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How the Google Play Store cuts will affect Indian firms

Following widespread controversy in India, Google has decided to cut commissions by charging engineers who sell products and services on its Play Store. While this has been well received by some developers, some are still not happy. Mint Explains:

What is the Google Play Store commission?

Google charges companies a commission for selling products and services through the Play Store. In fact, the tech giant requires companies to use its built-in payment systems to make such sales. To date, Google has charged 30% of companies for sales they have made. From July 1 onwards, the company said it would charge 15% of the first $ 1 million in receipts for in-app purchases (IAPs), and a 30% slab reserved for salaries in excess of $ 1 million. The company says this will lead to a 50% reduction in the revenue of 99% (worldwide) developers selling digital goods and services through the Play Store.

Why did Google reduce commissions?

Companies like Google and Apple have been under pressure from regulators and start-ups in terms of the power they use over the global ecosystem application. Many start-up founders feel that the 30% charge charged by these firms is huge and makes it difficult for companies to make a profit. In October last year, a group of 15 Indian founders held a meeting with the Indian Competition Commission, to discuss the money, which they said was anti-competitive. The US Congress’s sub-trust committee also concluded, after a hearing in July 2020, that Big Tech firms such as Google needed to be disbanded because of anti-competitive practices.

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Can apps avoid paying fees on Google?

Technically, yes. Google does not restrict users from downloading apps. Sideloading is the process of installing applications from other sources. Google also allows other app stores to be installed on Android phones. Developers may choose not to install a payment system on their platforms as well. However, the developers say this can make it harder for apps to monetize users.

Are starters in India happy with the reduction in funding?

Small game developers said this would help them hire more staff and build better products. But many are unsure: Paytm called Google’s action “completely hogwash” and accused it of trying to “divert attention” from “how it takes money from the Indian apps industry”. Experts say this will help small startups, which could take five years or more to reach the $ 1 million mark from IAPs. However, large firms will need to continue to pay Google for sales made through Google Play.

How does it really affect apps within the system?

That depends on the type of apps. For example, most game developers in India prefer to avoid IAPs and benefit from advertising. However, this affects user information. On the other hand, OTT platforms often prefer to direct users to their websites instead of selling subscription products through the Play Store. Some also claim that this gives Google an unfair advantage when engineers compete with their apps. The argument is that it is easy for users to pay for services when done with the Play Store.

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