5 ms·

Why on earth would Google even suggest such a deal? To get the 4% on the payments made via the Play Store? That seems rather desperate. 4% isn't an amazing dea

Why on earth would Google even suggest such a deal? To get the 4% on the payments made via the Play Store? That seems rather desperate. 4% isn't an amazing deal on payments from Spotifys point of view, and 10% for Netflix seems like in insult for processing payments. Normal payment processors are closer to 1.5 - 2%.

kleton 3y ago
Shopify signed a very large and long term GCP contract a while back.
willsmith72 3y ago
the closed gardens of mobile app stores don't have the regular healthy market competition that normal payment processors do. it's one of my least favourite parts of building for mobile
- mrweasel 3y ago
  I'm just questioning the point in offering a "deal" like this to Spotify, when Spotify can just handle their own payments for less. Is those 4% really worth that much to Google that it's outways the risk of others being made aware of how little payments actually cost Google to run. Now that Netflix knows that Spotify pay 4%, why would they ever agree to anything more?
  - freedomben 3y ago
    This clearly wasn't intended to get out, and predicting that Epic would file suit and then it would leak out of the court would be a hard reason to argue against trying to negotiate business in the moment.
  - agloe_dreams 3y ago
    I don't think you understand that over at Apple, not paying the 30% is not being on iPhone..period. Not being on the play store is not being on Android for 90% of customers. This is why both are facing major antitrust cases.
    - mrweasel 3y ago
      Aaah, okay, I was under the impression that you could actually be present on the Play Store as a subscription service and just handle your own payments and that would be perfectly acceptable. But that makes the deal even weirder, Spotify doesn't have a choice, yet they have a completely insane deal.
      - agloe_dreams 3y ago
        No Spotify = No Pixel Sales.
    - ogreswamp 3y ago
      That is simply not true. You can easily set account creation and payment on your website for "reader apps" if you're not willing to share 30/15% with Apple. (and Spotify & Netflix qualify as reader apps). Apple even allows you to put a link to your website for account creation right in the app (they didn't allow that in the past). https://developer.apple.com/support/reader-apps https://developer.apple.com/support/reader-apps Many companies (like Google) move Apple's subscription fee to end users, so don't feel too pity about them. Just compare YouTube premium cost as an in-app purchase and on the website. €15.99 vs €11.99 here in Ireland. Google had a choice not to offer the YouTube subscription as IAP and just link people to the website. But the conversion rate for IAP is way higher compared to the website link, so they just punish their users, who pay €4 extra every month.
      - willsmith72 3y ago
        Most apps aren't reader apps, that's a very special (and relatively new) rule
        ogreswamp 3y ago
        You're correct, most of apps aren’t. But the subject app Spotify falls under it.
      - agloe_dreams 3y ago
  - jsnell 3y ago
    Netflix currently pay 0%, getting them to agree to 4% sounds like a pretty good deal.
  - hutzlibu 3y ago
    "Now that Netflix knows that Spotify pay 4%, why would they ever agree to anything more? " I would suspect, they have a special deal as well.
- bushbaba 3y ago
  Normal payment processors don’t need to maintain the os ecosystem. Arguably Google needs to do the same work as a traditional payment processor AND much more.
  - bogwog 3y ago
