Paytm sets up own app store as Indian start-ups fight Google domination

26, Oct. 2020

Google plans to start charging new categories of apps like fitness, game, music, education and dating a 30 percent sales commission in India. (Photo courtesy of Unsplash)
Google plans to start charging new categories of apps like fitness, game, music, education and dating a 30 percent sales commission in India. (Photo courtesy of Unsplash)

By Atul Ranjan

NEW DELHI, NNA - Once a favored partner with Indian start-ups and app developers, Google is now facing a growing rebellion as they band together to fight the predominance of the internet behemoth in the app store arena.

At least 150 app players are in the midst of forming an association to give them more clout as they accuse the American tech giant of tamping down the growth of local start-ups which need nurturing and support.

The immediate trigger of the protest was Google’s decision in September to start charging a 30 percent commission on sales in new categories of app services like fitness, game, music, education and dating on Google Play, an app distribution platform.

App developers were also upset with its move to make it mandatory for them to use Google's in-app payment system.

Paytm, a digital financial service company which runs India's most popular payments app on Google Play, was fired up to lead the protest after Google took down its app in September, alleging that it had facilitated online gambling.

While Google has now decided to talk peace with the Indian startups and app developers to address their concerns as well as postpone the enforcement of its billing plan to end-March of 2022, startups including app developers led by Paytm seem to be in no mood for reconciliation.

They have continued to speak out against Google’s alleged “arbitrary policies” and abuse of its dominant position.

According to the Internet and Mobile Association of India, a digital industry lobby group, 98 percent of internet users in the country access the internet via a mobile device, with more than 90 percent using an android phone. This has given Google overwhelming “control over many layers between customers and their service providers”, said the association.

Reliance Jio Infocomm Ltd., which operates the largest telecom infrastructure and broadband network in India, has received strategic investments from Google and Facebook this year to launch ambitious plans to conquer the telco and e-commerce markets.

Google plans to make hundreds of millions of cheap phones for the Indian market.

Many Indian startups are currently in the process of forming a local app developers’ association to take on big global technology giants such as Google.

They have also met officials from government and regulatory bodies such as the country’s antitrust watchdog, the Competition Commission of India (CCI), to voice their concerns.

“Over 150 startups have come aboard, and more will be joining this association soon,” a fitness-app startup founder, who is already a pioneer member, told NNA.

“Recently, we have had virtual meetings with some of the key government ministries and also institutions like CCI and a government policy think tank over the issue,” he said, adding that this is the first time local startups are coming together to ensure that the monopoly of corporate giants like Google do not damage local businesses.

“Earlier, startups were fighting their individual battles with companies like Google. Now for the first time, we have all come together and we are very serious this time,” he added.

On Oct. 5, Paytm announced the launch of its android mini app store for Indian app developers. Three days later, it organized a “Paytm Mini App Developer Conference” in which it brought together the country’s app developer community to chart a future plan “for a self-reliant Indian app ecosystem”.

Paytm also announced a grant of 100 million rupees (around $1.3 million) to support local developers and startups building innovative products and digital services in India.

The company claimed that over 5,000 developers from across the country have expressed interest to join its free-listing Paytm mini app store.

It also said more than 300 app-based service providers such as Decathalon, Ola, Park+, Rapido, Netmeds, 1MG, Domino’s Pizza, FreshMenu, NoBroker have already joined the platform which received over 12 million visits in September.

“We firmly believe that if app developers are charged a fee of 30 percent or more, the overall cost of their product and service will increase. Developers spend a lot of money and resources to build their apps and then marketing them. Therefore, we have decided to not charge anything for listing their app on the Paytm Mini App Store,” Paytm said in statement, adding that its platform will enable app developers to reach 150 million monthly active users.

While Google is looking to make it mandatory for the app developers to use its in-app payment system only, Paytm Mini App is offering them much wider choices with multiple payment modes to make payment much easier for app users.

According to Paytm founder and chief executive officer, Vijay Shekhar Sharma, app developers and owners need a good variety of distribution channels and payment systems to market their apps and help generate revenues.

Vishwas Patel, founder of CCAvenues, a payment gateway service, and also chairman of the Payments Council of India, said Google cannot force Indian app developers and owners to use the Google billing and payment system only, and charge them a 30 percent commission.

They should not reject Indian apps which are using RBI, India’s central bank, and recognized payment aggregators and gateways, he said.

“Google’s stand in courts is that it does not need RBI authorization as it’s not a payment system operator and here it’s mandating that Indian apps use only Google’s proprietary billing and payment systems. Google should not exercise its dominant position, but rather allow a level playing field for everyone in the ecosystem,” he said.

In its latest statement on the issue, Google said there has been some “confusion” that Google Play billing is in itself a form of payment.

