Google reportedly considered altering its app store pricing model in an attempt to evade regulatory scrutiny. However, it ultimately decided against implementing a proposal to charge a set fee per app after realizing the potential cost of such a move. The details emerged from documents released in an antitrust lawsuit filed by Epic Games. The suit accused Google of abusing its monopoly power over the app store, resulting in a recent loss for the tech giant.
Under pressure from regulators and developers regarding the Play Store's 30% commission, Google launched Project Everest in 2021 to reevaluate its billing model. The documents reveal that Google's primary concern was to preempt potential regulatory overreach and maintain the status quo for a short period to support the development of reasonable legislation.
One proposal explored by Project Everest was charging developers incremental service fees based on app placement in the Play Store, as well as for user downloads, updates, and referrals. However, this model was deemed too risky and could potentially result in significant losses amounting to billions of dollars. As an alternative, Google employees recommended allowing app developers to process their own payments while paying a reduced fee to Google. This suggestion closely aligns with the recent $700 million settlement between Google and state attorneys general, where Google agreed to permit developers to use their own payment systems.
Google's loss against Epic Games could disrupt the app store duopoly dominated by Google and Apple, which collectively generate nearly $200 billion annually. Both companies have faced criticism for charging exorbitant commissions of up to 30% to software developers. This recent setback for Google may accelerate the push for reforming app store regulations, which have faced scrutiny from regulators and lawmakers globally.
Developers have long complained about the high commissions imposed by Google, arguing that they are forced to pass these costs onto consumers, thus increasing prices. Countries like Korea have already taken steps to address this issue by requiring Google to open its app stores to other payment systems. Additionally, new European Union regulations set to take effect in March will compel Google and Apple to allow alternative payment options in their stores.
While dozens of state attorneys general have sued Google for impeding competition in the app store market, the recently disclosed internal documents suggest that the company was already moving toward allowing third-party payment options. A Google spokesperson defended the fees, stating they were essential for maintaining investment in Android and the Play Store. The company has taken steps to reduce fees for subscriptions and the first $1 million in developers' earnings.
To address the demand for choice and flexibility, Google introduced the "User Choice Billing" program in 2022. App developers are now able to handle payments themselves, giving Google a slightly reduced fee of either 26% or 11% for subscriptions. During the recent Epic trial, Google employee Purnima Kochikar testified that approximately 80 developers had already opted for the User Choice Billing system as of May 2023.