Upon the pilling up of allegations against
Alphabet
’s
GOOGL
division Google regarding the exploitation of app developers, the company will now reportedly allow apps to introduce their billing systems in the Play Store.
This will offer an alternative payment system to users, while downloading the app from the Play Store. Notably, users only had Google’s billing system as an option until now.
To begin with, the company is set to allow the music streaming service provider
Spotify
SPOT
to use its payment system in its Android app. Hence, users will get the payment option via Spotify’s payment system or Google Play Billing.
Notably, Spotify will not be required to give its entire 15% fee to Google if the user pays via Spotify’s billing system.
Hence, the latest plan will undoubtedly benefit Spotify as well as other app developers.
Following the news, the SPOT stock rose 5.7% in the after-hours trading.
Growing Regulatory Concerns
Not only Google but also App Store operator and iPhone maker
Apple
AAPL
is facing growing regulatory concerns in the app industry.
Apple said that it would allow Spotify and other media apps to direct users to the web to complete payments. However, Spotify would not be able to integrate its payment system.
Although both Apple and Google slashed their commission fee from 30% to 15% on paid apps and in-app purchases last year, they have been accused of illegally extracting money from app developers by not letting them introduce their billing systems.
Reportedly, both companies collect up to 30% payment as a fee, which, according to them, is required to deliver a safe and secure mobile ecosystem.
However, developers find it too high and raised concerns over it.
In this backdrop, Congress is now looking into regulating app stores through the Open App Markets Act. This remains another headwind for both Google and Apple.
Google had to reduce app developers’ fees by 4% in South Korea after it was asked to provide an alternative billing system as a result of a regulatory action taken against it.
Bottom Line
Notably, the recent step of Google is expected to affect its proceeds from the Play Store.
Nevertheless, Google’s strong initiatives toward the advancement of its offerings for app developers remain noteworthy.
We believe that the latest move will aid Google’s traction across app developers, which, in turn, will bolster its developer base.
This, in turn, will continue to sustain the strong momentum of Play Store and Android.
Zacks Rank & Stock to Consider
Currently, Alphabet carries a Zacks Rank #3 (Hold).
A better-ranked stock in the broader technology sector is
Analog Devices
ADI
, which currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Analog Devices has gained 9.1% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.3%.
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