Dominance of App Store & Google Play is hurting developers and users. Telegram is just its latest victim

Apple and Google have nurtured their walled gardens — App Store and Google Play Store — condemning developers to walking on eggshells around store rules, paying exorbitant fees, and living in the fear of powerful reviewers working behind the scenes. The walls of these gardens are of different height — with Apple’s being far steeper than that of Google’s — but they are both hard to climb.

There have been numerous attempts to challenge these largely self-contained systems: some have resulted into minor, region-specific concessions, some have fizzled out with developers throwing in the towel as the stakes were too high, and some have triggered retaliation — such as when Apple and Google counter-sued Epic Games after the game developer planted a 3rd party paying option in Fortnite for iOS and Android.

The dominance of the Apple App Store and Google Play Store is hurting not only developers. End users become collateral damage in the world skewed in favor of big tech companies without even realizing it: they have to pay more for apps because developers have to factor in store commissions, they cannot download some apps because their developers have violated some arbitrary rules, or, in the case of the latest high-profile victim of the Apple ecosystem, Telegram, they cannot take advantage of all the features that an app offers.

‘The Destroyer of Dreams’

Telegram has become the latest, but certainly not the last victim of the system that favors tech behemoths behind app stores, in Telegram’s case — Apple. Shortly after the messanger introduced pay-per-view posts that could be paid for independently from Apple, the latter demanded its 30% cut. Telegram CEO Pavel Durov said that the content creators seeking to monetize their work on Telegram started to use third-party bots to process payments. That way, according to Durov, they were able to receive “close to 100%” of the amount their subscribers paid for what could have been an image, a video, or a text post.

Telegram chose to disable the feature for iOS rather than risk being expelled from the store. “This is just another example of how a trillion-dollar monopoly abuses its market dominance at the expense of millions of users who are trying to monetize their own content”, Durov wrote. Telegram’s founder urged regulators in the EU, India, and all over the world to take action until Apple “destroys more dreams and crushes more entrepreneurs.”

Photo: Alexander Grey/Unsplash

Apple charges developers who earn more than $1 million per year through the App Store a 30% commission on paid apps and in-app purchases. That used to be the default tax for all companies, regardless of their revenue. In November 2020, Apple lowered its cut from 30% to 15% for developers that make less than $1 million per year. Apple does not allow third-party app stores or side-loading apps, so iOS developers essenitally have no choice but to publish apps to the App Store and be bound by its rules and regulations. Apple argues that relaxing restrictions around sideloading would “destroy the security of the iPhone.”

The Telegram case is illustrative of the general trend: when push comes to shove, developers are more likely to back down than seek a direct showdown with the company at the center of the ecosystem. The chance to succeed is meager. The drawn-out legal battle between Apple, Google and Epic Games serves as a cautionary tale about what can happen if a developer decides to stick it to the tech giants and refuses to pay.

Legal wrangling of EPIC proportions

In August 2020, Epic Games, the world’s most popular gaming brand, kicked off “Project Liberty,” its masterplan to upend the “monopoly” of Apple and Google over their app ecosystems. The maker of Fortnite did this by sneaking an update into the Fortnite app for iOS and Android that allowed users to purchase an in-game currency called V-Bucks directly from Epic. Users could still buy V-Bucks through the Apple App Store and Google Play Store, but they would have to pay 20% more. Naturally, that did not sit well with either Apple or Google. The retaliation was swift: the same day the new payment method was introduced, Apple and Google yanked Fortnite from their respective stores for violating platform rules. Epic filed two separate lawsuits against Apple and Google, alleging they were breaking antitrust laws. Apple countersued Epic, accusing it wanting to “to line Epic’s pockets at Apple’s expense”, and Google followed suit.

Last September, a US court largely sided with Apple, ruling in favor of the company in 9 out of 10 claims. The judge ruled that Apple was not a monopoly in the context of the case, giving it carte blanche to keep charging the 30% fee and deny users access to third-party stores. On top of that, the court ordered Epic to pay Apple a total of $6 million in owned royalties plus interest. However, Apple was also ordered to allow developers to insert links to external paying options within the App Store. The ruling is currently being appealed by both Apple and Epic.

