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Can Paytm and other Indian startups take on the mighty Google?

Written by Moulishree Srivastava Published on 

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Amidst the mounting backlash from Indian startups, Google has postponed the enforcement of the 30% commission on in-app purchases by six months to April 2022.

Noida-based digital payments company Paytm on Monday ran a full-page advertisement on the front pages of almost all the local newspapers in India declaring it has launched a mini-app store on Paytm, pitting it against Google’s Play Store.

In the past couple of weeks, Google has risen as a common enemy of Indian technology startups as it not only removed a handful of apps from the Play Store, it also made the use of its billing system mandatory for all in-app purchases. Further, it said it would enforce 30% commission to companies for every in-app purchases. It’s to be noted that Google Play has a monopoly in India since its mobile operating system Android enjoys 95% of the market share in the country.

Ever since the announcement, Indian founders have been trying to find ways to get away with the “Google tax.” Dozens of startups such as the founders of Paytm, GOQii, India Quotient, A91 Partners, Innov8, Bharat Matrimony, upGrad, Dream11, and TrulyMadly, among others, came together to take on Google.

KrASIA looked at the series of events that lead to the unprecedented row between Google and Indian tech startups.

Trigger: In the third week of September, Google removed Paytm and its gaming app Paytm First Games from Google Play Store for allegedly violating its betting and gambling policy. A few days later, Google issued notices to food delivery companies Zomato and Swiggy for running cashback promotions on their apps related to the Indian Premier League (IPL), a cricket tournament that is in season now.

The US-based company in a blog said it doesn’t allow online casinos or support any unregulated gambling apps that facilitate sports betting.

While Paytm was restored within eight hours after it removed the promotions it was running, its founder and CEO Vijay Shekhar Sharma accused Google of misusing its dominant position to arm-twist companies to abide by its demands and unfairly gain customers for its own payment business.

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In an interview with local media Times Now, he said  Google is “judge, jury, and executioner all rolled into one” and that it’s a ‘Google-nirbhar bharat, not Atmanirbhar Bharat (it’s Google-dependent country, not the self-reliant country). PhonePe, Paytm’s biggest rival, turned up in support of Paytm’s drive that Sharma had started against Google.

Ten days after temporarily suspending Paytm, Google made it clear that all the apps on its app store would have to use Google’s own billing system for in-app purchases, and would be charged a 30% commission on these purchases. In comparison to Google, external payment gateways reportedly charge about 1.5-2% commission. The 30% ‘Google tax’ is likely to severely impact startups that make margins in a single digit.

In its defense, the American behemoth said in a blog post that the 30% commission policy had always been there, but it wasn’t enforced properly in India. Although the company claimed that this policy is only applicable to less than 3% of developers with apps on Google Play Store.

The said policy entails the in-app purchase of features or services such as virtual currencies, extra lives, additional playtime, add-on items, characters, and avatars, as well as subscription services in fitness, game, dating, education, music, video, and other content apps.

Repercussion: The day after Google issued the statement on the said policy, Paytm’s Sharma hosted a Zoom call with over 50 Indian founders to figure out a way to take on the American giant.

“This was a call about a genuine grouse against Google,” a founder told local news website MediaNama. “It wasn’t just about the Paytm issue. We’re serious about this.”

Another report by local media Mint, citing sources, said, Sharma called Google the “big daddy” that controls the “oxygen supply of (app) distribution” on Android phones. He reportedly urged the roughly 50 entrepreneurs on the call to join hands to “stop this tsunami.”

During the founders’ call, several ideas for the next steps were floated including creating an Indian internet founders’ association that can become the nodal agency to bring startups’ concerns to the government on their behalf.

However, the big idea that was explored was the creation of an Indian digital app store and the ecosystem around it to counter American giants Google and Apple.

Escalation: On Saturday, nearly 40 startup founders including Paytm’s Sharma attended a virtual meeting with the government officials from the Ministry of Electronics and Information Technology (Meity) to put forward their concerns over Google’s dominance in the app ecosystem as well as it billing policies.

Local media Economic Times, (ET) citing sources, said the discussions largely revolved around the recent temporary ban on Paytm by Google due to the alleged violations of its app store policies, Google’s payment mechanism, becoming a monopoly for in-app payments, and the 30% commission on every in-app purchase.

The ET report said the ministry has also invited representations from startups that are not opposed to Google’s policies. The report added that the ministry was also considering multiple other representations on the issue.

Read this: China set to launch antitrust investigation into Google over Android system dominance, report says

Opportunity: Paytm on Monday said it has launched a mini-app store on its platform which will enable Indian apps to reach out to millions of its users. The move is aimed at challenging Google’s dominance in the app ecosystem amidst the Indian tech startups’ crusade against the US tech giant. Although users won’t be able to download apps from Paytm’s mini-app store, they can use Paytm’s platform to access the services provided by these apps.

The company said more than 300 apps, including Decathlon, Ola, Rapido, Netmeds, 1MG, Domino’s Pizza, FreshMenu, NoBroker, have joined its app store.

It is to be noted that Paytm rolled out mini-programs earlier this July to help businesses leverage its app to showcase their services to its huge user base. Paytm’s mini-program platform was similar to China’s WeChat’s mini apps feature that let web apps integrate with WeChat. At the time, Paytm had a mere half a dozen apps listed as mini-programs.

Paytm now seems to have tweaked it and made it into a mini-app store in its drive against Google Play.

Reaction: Amidst the mounting backlash from the Indian startup community, Google has reportedly postponed the enforcement of the 30% commission on in-app purchases of digital goods by six months to April 2022. Earlier, the company gave app developers time till September next year to integrate their billing system with Google’s.

In a blog post Google said due to the “local needs and concerns,” it is “extending the time for developers in India to integrate with the Play billing system, to ensure they have enough time to implement the UPI for the subscription payment option that will be made available on Google Play.”

“We are setting up listening sessions with leading Indian startups to understand their concerns more deeply,” it added.

Paytm’s Sharma, however, in an interview with ET on Monday evening, called the move “admission of guilt” by the US giant.

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