Today, Google announced a major change to the revenue-sharing structure of Google Play apps—one that could significantly alter the fortunes of independent developers or small companies who rely on the Android platform’s app store for revenue.
Starting on July 1, Google will take a 15 percent cut of the first $1 million in annual Google Play revenue from Google Play that a developer earns. That’s down from 30 percent previously. The 30 percent figure will still apply to all revenue over $1 million each year.
Google claims that 99 percent of developers with apps and content on Google Play will experience reductions in fees paid to Google of up to 50 percent.
On the surface, this looks like a very similar deal to what Apple announced late last year when it declared that developers making under $1 million will soon begin paying just 15 percent to the platform rather than the historical 30 percent. But it’s actually different in a way that could be consequential for many developers; it’s arguably a little more generous.
That’s because Apple applies its lower 15 percent rate to a developer until that developer exceeds $1 million in revenue in a given year, at which point the higher 30 percent number is applied to all of that developer’s earnings. Google still charges 15 percent on that first million even if the developer makes $5 million. So in Google’s model, a developer who earns $1.2 million on an app pays 15 percent on $1 million, then 30 percent on $200,000. In Apple’s, a developer making $800,000 forks over 15 percent on that amount, but if they make $1.2 million, they pay 30 percent on 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 are pulling in $2 million, $5 million, and “even $10 million” each year have said to Google that this change will make a difference in making their businesses more sustainable, even though they make significantly more than $1 million. After all, an extra 15 percent of $1 million is $150,000, which is not a small amount of money to any but the largest and most successful companies.
This change is likely not born entirely of altruism, however. First of all, Google is almost directly matching—slightly beating, actually—Apple’s offer to developers as the App Store and Google Play compete directly. Also, both Apple and Google have been subject to antitrust lawsuits and investigations over their grips on their respective app marketplaces. Like Apple with the App Store, Google requires app developers to use its own payment system for apps on Play, making it difficult to circumvent these fees.
While the fees themselves are usually not the primary subject of the investigations and suits, this change improves optics and sentiment for the two tech giants while they are beleaguered, and it does so without costing them much money. The significant majority of the revenue Apple and Google receive from their app marketplaces comes from apps with revenues far beyond $1 million annually.