Google is going to start charging for the Play Store in Europe as a response to an antitrust ruling—and naturally, speculators are pontificating what that will mean. Here’s what will actually happen: Nothing.
What the What? Antitrust?
So here’s the deal, for those of you that don’t have time to pay attention to these things. The European Commission found that Google broke antitrust laws in the EU for anticompetitive behavior, fined them $5 billion, and gave them 90 days to comply.
Google has been banning phone makers from using forked versions of Android, and forces them to preinstall Chrome and Google Search if they are going to offer the Google Play Store. And of course, without the Google Play Store, your Android device is sorta worthless—that’s why our article on installing the Google Play Store on your Amazon tablet has nearly 3 million views.
There’s a whole bunch of debate that we won’t get into about how antitrust works and whether this is good or bad for consumers. The fact is that antitrust works differently in Europe than in the US, and over there, it’s more important to allow access to alternatives—even if those alternatives aren’t actually realistically going to happen.
Google’s Business Model for Free Android Needs Chrome
The main reason that Google is able to spend billions of dollars creating and promoting the free Android operating system is because they get the benefit of advertising dollars from people searching Google on their phones, usually using Chrome.
And the only way they can force manufacturers to not screw Android up it is to use the Play Store, and Google Play Services, as a big hammer to force everybody to stay in line and keep the core functionality updated. If you want to make a phone with Android, you need the Play Store, and if you want the Play Store, you have to set Chrome as the default browser with Google Search set to default.
After the initial ruling, Google hinted in a blog post that Android’s free business model would probably have to come to an end in Europe as a response, and they might need to start charging phone makers.
The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers. If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem. So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model.
Leaked documents have shown that Google is actually charging up to $40 per phone for phone makers to bundle the Google Play Store. That’s a ton of extra money for phone makers to have to pay, but it’s not going to change anything.
Google’s Solution: Pay Phone Makers More to Install Chrome
Earlier this week, Google laid out their solution to comply with the EU’s antitrust ruling, and it was a three-part plan:
- Phone makers will be allowed to use forked versions of Android in the EU if they choose.
- Google will start charging for the Play Store, and stop making Google Search and Chrome mandatory along with it.
- Google will start paying phone makers more to install Google Search and Chrome.
That’s right, the solution is that they are going to start paying phone makers more to keep Google Search and Chrome on their devices and set to default:
Third, we will offer separate licenses to the Google Search app and to Chrome.
We’ll also offer new commercial agreements to partners for the non-exclusive pre-installation and placement of Google Search and Chrome. As before, competing apps may be pre-installed alongside ours.
According to the always-excellent Ben Thompson over at Stratechery—a subscription website that is a must for anybody interested in analysis around the world of business and technology—this is essentially just moving numbers around:
What I suspect will happen is that Google will increase the amount it pays OEMs for the pre-installation of Search and Chrome by roughly the same amount it charges for the installation of Google’s other apps, including the Play Store. In other words, Google will spend more on traffic acquisition costs, but earn more in licensing fees; on the flipside, OEMs will pay more for licensing but earn more for preinstalling Search and Chrome.
So Google charges phone makers up to $40 per phone for the Play Store, and then makes them an offer they can’t refuse (probably around the same dollar amount) to offset that cost and keep Chrome and Google Search as the defaults, and everything stays exactly the same.
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