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Why can’t we make revenue generating apps? India contributes less than 1% of global in-app revenues

Here are possible reasons why Indians are not generating significant IAP revenues despite our download share crossing 30%.

By Deepak Abbot

India is the world’s no.1 in app downloads on Android with 23 billion downloads in 2021, almost 2.5x of USA. This makes Google Play Store one of the most powerful platforms in the country as they control almost 15 billion downloads if we exclude side loads and alternate app stores. Last year, Google announced that apps that are offering in-app purchases of digital goods, have to use Google Play’s billing system and pay 30% commission to Google. While this rule existed but Google never enforced this strictly. Currently, most apps offering digital music, IAP, OTT subscriptions are using external payment gateways paying anywhere between 0% to 2% MDR.

Apple also charges a 30% commission from all digital goods purchases and it never relaxed that rule; hence, even today all apps (Indian and Global) pay up to 30% commission.

Google’s announcement last year irked Indian app developers, who saw this as a monopoly tax. As a result, one alliance of startup founders has filed a petition before the Competition Commission of India seeking interim relief from Google’s new Play Store policy. CCI is also probing Apple, based “on the complaint filed by Together We Fight Society,”

In the USA, Epic Games filed suit against Apple in which the court ruled that app developers should be allowed to place links to direct its users to bypass apple payment gateway. Indian developers are fighting the same battle and I really hope they force Apple & Google to allow apps to use external payment gateways.

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While this battle is important, we have a bigger issue at hand which in my opinion should be addressed too. Before going further on this thought, let’s see some numbers which may help me establish my point later:

  • India has over 29,000 developers who have published 1,50,000 apps on Play Store. This accounts for less than 3% of developers on app stores.
  • Of the 15 billion downloads in 2021, Indian apps would have garnered over 4 billion downloads.
  • The majority of 4 billion Indian app downloads came from popular apps like Meesho, PhonePe, Paytm, Sharechat, Flipkart, Amazon India, Jio, and Hotstar, followed by a long tail of smaller apps.
  • Most of the big apps mentioned above do not sell digital goods (in-app items) and are not directly impacted by this Google policy.
  • Globally, the in-app economy is driven by gaming, dating, entertainment, education, and utility.
  • India roughly generated $600 million of in-app revenues in 2021 but Indian apps accounted for just 10% of this number. Let me rephrase this — $60 million of in-app revenues came from apps published by Indian developers.
  • Globally in-app revenues by Apple and Google were in the range of $85 billion.
  • India contributed 7% of this but Indian apps contributed a paltry 0.7%.
  • Over 230 apps and games generated $100 million each. Except for Hotstar, none was even closer to $10 million.

The fight put up by some of the founders is a fundamental one and I fully support them, but I want to highlight a much bigger issue here — why is our share of in-app revenue a meagre 0.7% while our download share globally is over 30%. Why are startups based in India worried about this number? Why are global gaming, dating, entertainment apps taking away the money from Indians? Are we not building quality games and apps to extract the money from Indians?

Solving for 30% commission is not going to solve the gap we have in in-app revenues. While some can argue that high commission dissuades many developers due to the rising cost of producing quality apps, this stands true for global apps too. If Apple and Google were to remove this forced billing, we are not likely to see the boom in in-app revenues.

Some possible answers to Indians not generating IAP revenues:

  1. Local opportunities are far bigger around e-commerce, finance, health, agri, and education, leaving little talent to build a global-focused product around gaming, entertainment, and utilities which drives in-app revenues.
  2. Slightly controversial but maybe we don’t know how to build quality games that can extract dollars from gamers’ pockets. Or maybe all the good talent has been scooped up by card or cash gaming companies?
  3. Ease of payments? While Google has introduced UPI as a payment mode, it is still not the seamless 1 click payout most games expect.
  4. Indian developers making money through app stores do not get counted in India due to their company’s domicile
  5. Freemium apps pricing policy doesn’t suit India as international developers do not have India-specific pricing making it difficult for masses to experience it?

*

Deepak Abbot is the co-founder of Indiagold. This article was cross-posted with permission and the original was first published here

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