Explainer: Google Play commission structure and what Indian startups need to know
Many Indian startups have raised concerns about Google Play Store’s billing system and are now thinking of an alternative app store to get the freedom to act independently.
The decision by tech giant Google to enforce 30 percent fee as commission for in-app purchases on its Play Store has sent shockwaves across the country, especially in the startup community, whose lifeline depends on these mobile applications.
On one hand, Google is monetising its platform, which is overwhelmingly dominant, but enforcing 30 percent commission will be a huge burden for the Indian startup ecosystem. Considering the fact that digitisation has just started to make inroads in the Indian economy, the latest fee structure is perhaps a little too early for the country.
This is also the time for the startup ecosystem, government, and other important stakeholders to think of an alternative app store, which will align with the government’s vision of ‘Aatmanirbhar Bharat’. A national app store with the freedom to act independently with the interests of startups in mind is the need of the hour.
YourStory provides a picture about Google Play Store’s new commission structure and its key implications.
- Anybody can upload an app on the Google Play Store provided the guidelines are met.
- According to Google Play Store regulations, any app which provides digital goods or services can be charged 30 percent commission.
- This means any app which has a subscription feature on it, where consumers pay a fee, is liable to pay 30 percent commission.
- The type of apps which falls into this subscription category include gaming, news, OTT (Netflix, Spotify, Amazon Prime), music, dating, fitness, edtech, data storage, etc. Find the full list here.
- This commission does not apply for those apps which enable transaction of physical goods like ecommerce, food delivery, ticket buying services, transport services, online payment (Paytm, PhonePe). The list is here.
- The 30 percent commission has been operational since January, 2018, but was not strictly enforced.
- Now, Google has said all payments for any subscriptions on the apps will have to be routed only through its payment gateway from January 20, 2021.
- Prior to this, many subscription apps were either using other Google Payment Gateway or other third party services. Or they ensured that transaction was done outside the Play Store on their websites.
- Google has provided time till September, 2021, for the apps to integrate into its payment gateway.
- Indian startups are worried as 30 percent commission on the value of the transaction is very high as this will severely impact their revenue and profits.
- This will also impact other third-party payment gateway service providers like Razorpay and PayU.
- In India, a very small percentage of consumers pay for subscriptions, and startups believe this 30 percent fee will further eat into their revenue and profits.
- Now, the alternative is to create an India specific platform, but challenges are plenty in terms of quality, stability, and popularity.
- There are other app platforms like Amazon and Samsung to name a few, but these are not very popular as it is Android and iOS which have dominated the smartphone operating systems.
Edited by Megha Reddy
