During its recent earnings convention on August 15, Chinese tech giant Tencent raised an issue facing game developers around the world: Apple’s requirement to close all payment loopholes.
According to media reports, Apple is putting increased pressure on domestic corporations such as Tencent and Bytedance to prevent such means of evasion. According to sources familiar with the matter, those terms were agreed upon, but other issues related to in-game chat, which was also used to provide select payment links, remained unresolved.
China is a mobile-driven economy. In 2023, users spent 1. 2 billion hours on mobile apps. Conglomerates like Tencent and ByteDance dominate web content and own trending favorites WeChat and Douyin, respectively, as well as thousands of game and app titles like oh! Sheep, endless snake wars and goose catching. Thanks to trendy content creators, Douyin has thrived, while WeChat, a mega-app with a billion monthly active users, is ingrained in the lives of Chinese consumers.
Brands rely heavily on the WeChat ecosystem, especially for everything from marketing and visitor engagement to sales and payments, says Arnold Ma, CEO of virtual firm Qumin. A disruption of this magnitude can simply obstruct your ability to succeed and engage with consumers, eventually leading to “a significant decrease in sales and logo visibility. “Private traffic and visitor base on those apps, as well as on Xiaohongshu, generate really significant profits for fashion and retail logos. While Apple has yet to explicitly target fashion and retail apps, there are considerations about the current challenge posed by game shows. “Losing WeChat’s clientele features would further complicate things, as logos would struggle to personalize relationships with their VIP and high-value customers,” he explains.
According to veteran game developer Kelly Vero, controlling the platform has a huge effect on developers. Correspondingly, she notes that, as a developer, navigating the complexities of this topic can be challenging. Vero, which works extensively with fashion and gaming corporations in China and Europe, says that “the 30% commission imposed through Apple particularly reduces margins” for developers, especially independent studios, forcing them to rethink their pricing models and profit methods “just to stay afloat. “
Vero explains, “In regions like China, where chosen payment strategies are more common, Apple’s insistence on controlling all transactions not only stifles innovation, but also limits our ability to connect with our player base. “
The question has other implications for fashion. According to her, all handheld devices in the game will need to be purchased through Apple and Google. This means that emerging brands (fashion or otherwise) that want to gain exposure through certain outlets could lose profits due to fees. .
Netizens are satisfied and the negative online reactions in China may simply hinder Apple’s strategy. Developers and users were protesting against the monopoly of the “Apple tax” (as it is called in the country). Refers to fees imposed on developers. and it is another in the whole world. In China, it stands at 30%, well above the world average. The Weibo hashtag #AppleWeChatUpdate currently has 44. 64 million views and 110,000 interactions.
Apple’s sleek, minimalist design first caused a stir in Greater China when the company entered the market in 2008. At the time, the products were even sought-after collector’s items by Chinese millennials, even markers of Chinese globalization. Since then, the R
In the face of such fierce local innovation and festival, Apple’s history in China provides an attractive reference.
Despite the fluctuating effects of recent years, the country still accounts for 30% of its market share. Rich Bishop, chief executive of AppinChina, a major Beijing-based software company, is optimistic about Apple’s appeal in the country, despite the effects, sales fell further. than analysts predicted in the third quarter, up 6. 5% to $14. 73 billion, and Apple exited the market, one of the nation’s five largest smartphone vendors. During a call, he warned that the drop in sales can be attributed to “a global slowdown, less common updates, etc. “Apple, he said, is still doing well in China and consumers will continue to spend “a smart portion of their monthly revenue stream on iPhones. “Tim Cook called China “the most competitive market in the world,” as they called it earnings in May.
However, that same month, Apple won its legal war in a Shanghai court over the app store fees factor in a case dating back to 2021.
But Apple’s decision to replace its policy toward European developers earlier this month highlights the disparity in those payments across the market. In June, the European Union Commission accused Apple of violating the bloc’s generation rules. This resulted in the arrival of a two-tier system: a 5% initial acquisition payment for new users and a 10% in-store payment for any sales made through consumers on any platform within 12 months of installing the application.
This raises the question of why this percentage is particularly higher in China than elsewhere. Vero agrees that the current disputes between Apple and large corporations (such as Douyin and ByteDance) highlight a very important challenge in the industry: the lack of a fair and universal solution. “As developers, we want a formula that balances the platform with moderate costs. A broader market consensus on this factor can lead to a more sustainable environment for developers around the world, allowing us to focus on what really matters: creating wonderful games and apps for our consumers,” he says.
According to the Business of Apps website, China’s app market earned $52 billion in profits in 2023, down from 2021 and 2022, with 113 billion downloads. Earlier this week, Tencent’s business and fintech department (which includes cellular payment feature WeChat Pay) saw profits rise 4% year-on-year to RMB 50. 4 billion. In everyone’s opinion, it is a vital activity.
Blocking app updates gains no benefit for either party, Bishop acknowledges. That doesn’t make it impossible; Several programs have already been removed. In April, Apple had to remove WhatsApp and Threads from the Chinese app store for security reasons. Tencent chief strategy officer James Mitchell told the earnings call that this was an ongoing discussion and expressed hope it would lead to a “positive outcome. “
Currently, Tencent and ByteDance, unlike Apple, do not charge fees to developers. While Apple and Tencent declined to comment, Mitchell demonstrated that “I think it would be in our and Apple’s interest, but even more so. It will benefit game developers and users if this monetization is achieved. ” But it needs to achieve it on “economically sustainable and fair” terms.
Shenzhen-based Tencent is one of China’s leading producers
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