Google today announced a major change to the revenue-sharing structure of Google Play apps, one that could significantly change the fate of independent developers or small businesses that rely on the Android platform’s app store for revenue.
Beginning July 1, Google will take a 15 percent discount on the first $1 million in annual Google Play revenue a developer earns. That’s down from 30 percent earlier. The 30 percent figure will still apply to all revenues over $1 million per year.
Google claims that 99 percent of developers with apps and content on Google Play will experience a reduction in fees paid to Google of up to 50 percent.
On the surface, this is very similar to what Apple announced late last year when it stated that developers making less than $1 million will soon pay only 15 percent to the platform instead of the historic 30 percent. But it’s actually different in a way that could affect many developers; it’s arguably a bit more generous.
That’s because Apple applies the lower 15 percent rate to a developer until that developer has more than $1 million in revenue in a given year, after which the higher 30 percent rate is applied to all of that developer’s revenue. Google still charges 15 percent on that first million, even if the developer makes $5 million. So in Google’s model, a developer who makes $1.2 million from an app pays 15 percent on $1 million and then 30 percent on $200,000. In Apple’s, a developer who makes $800,000 pays more than 15 percent of that amount, but if they make $1.2 million, they pay 30 percent of all $1.2 million, not just $200,000.
To that end, the author of Google’s developer blog post (Product Management VP Sameer Samat) claims that developers who bring in $2 million, $5 million, and “even $10 million” each year have told Google that this change will make a difference in making their businesses more sustainable, even though they earn significantly more than $1 million. After all, an extra 15 percent of $1 million is $150,000, which is no small amount for the largest and most successful companies.
However, this change probably did not come entirely from altruism. First of all, Google matches up almost right away — actually a bit better than Apple’s developer offerings, as the App Store and Google Play compete directly with each other. Also, both Apple and Google are subject to antitrust lawsuits and investigations into their hold on their respective app marketplaces. Like Apple with the App Store, Google requires app developers to use their own payment system for apps on Play, making it difficult to get around these charges.
While the fees themselves are not usually the primary subject of investigations and lawsuits, this change improves the optics and sentiment for the two tech giants as they come under siege, without costing them much money. The vast majority of the revenue Apple and Google receive from their app marketplaces comes from apps with sales well over $1 million a year.