Google issue overblown; to prevent ‘monopoly’ rents, India needs its own Google, with generous govt grants

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October 2, 2020 7:30 AM

To prevent ‘monopoly’ rents, India needs its own Google, with generous govt R&D grants, start-up challenges, etc

Big allegations, all aimed at Google, the multicoloured wonder of the digital age that has managed to grow from those modest beginnings as just another search engine in a nascent industry to the linchpin of a trillion-dollar conglomerate called Alphabet.

It is not clear whether the government or the Competition Commission of India (CCI) will take action to stop Google from charging a 30% commission—a year from now—on the in-app purchases of digital services. While Google argues that this has always been its policy, several local start-ups and digital economy players argue that this is just Google abusing its monopoly. By virtue of its Android platform, which is used by the majority of mobile phones in the country, the argument goes, Google’s Play Store has an unassailable position—Apple and its app store, have a small market share in India—and so hapless digital firms have no option but to pay the 30% revenue-share that Google wants.

At the outset, it appears the problem is overstated, at least for now. According to Google, less than 3% of developers with Play Store apps sold digital goods over the last 12 months and, of these, nearly 97% are already using the Google Play billing service and happily parting with a 30% commission. Indeed, it is important to keep in mind that the 30% commission does not apply to physical goods; so if you buy a computer from either Flipkart or Amazon, 30% of the amount you pay is not passed on to Google. The reason why Google makes this distinction between physical and digital goods probably has to do with the nature of the distribution network. While both Flipkart and Amazon have apps on the Play Store, in order to be able to supply goods to customers, both firms have invested billions of dollars in creating warehouses and in running logistics services; charging a 30% commission on top of these costs would kill the online delivery business. In the case of digital businesses, however, once they are listed on the Play Store, a large part of their marketing/distribution is taken care of; whether you think a 10% charge is more appropriate, it is this marketing reach that Google is charging for. Several years ago, whenever you bought a ring tone or a song on your phone, the phone companies used to take 70% of the revenue for this same marketing reach, with collection services bundled in.

Indeed, there are further carveouts, and that is why CCI may not intervene. For one, app developers can list on other stores like, for instance, Samsung’s Galaxy Store; the app can still be used on any Android phone and Google will not take a 30% commission. The reason why developers don’t want to do that and, instead, retain a Play Store presence is that a lot more people use the Play Store. Also, even if firms are on Play Store, there is no charge to be paid to Google if payments—let’s say for a subscription to a magazine—are made on their websites or through a WhatsApp link or something.

It is, however, possible that Google may choose to abuse its dominance in some other way. In which case, the real solution lies in India creating its own Google—in multiple Indian languages—over time, in the way it has created NavIC as a response to GPS or UPI as an alternative payments’ mechanism. Doing this requires healthy government funding for R&D, for start-ups, maybe even hackathons, start-up challenges etc. The system will have lots of bugs—which new product doesn’t?—but over time, these will get fixed. Atmanirbharta cannot be got by putting curbs on Google, it can only be achieved by creating India’s own products, and of a global quality.

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