About a month ago, Vijay Shekhar Sharma (VSS), the founder of payments company Paytm, created a WhatsApp group for Indian startup founders, to enable them to network and connect with each other. Called “India Startup Connect”, the group currently has 163 members. At 12:29 pm on Tuesday afternoon, a message on the group from Murugavel Janakiraman set a chain of events into motion, which could have consequences for Google in India.
Janakiraman – better known as Muruga – is a battle-hardened Indian founder of a publicly listed matrimony company, aptly called Matrimony, who has been taking on Google for over a decade now:
- In 2012, Matrimony (previously Consim Info) lost a case in the Madras High Court, trying to bar Google from allowing his competitors from advertising on the keywords ‘Bharat’ and Matrimony’. Matrimony.com was previously Bharatmatrimony.com. Its appeal against Google is still pending with the Supreme court of India.
- In 2018, it tasted success against Google: the Competition Commission of India fined Google India Rs 136 crores, finding it guilty of abusing its dominant position in search, based on complaints filed by Matrimony and CUTS International.
The worst fear is coming true…
“The worst fear is coming true”, Muruga had written, adding that “We can’t any more stay idle. It is a death kneel digital companies and payment companies in India. How can companies survive by paying 30% Google tax and Apple tax.” 32 minutes later VSS told the group that he is hosting a zoom call later that evening at 4:30 PM. That call, much to VSS’s surprise, saw participation from as many as 56 founders, including Muruga, Dinesh Agrawal from Indiamart, Yashish Dahiya from Policybazaar, GOQII’s Vishal Gondal, Vishwas Patel from CC Avenues, among others.
Muruga’s message was in response to changes announced by Google for its Play Store policy.
Google’s Play Store policy changes
- What is Google forcing upon apps? Google will now enforce its billing system on all apps downloaded from the Play Store, in a bid to collect a 30% commission on all in-app purchases. While this cut is now new, Google is now getting apps to pay up – apps are barred from taking users to in-app browsers or websites to make payments.
- What purchases will the cut apply to? In-app purchases include app subscriptions, virtual coins, ad-free versions of apps, paid extra lives or characters, etc. Many apps currently bypass Google’s billing system and ask users to directly pay, such as via debit card or UPI.
- By when do app-makers have to comply? New apps have a few months to comply (January 2021), and existing apps have a year (September 2021). Google said only 3% of apps sell digital goods, and of these, only 3% escaped the cut.
- Do app-makers have a choice outside of Google? Google has deals with mobile phone manufacturers to pre-install its core apps, Search, Maps, and the Play Store, in exchange for deploying the Android OS. This has made the Play Store de-facto for developers to push their apps, leaving no real alternative, even though Google allows other app stores on Android phones. Google has also reminded everyone that developers can still use alternative payment methods outside the Play Store, such as on another Android app store or through their website – but in front of Google’s dominance, this is hardly a reprieve.
…Just because people have to use the Play Store
Indian startup founders, to put it mildly, are pissed off. Some issues raised by Indian founders, when we spoke with them:
1. Dominance (and its alleged abuse): “Google’s dominance on the discovery and billing of apps, and their arbitrary implementation of policies can be a challenge for Indian startups.” Gondal told MediaNama earlier today.
“If you’re talking about 30% billing as compulsory, as being mandatory, else your app won’t be published (on the Play Store), you are forcing companies to use Google’s in-app billing”, Muruga told MediaNama. “It’s a monopoly trying to control things. This is a serious issue. Just because people have to use the Play Store.”
“Payment is only one thing,” he added. “The other thing is to make the app ecosystem neutral and not being controlled by google. Today we are all at the mercy of Google approving or rejecting apps. How do we ensure that there is fairness?”
Indiamart’s Agarwal, speaking with MediaNama, highlighted the key differences between Google’s approach to the world wide web, and apps, and how Google exercises control:
- App store and Operating System: Google owns both the app store and the operating system (Android). “The app Store is just a search engine for apps. I make an app for the Operating System, not for your app Store. While Google indexes all sites for its search, why does it discriminate for apps? The app is a substitute for the website.” In addition, Agarwal points towards the issue of auto updates, which are essential for apps. “Auto updates should be an Android function, not an app store function. It has nothing to do with the app Store,” he said.