“Google Play billing is a billing system that supports many ways for consumers to pay. Today Play’s billing supports more than 290 forms of payment globally,” it said.

It said over the last several years the company has added more local forms of payment in India. They include credit and debit cards, netbanking, carrier billing, gift cards, and all supported UPI (Unified Payments Interface) apps.

“And we will continue to engage with developers and consumers on adding additional forms of payment,” it added.

Google said its policy only applies when a developer charges users to download their app, or they sell in-app digital items. Such apps account for less than 3 percent of apps on Google Play, it added.

“Less than 3 percent of developers with apps on Google Play sold digital goods over the last 12 months, and of this 3 percent, the vast majority (nearly 97 percent) already use Google Play's billing,” said Google.

According to local startups and experts, the 30 percent cut that Google wants is not new, but the fear is that it is likely to continue adding new categories of apps under its billing system.

Vishal Gondal, founder and CEO of GOQii, a fitness startup, does not accept Google's reasoning.

He told NNA, “Look, Google has suddenly chosen fitness as a category to impose this tax at a time when fitness is going online because of the ongoing coronavirus pandemic. People can’t go to a gym or outside, so they are all exercising, taking consultations on our app. Similarly, online app-based education has started gaining traction amid the pandemic, so Google has also targeted education too.”

But the fundamental issue is that Google is "not following the laws of India,” he said.

“Paytm is a digital bank, governed by the RBI. How can Google on its own, for whatever reason, decide to take that app down. So are we following two laws in the country? A Google law and a law of India?” he added.

He also questioned Google's services on its app store and its claims that its payment system ensures safe transactions for consumers.

“There are over 500 fake FAU-G apps on Google and we wanted these apps to be removed. But Google is not acting while millions of people are getting duped by downloading these fake apps. Yet they want a 30 percent commission,” he said.

Gondal has already joined the proposed start-ups association.

Paytm’s Sharma, who is at the forefront of voicing opposition against Google, has accused the tech giant of “arbitrary” enforcement of its policy, which he said, can affect the entire Indian app ecosystem.

“Google is behaving like a toll collector. They are controlling our destiny. Google removes apps without giving them proper hearing. They said Paytm is a gambling app. They must not have said this,” Sharma thundered during a TV interview.

Sharma said that the Indian startups want big players like Google to abide by the local laws and that there should be tougher regulatory provisions for such foreign companies.

Murugavel Janakiraman, founder and CEO of Matrimony.com, a matrimony portal, is also helping to form the new association.

He said, “Today, we are all at the mercy of Google. We don’t know when they will remove the apps, based on some policy that they will decide. What Paytm has started is a freedom movement. The Internet in our country is controlled by Google and we all are at its mercy.”

According to industry experts like Rameesh Kailasam, CEO of IndiaTech.Org, a voluntary organization that helps promote a vibrant tech and innovation ecosystem in India, it was high time for India to emerge as a digital power house and have its own app store. After all, the country is not just consuming app services but producing them too, he said.

A recent report by 42matters AG, a leading provider of mobile app data analytics and app store insights, noted that India’s app ecosystem is maturing rapidly.

“While China remains the largest market in terms of usage and revenue, and American companies are perhaps the most innovative, India is now the top country in the world in terms of number of apps installed and used per month,” it said.

The report said there are 27,485 Indian app publishers on Google Play, representing 3 percent of the 905,876 on the platform in India.

Globally, there are at least 136,911 apps from Indian publishers on Google Play, among the 2,985,831 apps available.

Consumer spending on apps is also witnessing huge growth.

A October 1 report by app analytics firm SensorTower Inc., revealed that worldwide consumer spending in mobile apps reached $29.3 billion while installations climbed to 36.5 billion across Apple’s App Store and Google Play in the third quarter (July-Sept) of 2020.

The report found that consumer spending on in-app purchases, subscriptions, and premium apps jumped 31 percent to $19 billion globally on Apple’s app store, up from $14.5 billion in the same period last year.

Spending on Google Play saw even more substantial growth, rising 33.8 percent year-on-year to $10.3 billion, from $7.7 billion in the year-ago quarter.

California-based Google, a flagship subsidiary of Alphabet Inc., is being sued by the United States Department of Justice over alleged anti-competitive practices, following antitrust probes on tech giants by the European Commission. It is also facing regulatory probes in Asia too.

The EU plans to propose a law to ban dominant platforms such as Google, Apple, Amazon and Facebook from giving preference to their own services in search rankings or on devices.

Last week, Japan said it will join forces with the U.S. and Europe to crack down on any market abuses by the four Big Tech companies and will join global efforts to regulate digital platform operators.

The U.S. lawsuit and global probes have added to the woes of Google which suffered falling advertising revenues due to the coronavirus pandemic.

Alphabet is expected to announce Q3 earnings on Oct 29.