Apple orders Chinese social networks to stop 'tip' functions that break App Store rules

Posted:
in General Discussion
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.
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Comments

  • Reply 1 of 27
    rotateleftbyterotateleftbyte Posts: 1,527member
    This won't end well.

    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.
    gatorguyavon b7The_Martini_Cat
  • Reply 2 of 27
    This won't end well.

    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.
    The difference is that the "tips" are for content that appears within the app itself.
    macxpress78BanditSpamSandwichmagman1979indyfx
  • Reply 3 of 27
    ericthehalfbeeericthehalfbee Posts: 4,284member
    Good luck with that. They're just trying to get around Apples 30% cut for in-App purchases. Instead of calling themselves "developers" and charging in-App purchases for extra in-game goodies they now call themselves "content creators" and say they're accepting donations.

    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.
    macxpress78BanditSpamSandwichThe_Martini_Catpscooter63magman1979
  • Reply 4 of 27
    gatorguygatorguy Posts: 23,176member
    This won't end well.

    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.
    The difference is that the "tips" are for content that appears within the app itself.
    According to the article "As part of this, users can pay bills and purchase items, including food at a restaurant...
    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. 
    edited May 2017 singularity
  • Reply 5 of 27
    patsupatsu Posts: 430member
    If the providers are doing it 'for free', it means they are gathering user behaviors for $$$, or foot the cost of transactions themselves.

    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.
    edited May 2017
  • Reply 6 of 27
    gatorguygatorguy Posts: 23,176member
    It's not as much of an issue today anyway since big dog Tencent-owned WeChat is discontinuing their "tipping" service after trying to come to an agreement with Apple. That news was reported about a month ago.
    https://www.bloomberg.com/news/articles/2017-04-19/tencent-s-wechat-abolishes-tipping-feature-on-apple-iphones
    edited May 2017
  • Reply 7 of 27
    SpamSandwichSpamSandwich Posts: 33,408member
    These app developers are simply attempting to circumvent the rules they agreed to when they chose to develop for iOS. They want the benefit of using the platform Apple created without paying for the privilege. Deadbeats.
    ericthehalfbeemagman1979igorsky
  • Reply 8 of 27
    rogifan_newrogifan_new Posts: 4,297member
    I just sent my mother money via my banking app on my iPhone. How is that any different than what these chat apps are doing? Should Apple get a cut of that because the banking app is on the iOS platform?

    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.

  • Reply 9 of 27
    ericthehalfbeeericthehalfbee Posts: 4,284member
    gatorguy said:
    This won't end well.

    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.
    The difference is that the "tips" are for content that appears within the app itself.
    According to the article "As part of this, users can pay bills and purchase items, including food at a restaurant...
    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. 

    I can buy food through Apps in the App Store and Apple doesn't take a cut of those transactions.
  • Reply 10 of 27
    gatorguygatorguy Posts: 23,176member
    gatorguy said:
    This won't end well.

    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.
    The difference is that the "tips" are for content that appears within the app itself.
    According to the article "As part of this, users can pay bills and purchase items, including food at a restaurant...
    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. 

    I can buy food through Apps in the App Store and Apple doesn't take a cut of those transactions.
    You are correct. That's the issue for some in China who reportedly use those "tipping services" that Apple says they should receive a cut of to pay bills and buy food 
    edited May 2017
  • Reply 11 of 27
    patsupatsu Posts: 430member
    gatorguy said:
    It's not as much of an issue today anyway since big dog Tencent-owned WeChat is discontinuing their "tipping" service after trying to come to an agreement with Apple. That news was reported about a month ago.
    https://www.bloomberg.com/news/articles/2017-04-19/tencent-s-wechat-abolishes-tipping-feature-on-apple-iphones
    Ah, it's a non-story then ? If Apple can provide a function to re-enable tipping and donation with no tracking to all parties, they should just go ahead.

    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.
    edited May 2017
  • Reply 12 of 27
    rogifan_newrogifan_new Posts: 4,297member
    gatorguy said:
    This won't end well.

    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.
    The difference is that the "tips" are for content that appears within the app itself.
    According to the article "As part of this, users can pay bills and purchase items, including food at a restaurant...
    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. 

    I can buy food through Apps in the App Store and Apple doesn't take a cut of those transactions.
    What's the difference in how I use content on my device when I purchase it via Safari vs. via in-app? Does Apple really think people can't manage entering in credit card info in an app when they have no problem doing so in Safari (especially if they use Pay)?
  • Reply 13 of 27
    melgrossmelgross Posts: 33,035member
    Enforcing this is going to be a big headache for Apple. Cultural differences aside, if the government gets involved, Apple will have problems.

    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.
  • Reply 14 of 27
    evilutionevilution Posts: 1,397member
    Encroaches on Apple Pay and will double encroach on Apple Pay when they add person to person payments.
  • Reply 15 of 27
    holyoneholyone Posts: 398member
    This wouldn't be such a big thing if Apple wasn't trying to have a fortune 100 services arm to boost revenue and appease wall street, the former in and of itself is prudent and financially sound and the latter maybe not so much, the 30% cut may however need review, Apple shouldn't try to squeeze for every ounce of gain and profit in everything related to Its brand IMHO, not that developers should be maliciously defeating App store rules though. China is probably going to prove to be the most asking challenge of Tim's tenure as Apple CEO, it'll be interesting to see how he operates under that kind of pressure.
  • Reply 16 of 27
    croprcropr Posts: 1,051member
    These app developers are simply attempting to circumvent the rules they agreed to when they chose to develop for iOS. They want the benefit of using the platform Apple created without paying for the privilege. Deadbeats.
    As an app developer I disagree with you.  I don't mind that Apple takes a 30% cut if Apple brings value on the table, but in some cases Apple just does nothing.  In such cases Apple is abusing its power over the app developer (who has to agree to the rules of Apple if he wants to make an iOS app) to impose its very broad definition of in app purchase. 

  • Reply 17 of 27
    tzeshantzeshan Posts: 2,351member
    gatorguy said:
    It's not as much of an issue today anyway since big dog Tencent-owned WeChat is discontinuing their "tipping" service after trying to come to an agreement with Apple. That news was reported about a month ago.
    https://www.bloomberg.com/news/articles/2017-04-19/tencent-s-wechat-abolishes-tipping-feature-on-apple-iphones
    If this applies only to iOS not Android, then many iOS users will switch to Android .
  • Reply 18 of 27
    SpamSandwichSpamSandwich Posts: 33,408member
    The last barrier to a functioning digital economy is the ability to engage in completely anonymous, secure (a la Bitcoin or Ethereum) transactions which treat digital money the same as cash. I don't believe any large company can or will facilitate such a thing due to Federal anti-money laundering laws, but Touch ID would be the way to do it.
    edited May 2017 gatorguy
  • Reply 19 of 27
    robjnrobjn Posts: 263member
    You write
    "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)
  • Reply 20 of 27
    SpamSandwichSpamSandwich Posts: 33,408member
    robjn said:
    You write
    "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)
    Correct. And the suboptimal methods of storage and security for Bitcoin is what still makes it so vulnerable to theft. A true Touch ID protected wallet (with total anonymity) would rival cash.
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