Mint Explainer: Who will win in the app wars – Google or Indian startups?

Google’s notice to startups said their apps would be restored if they started paying “service fees” to be listed in the store. The move caused an uproar in India’s startup community, and Google reportedly began restoring the app after the union government intervened on Saturday.

But this debate did not originate in India. Since 2021, regulators in the United States and the European Union have been negotiating with Google over Play Store fees. CEO Sundar Pichai has been approached by multiple regulators, who have spoken out about Google’s overall influence on the internet and, by extension, the world’s major economies.

mint We will discuss India’s current situation and immediate future.

How much is the Google Play Store service fee?

This is the fee that Google charges companies that sell services through apps listed on the Play Store. Under current rules, apps that earn up to $1 million in subscriptions or in-app purchases are charged 15% of their revenue in service fees, and apps that make more than that are charged 30%.

In response to the global lawsuit, Google was also required to provide third-party billing services and offered users who use these services a 4% discount on their service fees. This means companies that don’t use Google’s own billing system will pay the tech giant 11% or 26% of their app revenue.

What did the Google notification say?

In a notice sent to over 10 startups in India, Google said it is enforcing a rule that businesses that do not pay service fees will not be listed on the Play Store. More than 200,000 apps in India are reportedly not paying service fees. In a blog post, it said that nearly 97% of all apps on the Play Store do not pay, and the majority of the rest pay 15%.

“For many years, no court or regulator has denied Google Play the right to charge for the value and services it provides. On February 9th, the Supreme Court also refused to interfere with our rights. “While some developers denied interim protection have begun to participate fairly in our business model and ecosystem, others have chosen to find ways not to participate,” Google said. I wrote about it in a blog post on Friday.

The company also emphasized its “consumption model” in a blog post, saying startups that don’t intend to pay should remove payment options from their mobile apps and instead use the browser to accept subscriptions from users. Ta. This means startups have to redesign their interfaces, which also breaks the user experience.

“Given that a significant portion of our revenue relies on subscriptions, removing the ability to seamlessly accept payments through our apps will have a significant impact on our overall business.” said Anupam Mittal, founder of People Group. Apple’s App Store charges similar fees. However, this is not very important as Apple’s market share in India is small.

How has this affected startups?

On Friday, several startups announced that their apps have been removed from the Play Store. Murugavel Janakiraman, founder and CEO of Bharat Matrimony, told Mint that more than 100 of his company’s apps, with a total of more than 20 million downloads, have been removed from the Play Store. Mittal said the same thing happened with the People Group app.

Other companies affected include real estate platform 99 Acres, owned by Sanjeev Bikchandani’s Info Edge, and job search platform Naukri. However, Bikhchandani confirmed late Friday that his company’s app had been restored in response to Google’s notification, and said he had already paid all related bills that were due. Overall, Google’s suspension affected his more than 100 million downloaded apps from the Play Store.

On Saturday, IT Minister Ashwini Vaishnaw said she had spoken to Google executives about the issue and the tech giant had started restoring the deleted apps.

Google’s Play Store is installed on more than 85% of smartphones in India, meaning more than 600 million internet users are using Google’s Android operating system. The Android ecosystem is essential to many businesses in India and around the world. This is why startups are standing up in arms and accusing Google of using its dominant market position to force startups to pay.

Does a startup make sense?

Google has been repeatedly held accountable for its monopolistic market practices around the world. In 2020, the company banned Paytm for violating several Play Store policies, including ads for games of chance (at the time, Google didn’t allow fantasy sports on its platform). The ban created quite a stir in the Indian startup community about the importance of building a homegrown alternative to the Play Store.

Google has also come under fire for using security warnings to limit the proliferation of alternative app stores, a practice many regulators say is unfair. The Indian government has long operated an alternative app marketplace called Mobile Seva. However, even after 10 years of its existence, this platform has only a fraction of the traction of the Play Store.

The startup uses all of these points to argue that Google shouldn’t be allowed to suspend apps at will. They also cited the Competition Commission of India’s 2022 order against Google and alleged that the tech giant had violated the CCI’s order. In its order, the CCI said Google must not engage in anti-competitive conduct.

Has the Indian judiciary been supportive of startups so far?

Not completely. The CCI is currently investigating orders against Google, which startups rely on to fight the company. Appeals filed by a number of startups (including those mentioned above) against Google in the Madras High Court last year failed to secure an injunction against the Play Store’s service fees. On February 9, the Supreme Court declined to block Google from implementing the service, but agreed to hear the issue at a later date.

What is Google’s stance?

Two executives close to the company and a legal consultant familiar with the matter told Mint that Google is giving startups several options, including the ability to set up payment gateways outside of mobile apps sold through the Play Store. It is said to offer an alternative. As such, Google’s actions are deemed to be in compliance with both the CCI order and Indian competition law.

Google has so far offered regulators an alternative, arguing that it is allowed to charge for the vast distribution network it provides for its apps. “After giving these developers more than three years to prepare, including three weeks from the Supreme Court’s order, we ensured that our policies are eco-friendly, just as we do for all forms of policy violations around the world. ​​We take the necessary steps to ensure consistent enforcement across our systems. Where necessary, enforcement of our policies may include removing non-compliant apps from Google Play. ” the company said in a blog post.

The legal consultant cited above said that as a commercial entity, Google can charge fees for its services. Startups are hoping for a positive verdict from the CCI, but the competition watchdog said in 2022 that the CCI should not be seen as a price regulator and has no basis for dictating how much companies should charge. said.

What’s next for Google and startups?

Talks on the issue will resume on March 4, when representatives of Google and startups are scheduled to meet with IT Minister Asini Vaishnaw. Google has reportedly agreed to temporarily restore suspended apps, but the issue remains suspended.