Google, Apple giving up less than 5% of revenue from apps with pay changes: estimate
The App Store logo displayed on a smartphone.
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New estimates from analytics firm Sensor Tower suggest neither Apple nor Google is giving up a substantial amount of revenue by changing the fees they charge developers.
The report follows changes Google announced on Tuesday when it said it plans to change the way it charges app makers on its Google Play app store, following a similar move Apple made in December.
Beginning July 1, Android developers will be charged 15% of the first $1 million in digital sales through the Google Play app store for Android phones. Google takes 30% of sales after that. Apple’s program is similar. As of Jan. 1, smaller companies can apply for a reduced fee of 15% from Apple. The total fee jumps back to 30% when the company surpasses $1 million in App Store sales.
Neither company is leaving much money on the table with their fee reductions, compared to the scale of their app store businesses, according to a new estimate from app analytics firm Sensor Tower:
- If the 15% fee schedule on revenue up to $1 million had been in place on Google Play in 2020, Google would have missed out on $587 million, or about 5% of Sensor Tower’s estimate of $11.6 billion in Google Play fees for the year.
- If Apple’s program had been in place for 2020, Sensor Tower estimates that it would have missed out on $595 million, or about 2.7% of its estimated $21.7 billion in App Store fees in 2020.
The Sensor Tower estimate underscores that apps are a winner-take-most business and that while the changes from Apple’s App Store and the Google Play store will help a substantial number of smaller app makers, the companies that make the most from the store will still pay close to 30% of digital sales.
That was the point made by Epic Games CEO Tim Sweeney on Tuesday in response to Google’s news. Epic Games is currently suing Apple and Google, seeking to make changes to their app stores to allow for third-party payment processors as well as other changes.
“It’s a self-serving gambit: the far majority of developers will get this new 15% rate and thus be less inclined to fight, but the far majority of *revenue* is in apps with the 30% rate,” Sweeney tweeted.
Apple and Google are facing increased scrutiny from lawmakers and regulators over their app stores.
Both would have been affected by a failed North Dakota bill that would have required app stores to enable software developers to use their own payment processing software and avoid fees charged by Apple and Google. A similar bill passed the Arizona House last week and is still waiting to be debated by the state Senate.
Apple frames its program as a way to help small business developers. Google said on Tuesday that “helping developers build sustainable businesses is a core part of Google Play’s mission.”
Neither company releases exact app store sales, but Apple announces payouts to developers on a regular basis, which can be used to roughly calculate the size of Apple’s App Store.
Apple reported $54.76 billion in services revenue in fiscal 2020, or about 19% of its total sales. App Store fees are only one part of Apple’s services business, which includes subscriptions, warranties and other products. An Apple spokesperson didn’t immediately respond for comment on the Sensor Tower report.
Alphabet includes Google Play revenue under other revenue sources, which posted $21.7 billion in sales in 2020. That figure also includes Google’s hardware business, subscriptions to YouTube and other products and services.
Google didn’t immediately have a comment on the report.