Apple orders Chinese social networks to stop 'tip' functions that break App Store rules
Apple is reportedly cracking down on social networks in China providing payment services between users, ordering the creators of popular messaging apps to disable 'tip' functions in order to comply with App Store rules, in what may be a move by Apple to try and increase revenue from in-app purchases.
A number of social networking apps allow users to 'tip' each other using mobile wallets, providing content creators with a source of revenue. Typically, these tips are conducted outside of Apple's system, with the services offered to users for free as a way to increase user engagement.
According to executives of messaging platform WeChat and other companies, the Wall Street Journal reports Apple wants the practice of providing tipping services through external mobile wallet accounts to stop in China. Instead, the companies have to stick to App Store rules regarding transactions, treating them as in-app purchases and providing Apple with its 30-percent cut.
Two company executives speaking to the report allege Apple told them that a refusal to disable the function could prevent updated versions of the apps from being made available to users, and could force Apple to pull the apps from the App Store entirely.
This switch to using a payment processing platform that takes a fee for the transaction is a sticking point for the companies involved. "We don't charge anything as the platform, but Apple gets 30 percent for doing nothing," one of the executives complained.
One company is said to have started talking to the Ministry of Industry and Information Technology about the matter, questioning if Apple is being unfair in imposing the rules over tipping. The regulator told the report it isn't currently involved in the disagreement.
Part of the problem is a differing cultural view of tipping itself, with Chinese developers seeing it as different to making a purchase. Tipping is thought to be a way to show appreciation for content, usually offered after the user has consumed it, rather than before consumption as with sales.
Conducting tip transactions outside of Apple's platform will certainly be seen as a missed opportunity to earn revenue, in what is already a major market for the company. In April, an App Annie report claimed China is the biggest iOS App Store market, earning between $5 billion and $6 billion in revenue, including $2 billion in in-app purchases in the fourth quarter of 2016, a number that could have been higher if Apple were able to tap into tipped funds.
Apple may have to be cautious when dealing with one of the biggest firms that provides tipping facilities, the Tencent-owned WeChat, partly due to its size. WeChat has 938 million monthly active accounts, the majority of which are in China, with approximately half of its users spending 90 minutes per day in the app.
WeChat does more than offer tipping and messaging between users, as its "mini-programs" within the main app can be used to provide extra services to third-party companies, without the user needing to leave WeChat to go into another app. As part of this, users can pay bills and purchase items, including food at a restaurant, all from within WeChat.
The mini-apps effectively turns WeChat into its own separate ecosystem, potentially threatening Apple's App Store and related services, though WeChat denies this to be a major issue. As for missed revenue, report sources claim WeChat is talking with Apple to find a solution for tips.
A number of social networking apps allow users to 'tip' each other using mobile wallets, providing content creators with a source of revenue. Typically, these tips are conducted outside of Apple's system, with the services offered to users for free as a way to increase user engagement.
According to executives of messaging platform WeChat and other companies, the Wall Street Journal reports Apple wants the practice of providing tipping services through external mobile wallet accounts to stop in China. Instead, the companies have to stick to App Store rules regarding transactions, treating them as in-app purchases and providing Apple with its 30-percent cut.
Two company executives speaking to the report allege Apple told them that a refusal to disable the function could prevent updated versions of the apps from being made available to users, and could force Apple to pull the apps from the App Store entirely.
This switch to using a payment processing platform that takes a fee for the transaction is a sticking point for the companies involved. "We don't charge anything as the platform, but Apple gets 30 percent for doing nothing," one of the executives complained.
One company is said to have started talking to the Ministry of Industry and Information Technology about the matter, questioning if Apple is being unfair in imposing the rules over tipping. The regulator told the report it isn't currently involved in the disagreement.
Part of the problem is a differing cultural view of tipping itself, with Chinese developers seeing it as different to making a purchase. Tipping is thought to be a way to show appreciation for content, usually offered after the user has consumed it, rather than before consumption as with sales.
Conducting tip transactions outside of Apple's platform will certainly be seen as a missed opportunity to earn revenue, in what is already a major market for the company. In April, an App Annie report claimed China is the biggest iOS App Store market, earning between $5 billion and $6 billion in revenue, including $2 billion in in-app purchases in the fourth quarter of 2016, a number that could have been higher if Apple were able to tap into tipped funds.
Apple may have to be cautious when dealing with one of the biggest firms that provides tipping facilities, the Tencent-owned WeChat, partly due to its size. WeChat has 938 million monthly active accounts, the majority of which are in China, with approximately half of its users spending 90 minutes per day in the app.
WeChat does more than offer tipping and messaging between users, as its "mini-programs" within the main app can be used to provide extra services to third-party companies, without the user needing to leave WeChat to go into another app. As part of this, users can pay bills and purchase items, including food at a restaurant, all from within WeChat.
The mini-apps effectively turns WeChat into its own separate ecosystem, potentially threatening Apple's App Store and related services, though WeChat denies this to be a major issue. As for missed revenue, report sources claim WeChat is talking with Apple to find a solution for tips.
Comments
How is this different from me using my banking app on my phone to setup a payment to a friend and then making said payment all through the phone. Do I have to pay apple 30% of that money?
I think not.
Bottom line is they are still people looking to make a profit by selling something via in-App purchases. You can change the name, but it's still people trying to make money.
Do you really feel Apple should get a cut of your restaurant tab or electric bill? If so there may be ways you can donate to Apple rather than force everyone into the same.
FWIW this is China-specific so not likely to impact most readers here which does make it easier to decide what's right when there's no dog in the fight.
If it's the first case, Apple and users would want an option to opt-out of the tracking. But there is no way today. I shouldn't become a product when I donate to someone.
If it's the second case, Apple should consolidate all these tipping and offer it as a common service at cost to everyone. So individual providers, not just big guys like WeChat, don't have to cover these cost themselves.
Traditionally, all the pundits can see are just profit and stock price. Everything is waterdowned to just making money because they are not creative and open enough to see bigger picture.
I suspect the story is out of context. WWDC is only 2-3 weeks away. We will probably get the lowdown from Apple, or at least can settle this face to face.
https://www.bloomberg.com/news/articles/2017-04-19/tencent-s-wechat-abolishes-tipping-feature-on-apple-iphones
It's one thing for Apple to take a cut when an app developer chooses to use Apple's payment system but when the developer has their own payment system and would prefer not to use Apple why should they be forced to just so Apple can get a cut? If I buy something using the Target app on my iPhone should Apple get a cut of that? Is that considered an IAP?
I don't think this will end well for Apple as Apple needs Chinese messaging apps more than they need iPhone.
I can buy food through Apps in the App Store and Apple doesn't take a cut of those transactions.
if the service providers are really not charging users and content providers for these tipping, the usual 30% cut is irrelevant.
if the transactions cannot be charged like transferring $$$ between my accounts, I doubt Apple will levy their tax on users. We are all they have.
and Gatorguy, discontinuing this for iPhones isn't good for Apple, as users will simply migrate to Android phones where this isn't a problem. So, yes, it's a major problem for Apple.
this is one area where Apple should leave well enough alone.
"in what may be a move by Apple to try and increase revenue from in-app purchases."
This is synical nonsense! Payment systems are highly regulated, Apple are probably themselves working on peer to peer payment with Apple Pay. This is not easy to do because of complex banking regulations in various parts of the world. These apps are providing a service in a way that could be illegal.
(By the way Bitcoin does what it does only because it has no ownership or organizational structure or legal entity running it)