In June of this year, Pavel Durov already wrote on Twitter that Apple and Google increase the price of mobile applications by 30% for all smartphone users in the world, thereby destroying startups and misusing their market position.
Now Durov published a detailed article on this topic (in Russian), noting that previously many Russian-language media misunderstood him and incorrectly translated his words from English.
Durov begins his story by saying that four years ago Telegram wanted to create a platform for game creators, where "developers from Eastern Europe could realize their talents by creating services for an international audience of Telegram." However, Apple got in the way of this idea:
“In 2016, Apple prohibited us from launching a gaming platform, citing its own rules. We had to remove the Telegram games catalog that we had already created and almost the entire platform interface – otherwise Apple threatened us with removing Telegram from the AppStore. ”
According to the founder of Telegram, the game catalog was banned for the same reason that Apple prohibits the installation of applications from any stores except the AppStore:
“Apple, taking advantage of its monopoly position, requires all application developers in the AppStore to transfer to it 30% of the turnover from the sale of any digital services. Digital services are, for example, fees for the applications themselves or premium features in them. In return, Apple gives developers nothing more than allowing their applications to be available to iPhone users.
Application developers spend significant resources on the creation, maintenance and promotion of their projects. They compete fiercely with each other and carry enormous risks. Apple does not invest almost any funds in creating third-party applications on its platform and does not risk anything, but it is guaranteed to receive 30% of their turnover. Developers on Android smartphones from Google are almost as sad.
The creators of applications have only two-thirds of the money they earned to pay salaries, hosting, marketing, licenses, state taxes. Often this is not enough to cover all costs, and further price increases for users are impossible due to lower demand. Those projects that manage to remain profitable despite the 30% fee almost always bring less net income to their creators than the duopoly of Apple and Google, ”Durov writes.
Thus, Durov concludes that at present, almost all developers who sell premium and digital services to smartphone users are more likely to work for Apple and Google than for themselves. And if Google still allows users to install applications not from the Play Store, then Apple does not release users beyond its own ecosystem. The latter, according to Durov, was created for only one purpose – to collect 30%, which ultimately is paid by either users or developers.
According to him, even in the 90s, in the era of Microsoft's dominance in the operating system market, developers were able to freely distribute their Windows programs and did not pay a percentage of their Microsoft earnings. And in the zero, developers could monetize their sites, also without paying any royalties to the creators of browsers.
“As a result, Apple and Google accumulate tens of billions of dollars in their offshore accounts, while hundreds of thousands of local development teams around the world are on the verge of economic survival. Funds that could allow start-ups to continue to improve their products and delight users are stored on the balance of Apple and Google, ”says Durov, and notes that because of this, entire sectors of the digital economy find themselves bleeding exorbitantly, possible only in the absence of competition. “We are in a paradoxical situation where two Silicon Valley companies have complete control over which applications billions of users around the world can install on their phones.”
To improve the situation, according to Durov, we need the combined efforts of the antitrust authorities and lawmakers. In particular, he suggests that different countries oblige Apple to at least pre-install alternative application stores on devices so that local developers have the opportunity not to deduct 30% of their turnover in California. Durov calls this step a more effective measure to maintain local IT than the digital tax that is being discussed in several EU countries. “Before attempting to impose a 3% digital tax on corporations, states should first stop paying the 30%“ digital tax ”to the budget of Apple and Google themselves,” he writes.
In the ideal case, the creator of Telegram proposes to legally oblige Apple to give users the ability to install applications not only through the AppStore.
“For many startups, such a change will have a more positive effect than any tax breaks. If this does not happen, Apple's capitalization, which has already exceeded one and a half trillion dollars, will continue to grow, while developers from Russia, Ukraine, Belarus and other countries will continue to sell their low-margin startups for small amounts for the giants of Silicon Valley. Users will continue to pay 30% more for applications, or be content with less quality services. And governments will continue to wonder why, despite a comfortable tax regime and an abundance of talent, in their countries there are no full-fledged analogues of Silicon Valley
Preventing two supranational corporations from collecting taxes from all of humanity is not an easy task. In the service of corporations – thousands of lobbyists, lawyers and PR agents. Their budgets are unlimited. At the same time, application developers are scattered and scared, since the fate of their projects depends entirely on the favor of Apple and Google. But we believe that the time for fear has passed. Now we need to start talking directly and openly about the harmfulness of the current situation – the harmfulness for billions of users, for hundreds of thousands of developers, for national economies, for global progress, ”sums up Durov.