Google’s app store deal with Spotify won’t placate critics

As legislators across the globe pursue legislation designed to reduce the power and profits of app store operators, Google announced a pilot program Wednesday with Spotify that will let the music streamer take in-app payments through a third-party processor. 

Apple and Google, the two dominant app store operators, make developers route virtually all in-app payments through the tech giants’ internal payment processing systems, where the two companies take a 15% to 30% cut. Critics of the current app store policies argue Apple and Google profit exorbitantly off their monopolistic smartphone operating systems and app stores, while the two companies respond that they’re providing a safe, user-friendly service valued by smartphone owners.

On its face, the new Google-Spotify partnership looks like an encouraging response to pressure mounting on the two tech giants, which reap tens of billions of dollars in profit annually from their app stores.

The announcement landed as the European Union neared an agreement this week on its landmark Digital Markets Act. The sprawling legislation would, among other things, force Apple and Google to allow in-app purchases through third-party payment processors. 

Congress is considering legislation, the Open App Markets Act, that would include similar in-app purchase requirements, though it’s unclear whether the bipartisan bill will get a floor vote this year.

The details of the Spotify agreement, however, don’t offer much concrete evidence that Google plans to make imminent, systemic changes without legislative prodding. A cynical observer could even argue the deal amounts to a weak, last-minute effort to placate on-the-fence policymakers.

Most notably, Google offered no timeline for evaluating the success or failure of the pilot, which will include “a small number” of yet-to-be-named developers in addition to Spotify. Even if Google does decide to extend the new in-app purchase protocols to more developers, the company still could drag its feet on the broader rollout. Google is already taking multiple years to phase in new Android privacy rules.

Google also could still take a significant cut of in-app purchases, regardless of whether it relaxes third-party payment rules. Bloomberg, citing a source familiar with the deal, reported Wednesday that Spotify “won’t have to give Google its entire 15% fee,” but Google will still take a to-be-determined cut. In a similar vein, Apple and Google have signaled they will still pursue a sizable cut of in-app purchases made on third-party platforms in South Korea, which recently passed laws that force app store operators to allow third-party payment options.

In addition, the choice of Spotify carries minimal risk for Google. 

As it stands, Spotify users must start subscriptions on the streamer’s website, with no option to make payments within its app. That will change under this new agreement, allowing Google to finally profit off of Spotify. Will Google act as friendly with apps that already funnel huge chunks of money into Play Store coffers?

Google’s Spotify deal could become a watershed moment that starts breaking the dam of app store dominance. For now, though, too many uncertainties remain for developers to declare any semblance of victory.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

City so nice. Uber’s app will soon feature New York City’s yellow taxis after the two sides reached a deal that will help alleviate the ride-sharing company’s driver shortage, Bloomberg reported Thursday. The agreement marks a rare collaboration between Uber and the city’s legacy taxi drivers, who have fought for years over fare prices and market share. Uber’s dearth of drivers has caused an increase in prices and wait times for customers, though the company’s revenue and ride totals remain at all-time highs. Taxi and UberX rides will cost the same amount, with surge pricing in effect for both operators.

Mom, I think I’m in trouble. Police in London arrested seven teens and young adults as part of an investigation into recent hacks of Microsoft, Nvidia, and other tech companies, Bloomberg reported Thursday. Investigators did not release information tying the suspects to the hack, but the arrests come one day after Bloomberg reported that cybersecurity researchers identified a 16-year-old Oxford teen as the mastermind of Lapsus$, the hacking collective claiming responsibility for the breaches. Cyber researchers and rival hackers said the teen did not take great pains to cover his tracks.

Back to the drawing board. Toshiba shareholders swatted away a plan Wednesday to divide the company into two parts, rejecting a management proposal designed to stave off a sale, The Wall Street Journal reported Wednesday. The defeat illustrated foreign investors’ desire to find a private-equity buyer for the Japanese conglomerate, which has faced criticism from shareholders for its underwhelming performance and reluctance to restructure. Toshiba management hoped to spin off the company’s electronic hardware unit after failing to receive any strong buyout offers.

Worth the cost? A top Ukrainian official confirmed the besieged country is using Clearview AI’s controversial facial recognition technology to identify the bodies of dead Russian soldiers and notify their families, Reuters reported Wednesday. Mykhalio Fedorov, a deputy prime minister responsible for digital transformation, said Ukrainian officials are contacting families through social media after using the technology to confirm identities. New York-based Clearview AI, which says it has a database of 10 billion-plus faces culled largely from public websites, has faced criticism and lawsuits stemming from claims of privacy violations and misuse of its technology.

FOOD FOR THOUGHT

Target acquired. Russian diplomats doomscrolling Facebook while in Washington may find a surprising messenger in their feed: the FBI. The Washington Post reported Wednesday that the feds appear to be targeting potential Russian spies on the social media network, sending them geo-targeted ads encouraging them to flip on President Vladimir Putin. How did the Post get this story? A reporter happened to see one of the ads in their Facebook feed Wednesday while standing outside the Russian Embassy. Counterintelligence experts lauded the effort as a novel, inexpensive tactic in the U.S.’ effort to help Ukraine beat back the Russian offensive.

From the article:

The ads are designed to capitalize on any dissatisfaction or anger within Russian diplomatic or spy services—or among Russian emigres to the United States—over the invasion of Ukraine, an event that counterintelligence experts call a huge opportunity for the U.S. intelligence community to recruit new sources.

The unlikely star of the campaign is Russian President Vladimir Putin, whose own words are used to encourage people working in or visiting the embassy to talk to the FBI.

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Crypto.com is the latest FIFA World Cup sponsor. Why are crypto companies going all in on sports advertising?, by Marco Quiroz-Gutierrez

Why this payment tech business has soared during the COVID pandemic, by Fortune editors

BEFORE YOU GO

RIP to the GIF OG. A fond farewell to Steve Wilhite, a pioneering computer programmer who created the GIF file format in the 1980s. Wilhite, who died last week at the age of 74, helped spawn our lasting obsession with dancing dogs, Michael Jackson noshing on popcorn, and Steve Buscemi asking how his fellow kids are doing. Wilhite originated the GIF file while working at CompuServe, where he developed the compressed graphic format and purportedly first animated a picture of a plane. Technological developments took over from there, including the ability to loop a video snippet. In honor of Wilhite, a reminder to all that the creator himself says it’s pronounced “jif.”