Walmart-backed PhonePe plans to launch an Android app store this week with zero in-app purchase fees for developers. The app store is based on technology from Indus OS, which PhonePe acquired in 2021.
In this article, we look at why developers are seeking alternative stores and what the market opportunity is for these stores.
How developers interact with Google
In September 2020, Google temporarily removed Indian fintech giant Paytm's app from the Play Store because it violated the platform's rules. At that time, Paytm offered his Paytm First, a fantasy sports app, which was also listed on the Play Store. Paytm's main app also promoted the service, which violated Google's rules for sports betting apps in India.
Later that month, a number of Indian startups banded together to form a coalition to explore alternative app stores. These executives included Paytm's Vijay Shekhar Sharma and Deep Kalra of travel ticket sales company MakeMyTrip. Executives from PolicyBazaar, RazorPay, and ShareChat will also be in attendance.
Over the years, other to start Executives also complained about the Play Store's 30% commission and are promoting a “Made in India” app store.
Founder and CEO of Paytm Vijay Shekhar Sharma (Photo credit goes to SAJJAD HUSSAIN/AFP/Getty Images)
In 2021, Google reduced the fee on the first $1 million a developer earns each year from the Play Store from 30% to 15%.
In 2022, the company launched a user-choice billing program for limited apps, allowing users to use other payment processors at a 4% discount off Play Store fees.
In January 2023, following a ruling by India's antitrust authorities, Google had to allow all its apps to use user-selected billing systems and alternative payment processors.
Last year, when Google announced that it would start enforcing Play Store billing rules, it noted that fewer than 60 developers in India were paying fees of 15% or more. The company said its fees are among the “lowest” of any major app store.
Examples of implementing alternative billing systems on Google Play Image credits: Google
Earlier this month, about 30 app makers sent a letter to Google asking it not to remove apps that violate Play Store billing rules. The companies asked Google to wait until March 19, when the Special Leave Petition (SLP) will be heard by the Supreme Court. Separately, India's Supreme Court declined to ask Google to potentially delist these apps.
Developers can use Google's own billing system or alternative payment systems through user-selected billing. Notably, Google has set a March 13 deadline to integrate its user-selected billing API to offer other payment options.
numbers
According to estimates by several analytics companies, India is the top market in terms of downloads. However, the country is not among the top 10 (or in some cases, top 20) countries in terms of spending.
According to Sensor Tower, users in India spent $520 million on in-app purchases on Play Store apps in 2023, a 25% increase from 2022. Gaming apps accounted for more than half of that spending, followed by other categories such as social, entertainment, and gaming. Productivity and dating. The company says users in India download five times more apps than in the US, but spend almost 25 times less.
According to Sensor Tower, the Play Store accounted for a larger portion of in-app purchases in India for many years in 2023 (74%) than in 2020 (56%). In particular, Android enjoys a large share in the Indian market, accounting for more than 90% of smartphone users.
According to data.ai's State of Mobile 2024 report, only a few apps like Disney+ Hotstar and ShareChat were the highest grossing apps in India on both the App Store and Play Store.
opportunities and challenges
With over 750 million smartphone users in India, there is a massive distribution opportunity for app makers. In an interview last year, Indus OS's then CEO Rakesh Deshmukh said the company had served more than 200 million users with more than 2.5 billion app downloads in seven years. .
PhonePe promises to take no fees from developers initially and no listing fees in the first year. The company lists opportunities on its website for marketers to reach “millions” of users. To achieve such scale, Indus app store will need to focus on user acquisition and partnerships with mobile phone manufacturers.
Building alternative app stores on a sustainable level is difficult. Paulo Trezentos, who founded Aptoide in 2009, told TechCrunch that there are alternative app stores that need to provide value to users. For example, Aptoide allows users to install older versions of apps that are appropriate for their device.
The store receives a 25% cut if the app uses Aptoide's own billing service and a 10% cut if the app redirects the user to a website. Of the 100,000 apps in the store, nearly 7,000 use the company's billing service, Trezentos said.
Image credits: aptoid
Last year, Aptoide served nearly 500 million downloads. Trezentos said the company works with OEMs and carriers, but operates in a “near break-even” manner by reinvesting profits internally.
Trezentos noted that Brazil, India, and Indonesia are the countries where Aptoide downloads the most apps. However, these countries are not the biggest source of income for developers.
“These countries offer massive scale for developers. Therefore, developers should focus on facilitating payments and creating more value for users in these markets,” he said. said.
PhonePe has previously said it is excited by the fact that India's smartphone users could cross 1 billion by 2026. The company is also offering some developers a launch pad under its accelerator program, which brings benefits such as increased visibility on the PhonePe store.
Google (and Apple) have consistently maintained how secure and private their app distribution channels are. Google will display a warning on your phone if you try to install an app from an alternative source.
In markets like India, the search giant itself is struggling with a huge number of fraudulent lending apps. Google has had to continually improve the way it handles these apps over the years, and yet many apps remain undetected by the company's scanning mechanisms.
PhonePe requires robust security to block malicious apps. Additionally, processes need to be in place to remove predatory loan apps. In order to keep downloading apps from the new store, the company needs to convince users that its store offers more value than the default Play Store.
If you are a developer publishing your app on an alternative app store, please contact us at im@ivanmehta.com.