    > Arguably Google needs to do the same work as a traditional payment processor Unarguably, they don't need to do that. They want to, because a monopoly on payment processing makes a lot of money. If 4%/15%/30%/whatever is what Google needs to charge to run their payment processing business, that shows that they're extremely inefficient/incompetent, and the market would be more efficient if other companies were able to offer that service instead. Last I checked, Stripe charges 2.9%, which is even less than what Google charges Spotify in this unicorn deal. EDIT: the same goes for "store infrastructure" or whatever. If Google offered publishers the option to run their own infrastructure for distributing apps/updates/whatever, everyone would take that deal rather than pay Google's nonsense fees.
    - freedomben 3y ago
      Even 2.9% (which is what card payment processors charge as well) is ludicrously high. They make a very, very healthy profit margin with that. One of my greatest disappointments about cryptocurrencies is that they didn't destroy that ridiculousness.
      - thallium205 3y ago
        The money largely funds consumer protection products such as when chargebacks have to be executed on fraudulent or other disputed transactions on your card. Zero liability guarantees that the card network infrastructure offers consumers come at a cost which is found here. Think of it as an insurance policy paid on every transaction which explains why it has to be a %. Crypto offers no protections so no fees need to be taken.
    - brookst 3y ago
      Characterizing app store fees as purely for payment processing is so disingenuous it's hard to even engage. The reality is these fees are for access to an audience. Google spends a lot of money developing Android and creating a storefront that huge numbers of people see every day. Casting that as "payment processing fees" is like complaining it's outrageous for a farmer's market to charge $200/day for a 10x10 booth because 100sf of parking lot can be had for $10/day somewhere else: you have to willfully misunderstand the business for the argument to make any sense.
- aalimov_ 3y ago
  While you may have a point about competition, comparing credit card processors and app stores solely on fee structure doesn’t make for an honest comparison because you get to ignore all the other things they do.
- kmeisthax 3y ago
  So, uh... I hate to break it to you, but payment processing is almost as monopolized as mobile app stores are. The fees are not as egregiously high as 30%, but they are still supracompetitive and eat up retailer margins. Payment processing even has similar censorship problems, as evidenced by the campaigns to defund porn companies by cutting them off of payment networks.
agloe_dreams 3y ago
Because the deal usually is 30%. Negotiating a good rate won't happen when one side says "Make a deal or we keep you out". Google's rate is a 'slice of a watermelon vs all of a grape' angle. Both parties probably worked over the advantages that all your Google payment customers would have one-click subscribe. Google knew they held some of the cards and Spotify knew that going off-play store would harm subs while also harming Google.
- ethbr1 3y ago
  Spotify's size and consequences of not being on the Play Store are exactly why Google would do this. Google gives no shits if random app developer isn't on Play. And so holds firm on their cut. Play without Spotify makes a lot of users ask "Why isn't Spotify on Play?" And probably follow-up with "How do I get Spotify? Download another app store? Okay, I'll do that." So essentially, the money that Google ceded to Spotify was approximately what they thought discouraging users from installing alternate app stores was worth.
abxytg 3y ago
Are you serious? The app store standard cut is like 30%.
- mrweasel 3y ago
  Processing credit/debit- cards isn't that expensive, 30% is a joke, even if you try to justify it with by saying that it helps pay for the store infrastructure. Spotify pays no feed to Google when they handle the payment processing themself, via some credit card processor and honestly why the hell should they. So Google decide that in an attempt to get even the tiniest amount of payments to go through them, they'd drop the price to 4%... Why is that so important to them?
