry stores across Asia. In the Philippines, for example, banking, online payments and other e-payment modes have an abysmally low penetration. Over 90% of the country’s retail and services economy runs on small-cash transactions.

This made us create what we call a subscription load distribution system, which essentially moves micro credit down a pyramid from a distributor to sub-distributor to retailer. A customer can easily walk to a retailer—in this case, a small store or a roaming vendor—and make a single purchase of a subscription for as low as a few cents. The transaction takes place through a message exchange, which also triggers an authentication of the customer as a paid subscriber. While our apps do let users pay through the big app stores’ native billing systems, most of our mass-market customers tend to ignore those app stores and choose small cash transactions instead.

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Updated: 22 Oct 2020, 08:41 PM IST
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