- Trust and discovery: By warning users about apps that they download from outside the Play Store, as being an untrusted source, Google tends to nudge apps to the Play Store, negatively impacting downloading of apps directly from websites. Agarwal said that there should be an unbundling of ‘trust’ from ‘discovery’, of certification from the app store.
“If I download an APK, why is there a warning? This is badmaashi. Have an independent certification system, just like there is an SSL certificate for websites, with multiple certification agencies. It is my app, and the discovery and promotion of it is a separate thing. It can anyway be downloaded form my website, because you say that you don’t guarantee it.”
2. The cost factor: For startups, digital advertising is their primary mode of acquisition of customers, and the fact that Google is taking an additional 30% of billing, really hurts. “30% of revenue on advertising. 30% billing revenue on top of that. That’s almost 50% of income going to Google,” Muruga said. “Today, [digital] companies don’t even make a 30% EBITDA profit.” Both Muruga and Agarwal pointed out that while other payment modes, such as credit cards and debit cards, take a 1.5% commission, Google is taking 30%.
“For what?”, a founder who wanted to remain anonymous said. “Google is just a distribution company.”
3. The risk of scope creep: This move to charge 30% smells of scope creep to some founders. “Today they mentioned music, video, health tech, education etc. These are digital services. Tomorrow they can widen it to food delivery, companies offering physical services. Literally, Google is taxing startups,” Muruga said.
4. Arbitrary application of policies: A founder also said that apart from Google’s 30% cut, another key issue concerning founders was arbitrariness from Google in enforcing its Play Store policies. Gondal, for example, said that he is struggling to get Google to remove fake FAU-G apps. FAU-G is a game from nCore games, a company co-founded by Gondal.
VSS is fresh off another battle with Google, where it pulled the Paytm app, for allegedly enabling real-money gaming on Paytm First Games. Real-money gaming apps are not allowed on the Google Play store in India. In a bid to restrict surrogate ads for real-money games, Google also barred promotions of fantasy gaming app Mobile Premier League on apps run by Times Internet (which owns 3% in MPL), sources had told MediaNama then. Yesterday, Google warned Swiggy and Zomato that their apps would be removed, for offering “real money worth prizes” based on outcomes in real world tournaments.
5. National Interest: A key point raised on the call was the risk for Indian startups if the US does to the Indian startup ecosystem, what it did to Huawei. “This could be a national security issue”, a founder told MediaNama. Another founder pointed out on the call, that when Russia took over Crimea from Ukraine, Mastercard and Visa ceased functioning in the region, crippling digital payments.
“Someone [Google Play] who is not in this jurisdiction, puts restrictions of their own policies on Indian apps”, a VSS added. “It is in national interest to have a viable alternate options for app stores and app billing,” Gondal said.
“Today Google controls 95% of the app ecosystem in India. More than 80% of our traffic is mobile apps,” Muruga explained, “almost all of which are through Google. Google controls the Indian Internet ecosystem. How do you ensure that there is fairness?” he asked.
In response to a request for comment, Google sent us this link.
“This was a call about a genuine grouse against Google”, a founder told MediaNama. “It wasn’t just about the Paytm issue. We’re serious about this”.
On the Zoom call several ideas for next steps were floated. The most interesting, according to VSS, was the idea that the Google should be forced to do in India what TikTok has been forced to do in the US: TikTok eventually reached a deal to create a US subsidiary, TikTok Global, 20% of which would be owned by Oracle and Walmart.
- Create our own app store, which was “the bottom line”, according to one founder. VSS said that this is now feasible, since Google plans to allow other app stores on its Platform soon.
- Complain to the Competition Commission of India against Google
- Go to court
- Form an Indian Internet Founders association
The last idea, of creating an Indian Internet Founders Association to lobby the government on behalf of Indian founders is an interesting one, and probably the one to be acted upon first. One founder told MediaNama that names of the association are already being discussed on the WhatsApp group.
The Internet and Mobile Association of India, was not seen by multiple founders we spoke with, as being representative of their needs. The issue: multinational companies like Google, Facebook and Microsoft are members of the IAMAI. “They will always have foreign companies. We want only Indian Internet companies”, VSS told MediaNama.
Meanwhile, IAMAI has called for a meeting next week, to discuss Google’s “perceived dominance”.
With inputs from Trisha Jalan and Soumyarendra Barik
Note: The Economic Times had first reported some of the developments mentioned in this story.