  - alwa 3y ago
    I believe the article cited 15% rather than 30% for subscriptions, or 11% if you process your own payments. So [.15, .11] —> [.04, .00], or an overall discount of 11% off subscription revenue they take through the platform. It sounded to me that, in exchange for that favorable per-subscription rate, Spotify paid $50,000,000 into a “success fund,” whatever that means. $50mm / .11 = $454mm... sounds like they’re basically paying the equivalent of Play Store commission on half a billion’s worth of revenue, without any guarantee that they’ll actually be able to sell that much new growth through Play Store. That feels like sharing the risk in a way that isn’t too out of the domain of reason. From [0], they added about $2bn in revenue year-on-year in 2022. Although we don’t know the term of this Play Store agreement (or what a “success fund” is), paying an amount equivalent to the normal commission on 1/5 of that total annual growth figure seems like a pretty nontrivial amount to commit. [0] https://www.businessofapps.com/data/spotify-statistics/ https://www.businessofapps.com/data/spotify-statistics/
  - Spivak 3y ago
    They aren't charging the fee for payment processing, they're collecting the fee via payment processing. I don't understand why people keep making this mistake. Hell even Epic made it and lost horribly when they made it. The fee is a sales commission, you pay it because you want access to the customer base. They are allowed to deliver you literally nothing at all in additional services and still charge you a fee. The other stuff they provide exists to sweeten the deal.
eitally 3y ago
Spotify is a long time Google Cloud customer, from the days when Google was essentially buying logos, so it would not at all surprise me to find out that the Play Store deal was tied to a massive GCP commit from Spotify (much like Niantic from the same era). In fact, i wouldn't be surprised if some of the more recent gaming signs from the Cloud business don't also have discount deals with Play. It's a pretty impressive list of publishers, actually (scroll to bottom): https://cloud.google.com/solutions/games https://cloud.google.com/solutions/games
- chatmasta 3y ago
  I'm not an anti-trust lawyer (or any kind of lawyer), but this feels illegal. It would be one thing if big GCP customers were getting discounts on GCP services in exchange for large commitments. But the Play Store is - at least ostensibly - a separate business from GCP. Receiving discounts in one should not require spending in the other...
ehsankia 3y ago
app stores do a lot more than payment processors though. Maybe not 30% worth, but definitely mote than 1-2%. The real issue though is that there isn't a good way to handle every app. In a normal world, every app would cost money to buy, and they would only be charged on the purchase prize. But in a world where most apps are free and then there are in-app purchases, there isn't really any other way for those to be monetized but to take a cut of transactions. But obviously these things don't scale the same.
deleted 3y ago
[deleted]
littlecranky67 3y ago
> Why on earth would Google even suggest such a deal? To prevent Spotify from filing more EU antitrust complaints as they did for the Apple Appstore? [0]. Plus, 4% sounds low, but nominally 4% from all Spotify subscriptions on Android with their imense user base is a very large sum compared to any minor 2-3 person App studio that is charged 20-30%. [0]: https://www.fastcompany.com/90836299/spotify-vs-apple-eu-app-store-complaint-rules https://www.fastcompany.com/90836299/spotify-vs-apple-eu-app...
fomine3 3y ago
Apple and Google virtually want to be a government in digital content area. 30% is a tax. I understand that something like government work (like operating infra and moderation) is needed in app store, but I don't want two California based companies to be a global government.