Photo: Joshua Hoehne on Unsplash

The Google versus Epic case is still to go to trial. In the latest twist of the long-running legal saga, Epic accused Google of paying off business rivals so that they do not launch their own app stores. Epic and dating app developer Match alleged that Google splashed out “a billion dollars on secret deals with the top app developers.” Google denied the claim of sweetening the pot for potential competitors, arguing that it merely “provides incentives for developers to give benefits and early access to Google Play users when they release new or updated content.”

While Epic may have not achieved everything that it wanted, its high-profile legal brawl with Apple and Google has shed more light on the questionable app store practices and prompted regulators to take a closer look at the playing feild.

A storm is brewing

Epic’s accusations echo the claims made in a series of antitrust lawsuits filed by the US authorities against Google over the past two years. In one such lawsuit, US states’ attorney generals accused Google of having “targeted potentially competing app stores”. The lawsuit specifically alleged that Google tried to kill off Samsung’s alternative to Google’s Play Store by paying off popular developers and even Samsung itself.

Unlike Apple, Google allows third-party stores and sideloading. That means that besides Google Play Store that comes preinstalled on most Android devices, users can install alternative app stores and download apps from them. Among the best known alternative app stores for Android are Amazon Appstore, Samsung Galaxy Apps, Huawei AppGallery and F-Droid. The latter focuses on free and open-source apps, and has neither ads nor tracking.

Given that Google allows users to take advantage of alternative stores, antitrust claims against the company are more nuanced and perhaps more shaky. At the same time, Google restricts payment methods available to developers in its own Google Play Store. Much like the App Store, the Google Play Store charges a 15% fee on a developer’s first $1 million in annual revenue and continues to charge a 30% fee if revenue exceeds $1 million a year. Certain categories of apps, such as those offering books, can pay as little as 10%. On June 1, 2022 Google made the use of Google Play’s billing system mandatory. Google stated that “apps using an alternative in-app billing system will need to remove it in order to comply with the Payments policy.” However, the implementation of the policy has been very selective, affecting some developers and sparing others depending on the country or category of the app. Thus, Google did not enforce the policy in South Korea and suspended it indefinitely in India following an antitrust order. Google ended up allowing developers of non-gaming apps to offer third-party payment options to users in India, Australia, Indonesia, Japan, and the European Economic Area, but not in the US. The reason why Google has made a notable exception for gaming apps is probably this: they bring in a lot of money. In 2020, gaming apps accounted for 83% of the global Google Play app revenues.

Both Google and Apple argue that a hefty commission they charge is justified by the unmatched level of security they provide. The money is going towards building developer tools, detecting fraud as well as ensuring that apps are free of malware, and are otherwise safe to use, they say. However, this assertion does not quite hold water. Despite supposedly robust moderation procedure, malicious apps regularly find their way into the App Store and Google Play Store. Some of these bad apps are even capable of stealing user data. And while independent app stores have fewer resources to vet apps, the question is whether Apple and Google are overcharging for a service that is not foolproof.

Photo: Pawel Czerwinski on Unsplash

Google and Apple may still look like colossuses of the app market, but their feet are of clay. Google now has to fend off numerous lawsuits. The US Department of Justice is also reportedly considering an antitrust lawsuit against Apple. This March the EU agreed in principle on the law which could transform the way Google and Apple are doing business in their app stores and elsewhere. The law, called the Digital Markets Act (DMA), went into effect on November 1 and will start to apply from May, 2023. Under the DMA, big tech companies will have to allow “developers to use alternative in-app payment systems or allowing end users to download alternative app stores” if they want to keep operating in the EU. But problems with app stores don’t stop here.

Obscure review process

Perhaps, you’ve already guessed it. We would not have vented so much at the way Google and Apple (mis)treat developers, if we did not hold a grudge against the companies ourselves.

