Google's in-app purchase policy change will cost plenty

Logo for app store Google Play. [GOOGLE KOREA]

Google's changes to its policy for in-app purchases will cost Korean firms up to 156.8 billion won ($142.2 million), according to the Ministry of Science and ICT.

In November, the U.S. IT firm said it would charge a 30 percent commission on all in-app purchases, as it had earlier for mobile games.

The new policy goes into effect on Sept. 30.

After a request from lawmaker Park Sung-joong of the People Power Party, the ministry studied the new policy and found that Google's commissions from Korea this year would rise between 88.5 billion won and 156.8 billion won. The first figure used app publishers' revenues from 2020, while the second used revenue projections from the companies.

The study used information provided by 246 domestic app publishers in the country, which generated more than 75 percent of mobile in-app purchases last year.

In-app purchases by Korean smartphone users totaled 7.5 trillion won in 2020.

From that amount, the ministry estimated that 5 trillion won, or 66.5 percent of last year's total, was generated via apps from Google's store. The corresponding figures for apps from Apple's store were 1.62 trillion won, or 21.5 percent. Purchases from apps from One Store, the only domestic operator, a joint venture between SK Telecom and Naver, were estimated at 882.6 billion won, or 11.7 percent.

Apple announced last November that it would charge a lower 15 percent commission from small publishers with annual revenues of less than 1.1 billion won starting this year. Previously, Apple's app store had charged a 30 percent commission on all in-app purchases.

According to the ministry's study, under the old policy, Apple would have earned 15.9 billion won from small Korean app publishers. The new policy would cut those revenues to 7.9 billion won this year.

Lawmaker Park expressed his concern that Google's commission hike would hurt consumers.

A survey of local app publishers showed that 57.1 percent of large and mid-sized firms accepted Google's policy change. Fifty percent said they would hike prices charged to their customers as a result of the new rules.

"The study clearly shows that a score of app operators will resolve the cost hike by pushing up consumer prices," said Park. "This proves that the biggest victim of Google's in-app purchase policy change will be Korean consumers."

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]