kleton 3y ago

Shopify signed a very large and long term GCP contract a while back.

willsmith72 3y ago

the closed gardens of mobile app stores don't have the regular healthy market competition that normal payment processors do. it's one of my least favourite parts of building for mobile

mrweasel 3y ago
I'm just questioning the point in offering a "deal" like this to Spotify, when Spotify can just handle their own payments for less. Is those 4% really worth that much to Google that it's outways the risk of others being made aware of how little payments actually cost Google to run. Now that Netflix knows that Spotify pay 4%, why would they ever agree to anything more?
- freedomben 3y ago
  This clearly wasn't intended to get out, and predicting that Epic would file suit and then it would leak out of the court would be a hard reason to argue against trying to negotiate business in the moment.
- agloe_dreams 3y ago
  I don't think you understand that over at Apple, not paying the 30% is not being on iPhone..period. Not being on the play store is not being on Android for 90% of customers. This is why both are facing major antitrust cases.
  - mrweasel 3y ago
    Aaah, okay, I was under the impression that you could actually be present on the Play Store as a subscription service and just handle your own payments and that would be perfectly acceptable. But that makes the deal even weirder, Spotify doesn't have a choice, yet they have a completely insane deal.
    - agloe_dreams 3y ago
      No Spotify = No Pixel Sales.
  - ogreswamp 3y ago
    That is simply not true. You can easily set account creation and payment on your website for "reader apps" if you're not willing to share 30/15% with Apple. (and Spotify & Netflix qualify as reader apps). Apple even allows you to put a link to your website for account creation right in the app (they didn't allow that in the past). https://developer.apple.com/support/reader-apps https://developer.apple.com/support/reader-apps Many companies (like Google) move Apple's subscription fee to end users, so don't feel too pity about them. Just compare YouTube premium cost as an in-app purchase and on the website. €15.99 vs €11.99 here in Ireland. Google had a choice not to offer the YouTube subscription as IAP and just link people to the website. But the conversion rate for IAP is way higher compared to the website link, so they just punish their users, who pay €4 extra every month.
    - willsmith72 3y ago
      Most apps aren't reader apps, that's a very special (and relatively new) rule
      - ogreswamp 3y ago
        You're correct, most of apps aren’t. But the subject app Spotify falls under it.
    - agloe_dreams 3y ago
- jsnell 3y ago
  Netflix currently pay 0%, getting them to agree to 4% sounds like a pretty good deal.
- hutzlibu 3y ago
  "Now that Netflix knows that Spotify pay 4%, why would they ever agree to anything more? " I would suspect, they have a special deal as well.
bushbaba 3y ago
Normal payment processors don’t need to maintain the os ecosystem. Arguably Google needs to do the same work as a traditional payment processor AND much more.
- bogwog 3y ago
  > Arguably Google needs to do the same work as a traditional payment processor Unarguably, they don't need to do that. They want to, because a monopoly on payment processing makes a lot of money. If 4%/15%/30%/whatever is what Google needs to charge to run their payment processing business, that shows that they're extremely inefficient/incompetent, and the market would be more efficient if other companies were able to offer that service instead. Last I checked, Stripe charges 2.9%, which is even less than what Google charges Spotify in this unicorn deal. EDIT: the same goes for "store infrastructure" or whatever. If Google offered publishers the option to run their own infrastructure for distributing apps/updates/whatever, everyone would take that deal rather than pay Google's nonsense fees.
  - freedomben 3y ago
    Even 2.9% (which is what card payment processors charge as well) is ludicrously high. They make a very, very healthy profit margin with that. One of my greatest disappointments about cryptocurrencies is that they didn't destroy that ridiculousness.
    - thallium205 3y ago
      The money largely funds consumer protection products such as when chargebacks have to be executed on fraudulent or other disputed transactions on your card. Zero liability guarantees that the card network infrastructure offers consumers come at a cost which is found here. Think of it as an insurance policy paid on every transaction which explains why it has to be a %. Crypto offers no protections so no fees need to be taken.
  - brookst 3y ago
    Characterizing app store fees as purely for payment processing is so disingenuous it's hard to even engage. The reality is these fees are for access to an audience. Google spends a lot of money developing Android and creating a storefront that huge numbers of people see every day. Casting that as "payment processing fees" is like complaining it's outrageous for a farmer's market to charge $200/day for a 10x10 booth because 100sf of parking lot can be had for $10/day somewhere else: you have to willfully misunderstand the business for the argument to make any sense.
aalimov_ 3y ago
While you may have a point about competition, comparing credit card processors and app stores solely on fee structure doesn’t make for an honest comparison because you get to ignore all the other things they do.
kmeisthax 3y ago
So, uh... I hate to break it to you, but payment processing is almost as monopolized as mobile app stores are. The fees are not as egregiously high as 30%, but they are still supracompetitive and eat up retailer margins. Payment processing even has similar censorship problems, as evidenced by the campaigns to defund porn companies by cutting them off of payment networks.

agloe_dreams 3y ago

Because the deal usually is 30%. Negotiating a good rate won't happen when one side says "Make a deal or we keep you out". Google's rate is a 'slice of a watermelon vs all of a grape' angle. Both parties probably worked over the advantages that all your Google payment customers would have one-click subscribe. Google knew they held some of the cards and Spotify knew that going off-play store would harm subs while also harming Google.

ethbr1 3y ago
Spotify's size and consequences of not being on the Play Store are exactly why Google would do this. Google gives no shits if random app developer isn't on Play. And so holds firm on their cut. Play without Spotify makes a lot of users ask "Why isn't Spotify on Play?" And probably follow-up with "How do I get Spotify? Download another app store? Okay, I'll do that." So essentially, the money that Google ceded to Spotify was approximately what they thought discouraging users from installing alternate app stores was worth.

