Google Slashes Developer Fees By 15% For Selling In-App Digital Goods; 99% Developers Will Benefit

Google has cut service tax by 50% to 15% on apps selling digital goods and with a valuation under $ 1 mn

Google is slashing service fee charges for apps selling digital goods on its Play Store by half. 

Service fees for apps that offer digital goods for sale is now cut down to 15% from 30%. 

The new rules take effect from July 1, 2021.

How It Works

However the revised rate applies only till $1 mn in revenue is achieved, post which the former 30% rate comes into effect. 

So if a developer earns for eg. $1.5 mn in a year, Google will charge 30% on the additional $ 0.5 mn and not the entire amount. 

What Are Digital Goods?

Digital goods refer to microtransactions which grants buyers extra benefits such as upgrading to a premium ad-free version, or in games where one can spend on accessories, additional playtime, player perks and boost items.

A Blessing For Small App Developers?

Google sees this as a boon to small scale developers who need time to have their apps take off in terms of popularity and revenue.

The savings enjoyed by apps pre- $1 mn revenue milestone will enable them to invest in new hires, marketing and increasing server capacity. 

Google acknowledged that earning millions doesn’t solve all problems. Even those that are sitting on say $ 2 mn, $ 5 mn or even $10 mn a year face challenges with scaling and development.

This is why Google will roll out the 15% commission charge for all apps regardless of size. 

Behind the Decision

The move comes after Apple rolled out a similar service fee of 15% for sub million dollar earners which was implemented on Jan 1,2021.

Google may also have been forced to respond to protests by Indian startups who allege that the service tax rates are too high. 

Protests and Opposition

Developing apps is a challenge as it is, but for the ones that are free, the sustainability of the app hinges on in-app microtransactions. 

Google claiming a third of revenues negatively impacts an app’s profit potential. 

Google has also imposed a demand on app developers that they must use the integrated Google payment platform and not any independent outlet (which is cheaper for the devs). Those who have not complied have until March 2022 to make corrections.

This has been interpreted as an anti-competition move by Google which does not allow apps to use unique payment gateways.

Indian companies are not satisfied with this development which they claim to be an abuse of power by Google in an Android dominant smartphone market. 

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