BLOG

Apple and Google respond to developer concerns

April 7, 2021

Greg Sigel

VP – Partnerships

Developers worldwide are applauding Apple and Google after the two companies announced they would halve the commission fees they charge for mobile apps monetised through their app stores. In a recent interview over a podcast, Apple CEO Tim Cook remarked how the app store had powered a half-a-trillion dollar economy with over a million app developers benefiting from it.

Apple cut the commission it charges on paid apps and sales made from within apps running on its iPhones and iPads from 30% to 15% as of January 2021. The price cut applies to all small app developers – those that make less than US$1m a year – which reputedly make up the majority of the approximately 1.8m paid apps in the App Store.

Google is about to do the same, pledging to reduce its current 30% commission to 15% for the first US$1m of sales made through Google Play from the 1st July 2021.[i] The company has also elected to delay the 30% commission it plans to charge on in-app purchases to April 2022 in India after many developers in the country voiced concerns that higher fees would stifle their development.[ii]

India is estimated to have accounted for 14% of global app downloads in 2020,[iii] with Statista calculating that 19bn apps were downloaded in the country in 2019. That makes the country extremely important to Google, which noted the proposed alliance of over 150 start-ups and other software companies formulating plans to launch their alternative app store and responded accordingly.

Apple and Google sales crucial to mobile app success

The importance of Apple and Google’s app store distribution power cannot be overstated, as evidenced by the rapid expansion of Epic Games.

The App Store has played a massive role in the success of its flagship Fortnite title. Market intelligence firm Sensor Tower estimated that Fortnite had accumulated the vast majority of its total US$1.2bn revenue (and 144m installs) from the App Store since its launch in March 2018. In the eight and a half months it was available on the App Store in 2020 before being removed contravening Apple’s monetisation rules (read my blog from Oct’20 here), the game generated approximately 20m downloads from Apple’s marketplace, around two-thirds of the estimated 31m total.

With US$293m in player spending during the same period, the App Store accounted for almost US$283m (97% of the total). Indeed, Sensor Tower estimates that Fortnite ranked 8th in the top mobile games ranked by global revenue in July 2020. It has also made the top ten in April, May and June previously as lockdown restrictions started to bite. In contrast, Google Play accounted for only a tiny proportion of Fortnite sales (US$9.7m) and only 11m downloads since its release in April 2020. However, it has to be remembered that Google allows developers to distribute their apps on other third-party platforms which offer alternative commercial terms.

Apple and Google combined are very much the growth engines for the entire mobile app industry. In its Mobile Market Forecast 2021-2025 report, market intelligence firm Sensor Tower estimates that global end-user spending via the Apple App Store and Google Play totalled US$111bn in 2020, with the App Store accounting for 65% of the total and Google Play 35%. Those values are forecast to increase at a compound annual growth rate (CAGR) of almost 20% over the next five years to reach a combined total of US$270bn by 2025, by which time the App Store will claim 68% and Google Play 32%.

App usage and eCommerce growth

The importance of Apple and Google’s app store distribution power cannot be overstated, as evidenced by the rapid expansion of Epic Games.

The App Store has played a massive role in the success of its flagship Fortnite title. Market intelligence firm Sensor Tower estimated that Fortnite had accumulated the vast majority of its total US$1.2bn revenue (and 144m installs) from the App Store since its launch in March 2018. In the eight and a half months it was available on the App Store in 2020 before being removed contravening Apple’s monetisation rules (read my blog from Oct’20 here), the game generated approximately 20m downloads from Apple’s marketplace, around two-thirds of the estimated 31m total.

With US$293m in player spending during the same period, the App Store accounted for almost US$283m (97% of the total). Indeed, Sensor Tower estimates that Fortnite ranked 8th in the top mobile games ranked by global revenue in July 2020. It has also made the top ten in April, May and June previously as lockdown restrictions started to bite. In contrast, Google Play accounted for only a tiny proportion of Fortnite sales (US$9.7m) and only 11m downloads since its release in April 2020. However, it has to be remembered that Google allows developers to distribute their apps on other third-party platforms which offer alternative commercial terms.

Apple and Google combined are very much the growth engines for the entire mobile app industry. In its Mobile Market Forecast 2021-2025 report, market intelligence firm Sensor Tower estimates that global end-user spending via the Apple App Store and Google Play totalled US$111bn in 2020, with the App Store accounting for 65% of the total and Google Play 35%. Those values are forecast to increase at a compound annual growth rate (CAGR) of almost 20% over the next five years to reach a combined total of US$270bn by 2025, by which time the App Store will claim 68% and Google Play 32%.

Apple and Google alternatives

There are third-party app stores that previously offered more favourable terms than Apple and Google, but they have historically accounted for a fraction of the revenue and the downloads. These include GetJar, Appland, Builds.io, TutuApp and AppValley for iOS developers alongside Amazon App Store, SlideMe, 1Mobile, Aptoide, and AppBrain for Android app builders.

With Google Play blocked or restricted by Internet censorship in China, alternatives to the App Store specific to that country (another one of the biggest markets for mobile apps in the world) in the country have also thrived. These include Tencent’s MyApp, Baidu, 360 Market, Oppo Software Store and 91 Market, while smartphone manufacturer Xiaomi runs its own Mi Store.

Developers do have alternative options for the distribution and monetisation of their software. Games companies, in particular, can partner with cloud streaming platforms such as Google Stadia, Microsoft xCloud, Sony PlayStation Now, Nvidia GeForce Now and Amazon Luna to facilitate downloads and payments.

Direct sales via small download fees or in-game purchases, which often run to no more than a few dollars at a time, can be problematic, however, especially when end-users are required to put in card details on a small smartphone screen. That can create a clunky checkout flow which leads to a higher chance of transaction abandonment.

An alternative approach could involve working with mobile network operators to add game purchase or subscription fees to buyers’ mobile phone account. Carrier billing is a particularly effective way of reaching new customers in regions of the world with low banking penetration and working with third-party payment service providers like us to negotiate multiple partnerships with operators in more than one country simultaneously.

The pace of change in the mobile app industry is starting to look unstoppable. It is developers, app stores, and digital storefronts that prove themselves ready and able to adopt a more flexible approach that will win out in the end.


[i] Google Play store to cut fees for Android app developers, BBC, 16th March 2021

[ii] Google delays mandating Play Store payments rule in India to April 2022, TechCrunch, 5th October 2020

[iii] Mobile app downloads in India four times higher than global average: InMobi report, The Economic Times, 19th January 2021