abxytg 3y ago

Are you serious? The app store standard cut is like 30%.

mrweasel 3y ago
Processing credit/debit- cards isn't that expensive, 30% is a joke, even if you try to justify it with by saying that it helps pay for the store infrastructure. Spotify pays no feed to Google when they handle the payment processing themself, via some credit card processor and honestly why the hell should they. So Google decide that in an attempt to get even the tiniest amount of payments to go through them, they'd drop the price to 4%... Why is that so important to them?
- alwa 3y ago
  I believe the article cited 15% rather than 30% for subscriptions, or 11% if you process your own payments. So [.15, .11] —> [.04, .00], or an overall discount of 11% off subscription revenue they take through the platform. It sounded to me that, in exchange for that favorable per-subscription rate, Spotify paid $50,000,000 into a “success fund,” whatever that means. $50mm / .11 = $454mm... sounds like they’re basically paying the equivalent of Play Store commission on half a billion’s worth of revenue, without any guarantee that they’ll actually be able to sell that much new growth through Play Store. That feels like sharing the risk in a way that isn’t too out of the domain of reason. From [0], they added about $2bn in revenue year-on-year in 2022. Although we don’t know the term of this Play Store agreement (or what a “success fund” is), paying an amount equivalent to the normal commission on 1/5 of that total annual growth figure seems like a pretty nontrivial amount to commit. [0] https://www.businessofapps.com/data/spotify-statistics/ https://www.businessofapps.com/data/spotify-statistics/
- Spivak 3y ago
  They aren't charging the fee for payment processing, they're collecting the fee via payment processing. I don't understand why people keep making this mistake. Hell even Epic made it and lost horribly when they made it. The fee is a sales commission, you pay it because you want access to the customer base. They are allowed to deliver you literally nothing at all in additional services and still charge you a fee. The other stuff they provide exists to sweeten the deal.

eitally 3y ago

Spotify is a long time Google Cloud customer, from the days when Google was essentially buying logos, so it would not at all surprise me to find out that the Play Store deal was tied to a massive GCP commit from Spotify (much like Niantic from the same era). In fact, i wouldn't be surprised if some of the more recent gaming signs from the Cloud business don't also have discount deals with Play. It's a pretty impressive list of publishers, actually (scroll to bottom): https://cloud.google.com/solutions/games https://cloud.google.com/solutions/games

chatmasta 3y ago
I'm not an anti-trust lawyer (or any kind of lawyer), but this feels illegal. It would be one thing if big GCP customers were getting discounts on GCP services in exchange for large commitments. But the Play Store is - at least ostensibly - a separate business from GCP. Receiving discounts in one should not require spending in the other...

ehsankia 3y ago

app stores do a lot more than payment processors though. Maybe not 30% worth, but definitely mote than 1-2%. The real issue though is that there isn't a good way to handle every app. In a normal world, every app would cost money to buy, and they would only be charged on the purchase prize. But in a world where most apps are free and then there are in-app purchases, there isn't really any other way for those to be monetized but to take a cut of transactions. But obviously these things don't scale the same.

deleted 3y ago

[deleted]

littlecranky67 3y ago

> Why on earth would Google even suggest such a deal? To prevent Spotify from filing more EU antitrust complaints as they did for the Apple Appstore? [0]. Plus, 4% sounds low, but nominally 4% from all Spotify subscriptions on Android with their imense user base is a very large sum compared to any minor 2-3 person App studio that is charged 20-30%. [0]: https://www.fastcompany.com/90836299/spotify-vs-apple-eu-app-store-complaint-rules https://www.fastcompany.com/90836299/spotify-vs-apple-eu-app...

fomine3 3y ago

Apple and Google virtually want to be a government in digital content area. 30% is a tax. I understand that something like government work (like operating infra and moderation) is needed in app store, but I don't want two California based companies to be a global government.