Walmart-backed PhonePe will launch its Android app store this week with no in-app purchase commission for developers. The app store is powered by Indus OS, a company that PhonePe acquired in 2021.
In this story, we'll look at why developers are pushing for an alternative store and what the market opportunity is for these stores.
The developers' fight with Google
In September 2020, Google temporarily removed Indian fintech giant Paytm's app from the Play Store, claiming that the app violated the platform's rules. At that time, Paytm offered the fantasy sports app Paytm First, which was also listed on the Play Store. The main Paytm app also promoted this service, which broke Google's rule related to sports betting apps in India.
Later that month, a group of Indian startups came together to form a coalition and explore an alternative app store. These executives included Vijay Shekhar Sharma of Paytm, Deep Kalra of travel ticketing firm MakeMyTrip; and executives from PolicyBazaar, RazorPay and ShareChat.
Over the years, others start up executives They have also complained about the 30% Play Store fee and have pushed for the creation of a “Made in India” app store.
Paytm Founder and Chief Executive Officer (CEO) Vijay Shekhar Sharma (photo credit should read SAJJAD HUSSAIN/AFP/Getty Images)
In 2021, Google reduced its commission from 30% to 15% for the first million dollars a developer earns on the Play Store each year.
In 2022, the company started a user-choice billing program for limited apps, allowing users to use other payment processors at a 4% discount from the Play Store commission.
In January 2023, Google had to allow all apps to use user-choice billing systems and alternative payment processors in response to a ruling by India's antitrust authority.
Last year, when Google announced that it would start enforcing Play Store billing rules, it mentioned that Less than 60 developers in India pay more than 15% fees.. The company said it has the “lowest commission rates” of any major app store.
Example of implementing an alternative billing system on Google Play Image credits: Google
Earlier this month, around tech/technology/indian-startups-urge-google-to-not-delist-app-developers-till-march-19/articleshow/107618301.cms”>30 app makers wrote to Google asking it not to remove their apps in violation of Play Store billing rules.. These companies asked Google to wait until March 19, when the Supreme Court will hear their Special Leave Petition (SLP). On the other hand, India The high court has refused to ask Google to potentially delist these apps..
Developers can use Google's own billing system or use an alternative payment system through billing of the user's choice. In particular, Google has established March 13 as deadline integrate billing APIs chosen by the user to offer other payment options.
The numbers
India is the top market in terms of downloads, according to estimates from multiple analytics companies. However, the country does not rank among the top 10 (or sometimes top 20) countries for spending.
According to Sensor Tower, Indian users spent $520 million on Play Store in-app purchases in 2023, up 25% from 2022. Gaming apps accounted for more than half of that spending, followed by other categories. such as social media, entertainment, productivity and dating. The company said that while users in India download apps five times more than in the United States, spending is almost 25 times less.
Sensor Tower says that over the years, the Play Store accounted for a larger share of in-app purchases in India in 2023 (74%) than in 2020 (56%). Notably, Android has a huge share in the Indian market, with more than 90% of smartphone users.
According ai/en/go/state-of-mobile-2024/” target=”_blank” rel=”noopener”>data.ai State of Mobile Report 2024only a few apps, such as Disney+ Hotstar and ShareChat, were the top-grossing apps in India on both the App Store and Play Store.
Opportunities and challenges
India has over 750 million smartphone users, so there is an opportunity for large-scale distribution app makers. Last year, in an interviewIndus OS's then CEO Rakesh Deshmukh said the company had served more than 200 million users who downloaded more than 2.5 billion apps over seven years.
PhonePe has promised to not charge developer commissions upfront or listing fees for the first year. The company lists on the website an opportunity for marketers to reach “millions” of users. The Indus app store will have to focus on acquiring users and partnering with phone manufacturers to achieve that kind of scale.
Creating alternative app stores at a sustainable level is difficult. Paulo Trezentos, who founded Aptoide in 2009, told TechCrunch that there are alternative app stores that should provide value to users. For example, Aptoide allows users to install an older version of the app that might fit their device better.
The store takes a 25% cut if an app uses Aptoide's own billing service, and a 10% cut if an app redirects users to a website. Trezentos said that of 100,000 apps in the store, almost 7,000 use the startup's billing services.
Image credits: Aptoide
Last year, Aptoide had almost 500 million downloads. While the company also partners with OEMs and operators, Trezentos said it operates in an “almost balanced” manner by reinvesting any profits into the company.
Trezentos noted that Aptoide has Brazil, India and Indonesia as the countries that download the most applications. However, these countries are not the main sources of income for developers.
“These countries offer massive scale for developers. Therefore, developers should focus on ease of payment and creating more value for users in these markets,” he said.
PhonePe has previously said that it is confident in the fact that India will potentially have more than a billion smartphone users by 2026. It is also providing a launch pad for some developers under its accelerator program with benefits such as better visibility in the PhonePe store .
Google (and Apple) have been persistent that their app distribution channels are secure and private. Google also displays warnings on your phone when you try to install apps from alternative sources.
In markets like India, the search giant itself has struggled with the problem of a staggering number of fraudulent loan apps. Over the years, Google has had to continually improve the way it handles these apps, and despite this, many apps go undetected by the company's scanning mechanisms.
PhonePe will need to have strong security to block malicious apps. Additionally, you will need to have processes in place to remove predatory lending applications. The company has to convince users that its store offers more value than the default Play Store so that they continue downloading apps from the new store.
If you are a developer publishing your app on alternative app stores, I would love to hear from you at [email protected]
