An Android statue is displayed in front of a building on the Google campus on January 31, 2022 in Mountain View, California. Google parent company Alphabet will report fourth quarter earnings on Tuesday after the closing bell.
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Typically, Google Play and Apple’s App Store for iPhones take between 15% and 30% of digital sales inside apps through their billing platforms.
Allowing companies to bill users’ credit cards directly in an app allows services like Spotify to reduce those fees. Google said in a support document that apps that bill users directly will still have to pay Google a percentage of their app sales. And Spotify will continue to accept subscription payments through Google Play billing.
“When a consumer chooses to use an alternative billing system, the service fee the developer pays will be reduced by 4%,” a support document said.
Thursday’s move is a significant concession from a major mobile app store to allow third-party billing and a significant difference in Google Play’s policies versus Apple’s App Store policies. It’s also a sign that Spotify and Google have an alliance on app store issues even as Spotify continues to fight with Apple over its rules.
However, Google’s change is not as drastic a move as some app makers have called for. Developers want the ability to bill customers directly without paying a cut to a mobile app store. Google’s Android operating system allows “sideloading,” or the ability to install apps from sources that aren’t Google Play.
Spotify has loudly pushed back against app store fees and rules, saying they are anti-competitive. Most of its ire has been directed at Apple.
Apple still does not allow direct billing in most countries it operates and has fought against it with regulators and the courts. Apple has a similar program in South Korea to allow direct billing because of regulations in that country. Apple says its App Store’s policies are important for user security and privacy.
Spotify hailed Google’s decision in a blog post in which it said it had started billing users directly for premium subscriptions in several countries around the world this week. “Google has taken a bold step to help level the playing field, but this is just the beginning,” the company said.
Google announced the policy change, called User Choice Billing, in March. The company calls it a “pilot,” and expanded the test to the U.S., Brazil, and South Africa on Thursday in addition to previous regions including Australia, India, and Europe.
Google said the pilot is available to non-gaming apps that comply with its user interface guidelines about how to implement the billing.
In October, Spotify skirmished with Apple over one of its rules about whether it could create a button inside its apps to email customers with a purchase link that bypasses Apple’s App Store cut, according to the New York Times.
Spotify stock rose just under 10% on Thursday. Bumble stock was up over 10%. Google gained over 7% as well on a strong day for the markets after the lower-than-expected inflation report.