Lying Liars Who Lie (Premium)

As you may have seen, South Korea today approved a new law that will require digital platform makers like Apple and Google to allow developers to use third-party payment systems, a change that will save developers a lot of money. When it was proposed, this law was referred to by its advocates as “the Google law” because Android has such a stranglehold in that country. But it’s fair to say that it will impact both companies—and, potentially others—hard, given how the massive revenues they each derive from the online stores.

I already wrote about the news and my worry that Apple and Google will try to bypass it, most obviously by support third-party payment systems only in South Korea, which would be a burden to developers and could lead to some developers just not offering apps there. Here, however, I’d like to focus on something different: What Apple and Google said about this new law. It’s rather incredible.

Let’s start with Google.

“Google Play provides far more than payment processing, and our service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world,” a Google spokesperson said.

There’s more to this quote, and I’ll get to it. But that first bit—“Google Play’s service fee helps keep Android free,” essentially—deserves a bit of scrutiny.

Because it’s an outright lie.

In fact, it’s a compound lie. Google Play’s service fee does not help keep Android free because Android isn’t free. What’s free is something called the Android Open Source Project (AOSP), which doesn’t come with Google Play and is thus useless to most hardware makers. You can’t license Android without paying a fee. And the primary thing you get for that fee is, wait for, Google Play. And the apps—Maps, Chrome, Search, and so on—that Google Play enables.

Look, companies routinely lie through obfuscation and by limiting what they say and don’t say. Microsoft, for example, is lying to customers when it states publicly that it will only support upgrading PCs with 8th-generation or newer processors (and their AMD equivalents) and TPM 2.0 to Windows 11; Microsoft has privately communicated to numerous publications that users on older hardware can, in fact, upgrade to Windows 11. (And Microsoft bungled that latter bit by later telling others that those unsupported users “might” not even get security updates; that’s obviously another story.)

But outright lying in business, at least at this scale, is unusual. I’ve been covering Microsoft and personal technology for over 25 years, and I can’t really point to many major examples of actual lying. These are publicly held companies, after all. There are still some standards.

This Google statement, however, is a lie, a double lie, and that they were able to deliver this lie without fear of reprisal and directly to a mainstream news organization like CNN says a lot. It says a lot about how little people understand technical issues, like the differences between AOSP and Android. And how little they understand Android, period: the myth that Android is “free” is so easily debunked that anyone who believes otherwise is delusional.

The statement continues.

“And just as it costs developers money to build an app, it costs us [Google] money to build and maintain an operating system and app store.”

Yes, it does “cost” Google money. But that’s a technicality and is thus immaterial: it recoups that money and then some thanks to the heady margins of its Play Store. As I reported just days ago, Google Play earned a profit of $8.5 billion on revenues of $11.2 billion in 2019, with margins of 62 percent. (And Apple’s profits, revenues, and margins are even higher.) If Google’s fee structure was struck down by three-quarters, the Store would still be wildly profitable. It doesn’t actually cost Google anything to run the Store because of these crazy profits and margins.

And it’s not just Google. Apple, that liar of all liars, has added its own bit of nonsense to the conversation.

“We believe [that] user trust in App Store purchases will decrease as a result of [the new South Korean law], leading to fewer opportunities for developers,” an Apple statement claimed.

Hogwash.

Users know nothing about the payment systems that developers are forced to use today, nor would they know anything about the multiple payment system choices they will have under this new law. That’s true of every business with which we pay for products and services. Have you ever once handed your credit card to an employee of a store or restaurant and wondered about their back-end business? No, you haven’t.

For example, my wife and I frequent a local restaurant, and we have no idea what back-end payment system they use for their business. But we do know that there is competition in this market and that this restaurant has choices. They use the payment system that makes the most sense for them, and if they save money doing so, great: Their business—you know, the one that actually matters here (like the developers in the app stores)—can be more profitable. That can lead to better pay for the owners and employees, more food options, special events, or even direct savings to customers. It’s up to them, as it should be.

With this South Korean law, Apple and Google will be forced to provide developers to choose the payment system they prefer, just as all non-digital businesses can. Some will undoubtedly stick with Apple and Google. But other payment systems will surely offer lower prices and better incentives. Competition is good like that. Always.

More to the point, this so-called in-app purchase (IAP) fee system is a primary component of these firms’ lock on their respective ecosystems and a primary driver of their unfairly high services-based revenues. And decoupling the terrible business practices that they use to maintain their dominance—their duopoly—is essential.

I know there are still doubters. Some people, some smart people even, illogically argue on behalf of Apple and Google as if these companies give the slightest crap about them too. But those who argue that Apple and Google are somehow “right” to charge such incredible fees are objectively wrong. These fees are both arbitrary and arbitrarily high, much like that 10,000 steps per day thing that we all think is based on science (but isn’t).

The broader issue, of course, is that these fees do impact end-users. It’s just that they don’t see or even know about it. If Apple and Google are forced to accept third-party payment systems, then we will see three obvious outcomes: Apple’s and Google’s unfair services revenues will drop, developers will see lower prices because of the increased competition in payment systems, and, as noted, end-users will see some combination of better products—because developers are making more and can invest more in their offerings—and lower prices.

But there are other less tangible benefits, too, and this is tied to monopolies (or duopolies) in general: Smaller developers that today can’t easily afford to offer solutions to end-users before will now be freer to innovate and possibly enact major advances of their own. Today, these people and companies are silently prevented from even getting started. Put simply, this change will enable future innovation that could change the world for the better.

Folks, that’s a good thing. And this kind of law being applied worldwide is likewise a good thing. For all of us.