Google’s app war with India app developers has adverse effects

As our data journalism series dives into the world of the new app economy , CNN speaks to the power play of a market that’s been waiting to be disrupted, except it won’t be

As our data journalism series dives into the world of the new app economy , CNN speaks to the power play of a market that’s been waiting to be disrupted, except it won’t be coming from Google

In its fight for supremacy in the app market, Google’s been giving up prizes to startups.

That isn’t a bad thing for the search giant, which makes almost all of its money from adverts on its app search engine, but for the economy, it’s not good, either.

India is home to the world’s second-biggest app download market, with 130 million users, according to Statista, but it’s all coming at a cost.

The incentives announced this year — unlocking over $500 million in cash and prizes — have given a huge kick to the app developer community, which included a 7.4% commission.

“If you search for a keyword in a Google app, or search for anything related to app stores, all of the traffic is funneled to the apps that Google put there first,” said Sumant Somnath, founder of the mobile app store in India, PhonePe.

“That is killing a lot of homegrown developers and startups. In today’s world, (competition) is fierce and guys from Silicon Valley and India have really upped their game. But there are companies like us that are completely hardware-independent and offer a huge amount of upside.”

Shaking up app stores

Mobile apps were a hot topic earlier this year when Google announced the launch of its own app store for Android. The service, curated by Google engineers, has proved popular, but it’s also had a harmful impact on the business models of smaller competitors.

PhonePe, which launched in 2014, is being billed as “India’s next great app store.”

It has no incentive to let users find anything other than quality apps, and it hopes to remove the competition from Google, which now lists hundreds of thousands of apps in India and millions of apps worldwide.

“Unlike Google, we don’t showcase their apps, so we have chosen to steer clear of promoting any partner search results. We do expect some kind of shift in market share for them but we have already seen it,” said PhonePe CEO Aditya Agarwal.

“There is a new breed of influencers in India, who used to design apps and brand them as YouTube or Vimeo before, and they have spread their wings in the last three years.”

Since the Google Store launched in India in January, PhonePe says it has seen a 70% increase in its selection of apps and a 350% jump in downloads.

The app is available for free, without the need for an Amazon account, and sends alerts about app updates and new offers, it says.

That hands-off policy could protect smaller developers from Google’s search algorithms, which can spike downloads of major apps in search results and a lag time can be as long as 90 minutes.

App fever in India

While smaller apps are languishing, the most popular apps in India are unsurprisingly app stores run by Google and Apple.

Both have over 85 million downloads each per month, according to PhonePe, with Google Play and Apple’s App Store accounting for more than 90% of downloads.

Apple is due to open a dedicated app store in India. Meanwhile Google has had two apps for India since 2012 — Google Play and Android Market.

In the future, PhonePe’s partners include brands including fashion retailer Tata, mobile phone manufacturer Micromax and browser Chrome.

Though PhonePe’s partners are inking deals with local app stores, Somnath said they do want to become independent, like Amazon.

The e-commerce giant raised eyebrows when it struck a deal with India’s largest offline retailer, Reliance Retail, for its first bricks-and-mortar store.

Experts say Google’s app store will give more weight to the smaller app stores.

But for developers, the advantages of working with Google are clear.

“Google has been very generous with their financial aid to the startup ecosystem in the past couple of years. They have kept Appster up and running for the past four years, even though they didn’t really need it,” Somnath said.

“Google’s market share is very high, so when you look at the technical cost, Google’s market share is hugely superior.”

Leave a Comment