[W Forum] The Domestic App Market Dependent on Google

Imagine a country A where goods can only be purchased through department stores. Despite the existence of multiple credit card companies, at the 'Sagwa' Department Store, only the 'Sagwa' credit card issued by the 'Sagwa' Department Store can be used, and at the 'Geomsaek' Department Store, only the 'Geomsaek' credit card is accepted. The sales of tenant companies fluctuate according to the card fees set by the two department stores. Tenants who lowered the expensive fees by using other payment methods were immediately expelled. In this situation, both department stores raised the fees uniformly to 30%. Amid the anxiety over the fee increase, companies put product development on the back burner and only consider raising prices while watching consumers. Meanwhile, other credit card companies face the risk of going out of business.

This scenario may seem somewhat forced and exaggerated, but similar events have occurred in the mobile app ecosystem. According to the '2019 Mobile Content Industry Status Survey' by the Ministry of Science and ICT and the Korea Mobile Industry Association, Google accounts for 63.4% and Apple for 24.4% of the domestic app market. In this context, Google is known to be stripping app developers of the choice of payment systems and forcing the use of its own payment system (hereinafter referred to as "in-app payment"). The 30% paid transaction fee, which was previously applied without exception to game apps, is expected to be imposed on all app payments including digital content and cloud services. Apple has already been enforcing in-app payments with a 30% fee, so this issue is not solely caused by Google. However, considering Google's dominant share in the domestic app market, if it expands the in-app payment method, which it has so far enforced only on games, to other apps, the potential impact on the domestic app ecosystem cannot be overlooked.

The first concern is the increase in user fees. Even now, Apple users pay more than Google users for the same services. For example, Wave charges 7,900 KRW on Google but 11,500 KRW on Apple. Melon charges 10,900 KRW on Google and 15,000 KRW on Apple. This price difference is due to the in-app payment fees. If Google enforces the in-app payment method and aligns with Apple's 30% fee, user fees will be dependent on the fees of both companies and will increase further. On the other hand, the domestic native app market, One Store, charges a 20% in-app payment fee, and only a 5% fee if the One Store payment method is not used. Moreover, in the Chinese market, companies do not force their own in-app payments but support linking with WeChat Pay and Alipay for in-app payments, and the in-app payment fee is known to be less than 1%.

The second concern is unfair competition against non-Google and non-Apple apps. Google and Apple, which dominate the mobile market, provide app services in various areas such as games (Google Stadia, Apple Arcade), music (YouTube Music, Apple Music), video (Apple TV+, YouTube Premium), personal cloud (Google Drive, iCloud), audiobooks, and e-books. In this situation, domestic developers must provide 30% of their sales to Google and Apple while competing with them. It is already a distant prospect for domestic startups, which find it difficult to even make operating profits, to compete fairly with these companies offering the same services. If Google enforces a 30% fee on non-game apps and expands bundling practices, it could dominate not only the mobile OS and app market but also the domestic cloud market.

The absence of competition leads directly to market disruption and consumer harm. The most fundamental problem is the failure to establish competition in the app market. If the app market had a competitive structure rather than a duopoly of Google and Apple, competition to lower fees would occur, and consumers would enjoy a variety of choices. Google co-founder Larry Page once said, "If our goal was money, we would have sold the company a long time ago and been lying on a beach," but judging by recent actions, it seems clear that Google's goal is indeed money.

Hyunkyung Kim, Professor at Seoul National University of Science and Technology

This content was produced with the assistance of AI translation services.