(Bloomberg) — Alphabet Inc.’s Google considered changing its app store pricing model to avoid a regulatory crackdown that could cost the company billions of dollars. It was revealed that the company had abandoned its proposal to charge a fixed fee for each app. The document was released late Thursday.
Most Read Articles on Bloomberg
Google established Project Everest in 2021 to rethink the Play Store’s billing model, according to documents released as part of an antitrust lawsuit by Epic Games Inc. Last week, Google lost a lawsuit brought by the makers of Fortnite by a federal jury. Tech giants abused their monopoly power over app stores.
In the wake of growing pressure from regulators and developers over Google Play’s hefty 30% fees, the presentation highlighted the search giant’s concerns about discouraging potential regulatory violations. Indicated.
“We can protect the status quo for several months,” Google said in a presentation. “Making the proposed changes sooner may support reasonable legislation, position Google as a leader, and help prevent stricter legislation.”
Project Everest considered charging developers a tiered service fee to list their apps and games on the Play Store, with additional fees for user downloads, updates, and referrals. However, the company estimates that this model resulted in a “potentially significant loss” of $1 billion to $2 billion for apps and $6 billion to $9 billion for games.
Instead, employees recommended allowing app developers to process payments themselves instead of paying Google a lower rate. The company estimated that the change would reduce the store’s annual revenue by between $250 million and $1.3 billion, depending on the number of users who chose other payment methods. The settlement essentially mirrors a $700 million settlement that Google announced last week with a group of state attorneys general in about 34 states and consumers.
Google’s loss to Epic disrupts its app store duopoly with Apple Inc., which generates nearly $200 billion a year and governs how billions of consumers use their mobile devices. There is a fear. For years, Epic has slammed Apple and Google’s practices of charging fees as high as 30% to software developers who typically have few other options. Google’s loss could accelerate the weakening of app store rules that have already been criticized by regulators and lawmakers around the world.
Mobile app developers have long complained that Google charges too high fees and asks consumers to charge more, and that dissatisfaction has led countries like South Korea to force the company to replace its app stores with other payment systems. I am requesting that it be opened. New European Union rules set to take effect in March will also require Google and Apple to open stores.
Dozens of state attorneys general also sued Google in 2021, alleging the company employed illegal tactics to stifle competition and leave developers with no choice but to go through the Play Store. . On Monday, states announced that Google would pay $700 million to settle the lawsuit and allow developers to use their own payment systems.
But Google’s internal documents show the company is already moving in that direction.
Google spokesman Dan Jackson said the fees help the company maintain its investments in Android and the Play Store. Google also lowered fees for subscriptions and the first $1 million that developers earn on the store.
The company plans to roll out the program in 2022 under the title “User Choice Billing,” allowing app developers to process payments themselves and pay Google a slightly lower fee of 26% or 11% for their subscriptions. I made it possible to give.
“User Choice Billing is designed to address choice,” Purnima Kochikar, one of the Google employees who worked on its design, testified as part of Epic’s trial. She testified that as of May 2023, approximately 80 developers had chosen to migrate to her User Choice Billing.
(Updates Settlement Participants in paragraph 6.)
Most Read Articles on Bloomberg Businessweek
©2023 Bloomberg LP