Walmart-backed PhonePe is set to launch its Android app store this week with zero commission on in-app purchases for developers. The app store is powered by Indus OS technology, a company that acquired PhonePe in 2021.
In this story, we’ll take a look at why developers are pushing for an alternative store and what the market opportunity is for these stores.
Developer hassle with Google
In September 2020, Google temporarily pulled Indian fintech giant Paytm’s app from the Play Store, citing that the app violated the platform’s rules. At that time Paytm offered Paytm First fantasy sports app which was also listed on Play Store. Paytm’s main app also promoted this service, which violated Google’s rule on sports betting apps in India.
Later that month, a bunch of Indian startups came together to form an alliance and explore an alternative app store. These executives included Vijay Shekhar Sharma of Paytm, Deep Kalra of travel ticketing company MakeMyTrip. and executives from PolicyBazaar, RazorPay and ShareChat.
Over the years, more get started executives they have also protested the Play Store’s 30% charge and pushed for a “Made in India” app store.
Paytm Founder and CEO Vijay Shekhar Sharma (Photo should read SAJAD HUSSAIN/AFP/Getty Images)
In 2021, Google reduced its commission from 30% to 15% on the first $1 million a developer earned from the Play Store each year.
In 2022, the company launched a user-choice billing program for limited apps that allowed them to use other payment processors at a 4% discount on the Play Store commission.
In January 2023, Google had to allow all apps to use user-choice billing systems and alternative payment processors, in response to a ruling by India’s antitrust authority.
Last year, when Google announced that it would start enforcing the Play Store’s charging rules, it mentioned this less than 60 developers in India pay fees above 15%.. The company said it has the “lowest commission rates” of any major app store.
Example of implementing an alternative billing system on Google Play Image Credits: Google
Earlier this month, approx 30 app makers have written to Google asking the company not to remove their apps for violating Play Store billing rules. These companies have asked Google to wait until March 19, when their special leave petition (SLP) will be heard by the Supreme Court. Separately, of India The high court declined to ask Google to potentially delete these apps.
Developers can use Google’s own billing system or use an alternative user-selected billing payment system. In particular, Google has set March 13 as the closing date integrate user-choice billing APIs to offer other payment options;
The numbers
India is the leading market in terms of downloads, according to estimates by several analytics firms. However, the country does not appear in the top 10 (or occasionally top 20) countries by spending.
According to Sensor Tower, users in India spent $520 million on in-app purchases on Play Store apps in 2023, up 25% from 2022. Gaming apps accounted for more than half of this spend, followed by other categories, such as social, entertainment, productivity and dating. The company said that while users in India download apps 5 times more than in the US, spending is almost 25 times lower.
Sensor Tower says that over the years, the Play Store accounted for a larger share of in-app purchases in India in 2023 (74%) than in 2020 (56%). Notably, Android holds a huge share in the Indian market with more than 90% of smartphone users.
According data.ai State of Mobile 2024 reportonly few apps like Disney+ Hotstar and ShareChat were top grossing apps in India on both App Store and Play Store.
Opportunities and challenges
India has more than 750 million smartphone users, so there is an opportunity for app makers for large-scale distribution. Last year, at an interviewthe then Indus OS CEO Rakesh Deshmukh said the company had catered to over 200 million users who downloaded over 2.5 billion apps in seven years.
PhonePe promised to take no commission from developers at first, and no registration fee for the first year. The company lists the site as an opportunity for marketers to reach “millions” of users. Indus app store should focus on user acquisition and have partnerships with phone manufacturers to achieve this kind of scale.
Building alternative app stores at a sustainable level is difficult. Paulo Trezentos, who started Aptoide in 2009, told TechCrunch that there are alternative app stores that need to offer value to users. For example, Aptoide allows users to install an old version of the app that may be a better fit for their device.
The store takes a 25% cut if an app uses Aptoide’s own billing service and a 10% cut if an app redirects users to a website. Trezentos said that of the 100,000 apps in the store, nearly 7,000 apps use the startup’s billing services.
Image Credits: Aptoide
Last year, Aptoide handled almost half a billion downloads. While the company also works with OEMs and carriers, Trezentos said it operates on an “almost one-off” basis by reinvesting any profits back into the company.
Trezentos noted that Aptoide has Brazil, India and Indonesia as the countries that download the most apps. However, these countries are not the top sources of revenue for developers.
“These countries provide a huge scale for developers. Therefore, developers need to focus on ease of payments and creating more value for users in these markets,” he said.
PhonePe has previously said it is banking on India potentially having more than one billion smartphone users by 2026. It is also providing a launchpad for some developers under its accelerator program with benefits such as better visibility on the PhonePe store.
Google (and Apple) are adamant about how their app distribution channels are secure and private. Google also displays warnings on the phone when you try to install apps from alternative sources.
In markets like India, the search giant itself has struggled with the problem of a staggering number of fraudulent loan applications. Over the years, Google has had to constantly improve the way it handles these apps, and still, many apps remain undetected by the company’s scanning mechanisms.
PhonePe should have strong security to block malicious apps. In addition, there should be procedures in place to remove predatory loan applications. The company needs to convince users that its store provides more value than the default Play Store in order to keep downloading apps from the new store.
If you’re a developer publishing your app to alternative app stores, I’d love to hear from you at im@ivanmehta.com
