Google Reduces Play Store Commissions Following Apple's Lead

This week, Google announced a reduction in the commissions charged to Android app developers who distribute their applications through the Google Play marketplace. This decision mirrors a similar adjustment made by Apple last year, and is largely motivated by efforts to address potential antitrust concerns.

Google estimates that approximately 99% of developers selling goods and services will experience a halving of their fees. The standard 30% commission will be lowered to 15% on the first million dollars earned by each developer.

App Earnings Distribution on Google Play

Data provided by App Annie offers insight into the distribution of earnings within the Google Play Store, and allows for comparison with Apple’s App Store. The majority of Google Play publishers – 97.9% – generated less than $1 million in annual consumer spending in 2020, qualifying them for the reduced commission rate.

However, Google’s implementation differs from Apple’s. Google will apply the reduced commission to the “first” $1 million in revenue earned during the year, rather than establishing $1 million as the point at which the commission increases, as Apple has done. Consequently, a larger number of developers may benefit from Google’s policy change.

The data reveals that a small percentage of developers will be affected by the higher commission bracket. Many developers receive modest returns from paid downloads, in-app purchases, or subscription services.

Developer Revenue Breakdown

In 2020, 85,381 Google Play developers generated less than $100,000 in consumer spending. A further 3,404 developers earned between $100,000 and $500,000.

Only 568 developers approached the $1 million mark, with consumer spending ranging from $500,000 to $750,000. An even smaller group, 359 developers, generated between $750,000 and $1 million.

The number of developers subject to the 30% commission is relatively small.

Just 215 developers saw consumer spending between $1 million and $1.25 million. 512 developers earned between $1.25 million and $2 million. The most profitable 1,308 developers exceeded $2 million in revenue in 2020.

Comparison with Apple’s App Store

This revenue distribution – a large number of developers earning under $100,000, with a small percentage generating significantly higher incomes – is similar to that of Apple’s App Store in 2020. However, Apple’s App Store sees a greater number of developers earning a substantial income in the sub-$1 million brackets compared to Google Play.

Apple’s decision to maintain a higher commission for developers earning over $1 million is reflected in these figures. Apple has a larger number of developers who meet this revenue threshold. (Specifically, 3,611 developers on iOS earn $1 million or more, compared to 2,035 on Google Play).

Implications of the Policy Changes

These policy adjustments benefit the majority of mobile app developers by increasing their earnings. They also provide Apple and Google with a means of demonstrating to regulators that they are not unfairly leveraging their market dominance against smaller developers.

App Annie’s data indicates that developers accounting for up to $1 million in consumer spending represent only 5% of total Google Play consumer spending, despite the fact that 94% of Google Play apps offer in-app purchase options.

While these changes have a limited impact on the platforms’ overall commission revenue, Google’s approach is simpler and more equitable for developers who are still scaling their businesses, even after surpassing the $1 million revenue mark.

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