Google announced last week the company will reduce its app subscription commissions from 30% to 15%, effective January 1, 2022. Most recently, Google was charging subscription app developers 30% for the first year their app appeared in the Google Play Store and 15% for subsequent years. According to an October 21, 2021 blog post by Sameer Samat, vice president of product management, Google’s customers said that customer churn made it hard for the companies to benefit from the 15% commission structure.
“…99% of developers qualify for a service fee of 15% or less. And after learning from and listening to developers across many industries and regions, including developers like Anghami, AWA, Bumble, Calm, Duolingo, KADOKAWA, KKBOX, Picsart, and Smule, we’re announcing additional changes to further support our ecosystem of partners and help them build sustainable businesses, and ensure Play continues to lead in the mobile app ecosystem,” wrote Samat.
“To help support the specific needs of developers offering subscriptions, starting on January 1, 2022, we’re decreasing the service fee for all subscriptions on Google Play from 30% to 15%, starting from day one,” added Samat.
Second fee reduction in recent months
This is the second time Google has adjusted its fees for developers this year. Effective July 1, 2021, Google Play service fees were 15% for the first $1 million in revenue a developer earned per year. Announced in March, Samat said 99% of developers would see a 50% reduction in fees.
“These are funds that can help developers scale up at a critical phase of their growth by hiring more engineers, adding to their marketing staff, increasing server capacity, and more,” Samat said in a March 16, 2021 blog post.
Commission fees for cross platform experiences
Recognizing that subscription apps are now available on multiple platforms (e.g., TVs, cars, watches, tablets, etc.), Google launched the Play Media Experience Program earlier this year to encourage audio, video and book developers to help grow the Android platform across devices. At that time, Google charged a service fee “as low as 15%.” Google is changing that too. Ebooks and on-demand streaming services are now eligible for a service fee as low as 10%.
Google did not specify how the service fee is calculated for developers in its blog post, so that may be discretionary. A Google spokesperson said, “Developers can review program guidelines and express interest now and we’ll follow up with more information if they are eligible,” reports The Verge.
To be eligible for the Play Media Experience Program, developers must be a developer in good standing, have over 100,000 monthly active installs on Google Play, offer a high-quality user experience, and integrate specific Google platforms and APIs, depending on content time.
“The new rates recognize industry economics of media content verticals and make Google Play work better for developers and the communities of artists, musicians and authors they represent,” Samat said.
Google said it realizes that a “one size fits all” commission structure does not work for every subscription business or developer. To help address this issue, Google has created programs like the Play Media Experience Program to address the issues of different industries.
Google shared two customer testimonials who are pleased about the changes.
“Our partnership with Google has been a powerful one for our business, helping us to scale and ultimately playing a key role in advancing our mission to empower women globally. The pricing change they’ve announced will allow us to better invest in our products and further empower users to confidently connect online.”
– Whitney Wolfe Herd, Founder and CEO, Bumble Inc.
“Just as every person learns in different ways, every developer is different as well. We’re excited to see Google continuing to collaborate with the ecosystem to find models that work for both the developer and platform. This reduction in subscription fees will help Duolingo accelerate our mission of universally available language learning.”
– Luis von Ahn, Co-Founder and CEO of Duolingo
Apple’s settlement in class-action lawsuit
This news comes just two months after Apple agreed to make major updates to its App Store policies to settle a class-action lawsuit brought against it by U.S. developers. Part of the settlement included agreeing to maintain its current commission structure for developers for at least the next three years. Developers earning less than $1 million in revenue per year pay 15% commission. Developers making more than $1 million per year pay 30% commission in year 1 and 15% in subsequent years. Another major change is that Apple will allow developers to directly contact their customers and to offer payment options outside the App Store.
This is a positive change for developers and one that may help them look more favorably on Google than on Google Play’s primary competitor, Apple’s App Store. While this reduction in fees will impact Google’s bottom line, as of June 30, 2021, Google’s parent Alphabet reported total revenue of $61.9 billion, a 62% increase year-over-year. The tech giant can afford to be generous. The commission reduction may also have been a preemptive move to prevent any lawsuits similar to the class-action lawsuit settled by Apple based on commission structure.