Google's play

India's user base can help challenge the app ecosystem

The Indian technology industry may try, with the government’s support, to stitch together an alliance offering an alternative to the Google Play store, which dominates India’s mobile ecosystem — a space that is seeing a lot of heated arguments. Indian developers are attempting a pushback against the Google monopoly, given that over 95 per cent of Indian smartphones operate on Android. The brief removal of the Paytm app from the Play has also led to apprehensions that Google could use the muscle derived from its monopoly to insist on terms and conditions developers find difficult to comply with. Last week, the US-based tech giant proposed all Indian education, gaming, and dating apps distributed via the Play should use the Google billing system for respective in-app payments. It also proposed to impose the standard 30 per cent commission it charges in other regions on Indian apps sold through Play. After a volley of protests from the Indian tech industry, Google has finally deferred this charge till March 31, 2022.

The overwhelming majority of smartphone apps are listed in Google Play store for android, and in iStore, run by Apple for iOS devices. There are also stores run by handset-makers Samsung and Huawei, which offer apps tailored for their respective devices. Netflix is said to have used its own dominant industry position to negotiate better terms with Google and Apple. Streaming music service Spotify has resorted to legal action against the two tech majors in the EU. Major gaming studios like Epic have launched specialised app-stores for gaming. In addition, it is possible to “side-load” apps directly without going through an app-store. The competition has been triggered by the fact that Apple and Google both charge a hefty 30 per cent commission for selling apps. Both tech majors also insist that apps listed in their respective stores do not advertise alternative payment systems.

There are several justifications cited for the hefty commissions. One is that an app listed in the Play store or iStore has gone through careful curating, and passed hygiene checks for bugs and malicious code. A second rationale is that Google/Apple have taken on the responsibility for building and maintaining the massive infrastructure required to showcase millions of apps and securely process millions of daily financial transactions. A third justification is simply scale: An app listed in the Play store accesses a potential global market of billions of users. Of course, in addition to revenue from commissions, every transaction (including download of free apps) generates data, which is, in itself, worth a lot. It is reasonable to expect the owner of a retail store, whether online or offline, to keep a margin on products. However, the laws of economics also suggest that margins are higher than they would otherwise be due to the absence of meaningful competition.

Gaming major Epic has started to chip away at this by charging about 10 per cent commission on merchandise offered outside the Play/iStore environment. If India with its large domestic market and user-base does put together alternatives, it could be a game changer for the app ecosystem. While competition may be healthy for both developers and users, it will require substantial investment to securely cater to the sheer volume of transactions. It will also need sensible regulation to ensure this doesn’t result in cartelisation, or turn into a three-way oligopoly.