Being de-facto monopolists within their worlds, Google and Apple play the judge, jury and executioner with their store moderation policies. Someone might argue that they are private companies and are entitled to do what they please to the apps that try to grow in their walled gardens. But this system reeks of unfairness, stifles innovation and disadvantages users.

Google removed AdGuard from its Play Store back in 2014 for the violation of one of its vaguely worded store rules. The rules could arguably be stretched to remove a lot of apps from the store if Google only so wished. One thing is certain, though: network-level ad blocker like AdGuard would have interfered with Google’s ability to make money off its users.

The problem with app store moderation policies is not only that they are vague and are subject to interpretation, but that they are enforced inconsistently. We had to let go of a system-wide ad blocking functionality in the AdGuard app for iOS in 2017 after Apple decided to enforce a policy prohibiting “interference with the performance or capabilities of other apps.” The policy was not entirely new and apparently lay dormant up until Apple decided to wield it against ad blockers outside of Safari. After Apple banned non-VPN apps from using a VPN profile in 2018, we had to discontinue the app in its current form, and focus on improving ad blocking in Safari… only for Apple to reverse course and relax restrictions around using an API to configure a VPN tunnel. Surely enough, we did not receive any heads-up from Apple about any upcoming policy changes.

And we are far from alone in not being fans of the process. The already mentioned Durov has complained that Telegram is “often unable” to push timely updates due to “obscure “review process” imposed on all mobile apps by the tech monopolies.” Sometimes the updates would get stuck in the review process for weeks, with not much of a word back, he said. And if such big companies as Telegram suffer, then smaller apps must be suffering even more. As Durov pointed out: “It’s not just demoralizing: it causes direct financial losses to hundreds of thousands of mobile apps globally.”

Smaller markets showing the way

If we have to make a bet, it’s likely that Apple and Google will have to give up some of their leverage over app stores if they want to weather the brewing regulatory storm. In fact, regulators in several countries have already succeeded in putting the tech giants on the back feet.

This year South Korea approved a law banning Google and Apple from forcing developers to use their proprietary payment systems. Both companies now allow the use of third-party payment systems for in-app purchases in the country. In the Netherlands, Apple allows local dating apps to use alternative billing methods after being fined €5 million ($5.6 million) by the Dutch antitrust authority. Apple has also agreed to allow “reader apps” in Japan like Netflix to include a signup using a non-App Store payment method in exchange for the Japanese regulator closing the investigation into the company.

Cracks start to appear in the Apple and Google app distribution and payment models as more and more countries are taking them to task. But the big tech won’t cave in without a fight and will, no doubt, use every tool available to dodge the bullet. For example, in South Korea, where Apple was forced to allow alternative payment methods, the company charges a 26% commission on all app sales processed by third-party providers. It means that South Korean app developers eligible for a reduced rate of 15% in the App Store will pay almost twice as much if they switch to an alternative payment method.

Something has to be done

To sum it up, when you’re dealing with app stores, you are sitting on a powder keg ready to explode any minute. Google and Apple enjoy dominance on the market, while suppressing alternatives, either directly or indirectly. For app developers it often means a dragged-out review process, a high commission, and little transparency from Apple and Google when it comes to enforcing store rules. It also means that some categories of apps, like those with ad-blocking functionality, can be regarded as a threat by tech giants, fall out of favor with them and not be allowed back. For example, the AdGuard app for Android can only be downloaded manually, since Google prohibits distribution of network-level ad blockers via Google Play.

Attempts by individual companies to challenge the system are doomed to fail, and it’s up to regulators working in concert with each other to rein in Apple and Google. It’s not only app developers who are hurting due to the duo’s hegemony. The users, are suffering the most. They don’t get to install otherwise great apps because these apps did not pass the muster with App Store or Google Play. They also have to shoulder the fees that app stores take from developers, and which the latter have to factor into the price.

Less power consolidation will only bring about healthy competition, promote innovation and benefit users.