[Kakao VS Google] Masters of Profitable In-App Payments... IT Elders Volunteering as Anti-Google Resistance Forces

-Google, App Consumer Spending Stagnant Despite Increased Downloads
-In-App Payment Enforcement Efforts Ongoing for Years
-Kakao Opposes Google's In-App Payment
-Leading Domestic IT Company Joins Domestic and International 'Anti-Google Sentiment'

[Asia Economy Reporters Nahum Kang, Seungjin Lee] The power struggle between Kakao and Google over the mandatory enforcement of Google in-app payments is escalating rapidly. When Kakao maintained the outlink method of web payments within the KakaoTalk application (app), Google rejected the latest version review, preventing KakaoTalk from updating. In response, Kakao began distributing the KakaoTalk installation file directly, and the conflict shows no signs of stopping.

Why Google? ... 'Maximizing Google Play Revenue'

The reason Google is pushing ahead with mandatory in-app payments despite conflicts with domestic companies and app developers lies in the ‘decline in profitability’ of Google Play. Although the number of app downloads via Google Play increased globally in the second quarter of this year, spending on Android mobile apps remained stagnant.

According to mobile data and analytics platform Data.ai, Google Play downloads in the second quarter of this year grew 5% year-on-year to 26 billion. However, despite the increased downloads, Android mobile app consumer spending remained at $11 billion, the same level as in the first quarter of 2021.

This contrasts sharply with the Apple App Store. The App Store maintained last year’s level of downloads in the second quarter of this year. However, iOS mobile app consumer spending increased by 4% compared to the first quarter of last year, reaching $22 billion. Although Google Play accounted for about 76% of the total 34 billion downloads across the two major app markets in the second quarter, Android mobile app spending was only half that of iOS.

Google Play appears to be introducing the mandatory in-app payment policy and a maximum 30% commission rate on in-app payments to overcome this situation. Since the COVID-19 pandemic, various content apps have grown rapidly, and by applying this policy to those apps, Google expects to drive higher Android mobile app consumer spending. In fact, the categories showing the highest consumer spending growth rates quarter-on-quarter in the second quarter were comics, books and reference materials, and dating apps, which grew by 46%, 37%, and 35%, respectively.

Google’s push for mandatory in-app payments has been ongoing for several years. A representative example is the change in the app registration method on the Google Store. Since August last year, Google has forced apps newly uploaded to Google Play to use the AAB file format instead of APK files. If APK is a finished product, AAB is a concept of ‘components’ that split the APK.

When developers upload files in AAB format, Google Play creates the final APK file, signs it, and then distributes it. Therefore, many believe it is only a matter of time before Google completely bans direct APK installation on Android or removes APK building functionality. This means that, like Apple, distributing APK installation files without Google’s signature could become impossible.

Why Kakao? ... 'Opposing Google’s Abuse of Power'

Why does Kakao resist even at the risk of being expelled from Google Play? The first reason cited is the ‘anti-Google sentiment’ in domestic politics, public opinion, and the international community.

In Korea, domestic publishers and authors previously filed civil lawsuits claiming Google’s mandatory in-app payments were unfair, and consumer groups such as the Consumer Sovereignty Citizens’ Association submitted complaints to authorities, accusing Google of violating the spirit of the Google Abuse Prevention Act (an amendment to the Telecommunications Business Act) and its enforcement decree. Global companies like Spotify and Epic Games, as well as 36 U.S. states, Washington D.C., and the Netherlands Consumer Competition Claim Foundation, are also engaged in lawsuits against Apple and Google over mandatory in-app payments.

Regulatory moves by authorities also support Kakao. The Korea Communications Commission has begun inspecting damages caused by mandatory in-app payments, and if Google interferes with KakaoTalk, it is likely to become a representative case of in-app payment damage. This suggests that the Communications Commission’s regulations could be expedited.

Above all, KakaoTalk’s representativeness is significant. KakaoTalk’s monthly active users (MAU) in Korea number 47.43 million. It is effectively a ‘national app’ used by almost the entire population. Even if Google deletes the app from Google Store, the possibility of user outflow is low. There is also an interpretation that Kakao, as a senior figure in the IT industry, has taken the lead in this battle. However, Kakao is cautious about overinterpreting the dispute with Google. They stated, “Since it is an app used by many people, we only guided a cheaper service method (outlink), and it was not intended to create a confrontation with Google.”