Kakao Talk is on the verge of being kicked out of the Google Play Store after guiding consumers to outlink web payments in defiance of Google’s in-app payment policy. The meeting between the two sides took place, but it ended with only confirming their position. There is a prospect that it will be a long-term war.
‘Korean messenger’ status Kakaotalk and Google’s long-term war, conscious of global market, is inevitable…”The government needs to come forward and compromise.” Kakao Talk rebelled against Google’s payment policy by providing a “web payment outlink” that can be subscribed at a lower price on the emoticon plus purchase page.
On July 7, executives of Google and Kakao Talk held a private meeting with related departments of the Korea Communications Commission. As Kakao Talk proceeded with the update at the end of May, there was a dispute between the two sides as it introduced a web payment outlink that can be subscribed at a lower price than $1.5 in addition to in-app payment (in-app payment) regarding the emoticon plus subscription service. Since June 1, when Google fully implemented its new payment policy, Kakao Talk’s web payment outlink has still remained on the payment page, which has been a problem. Google refused to review the latest version of Kakao Talk because it did not comply with its payment policy, and Kakao Talk will not be able to service the latest version of Kakao Talk through Google Play from July 1.
The interview held at the Korea Communications Commission was private, so it is not known what was going on. After the meeting, there were reports that Kakao Talk would give up on outlink payments and take a step back, but Kakao said it was “groundless.” Analysts say that a dramatic agreement is unlikely at the moment as both sides remain strong.
Google’s forced in-app payment became controversial in July 2020 when Google announced its plan to expand in-app payments to all apps, which had been forced only in game apps. In-app payment is a payment method in which Google imposes an app market usage fee on the amount of content used in the app, and the apps that have been making sales using Google Play’s distribution network have been targeted.
Google limited the update of applications that do not follow the in-app payment (in-app payment) policy from April 1, 2022, and applied the policy to exit the app market from June 1. The amount of content usage increased sharply by applying fees of up to 30%. Public opinion has worsened, and content creators are also stamping their feet on whether consumers will leave and sales will decrease as the cost of using them has increased.
From Google’s point of view, it is necessary to cover the cost of maintaining, repairing, and operating the app market Google Play, but it will be difficult to secure sales commission sales if apps guide cheaper web payments. In other words, it is an irresistible fight. Some point out that it is similar to a dispute over network usage fees between overseas content platform companies and domestic mobile carriers.
Netflix, a global online video service (OTT) company, is engaged in a legal battle with SK Broadband, Korea’s largest telecommunications company, as it has not paid network fees while generating large amounts of traffic. In June 2021, the first trial court ruled in favor of SK Broadband. At the time, the first trial court ruled, “The Plaintiff (Netflix) is accessing the Internet network through the Defendant (SK Broadband), or at least is provided with a paid service from the Defendant to connect to the Defendant’s Internet network and maintain its connection status.” In other words, SK Broadband is using a network that is maintained and repaired, so it is obligated to pay a price.
An official from the app market industry said, “It’s best to find a way to provide content providers at a low price to consumers, but platform operators need economic motivation to operate the platform,” adding, “In the end, it’s not just a matter of criticizing in-app payments because it’s a matter of who pays for the platform or network.”
Another controversy is the appropriateness of commission rates. It is pointed out that it is never advantageous to Google. Wi Jung-hyun, a business professor at Chung-Ang University, said, “30% of sales is a commission rate that Google, which has monopoly power, makes excessive profits due to its separate advertising costs, but Google has never disclosed the basis for calculating the commission rate.” According to an analysis by the National Assembly’s Science, ICT, and Communication Committee, Google is expected to be able to earn up to $400 million in additional profits in Korea this year by forcing its in-app payment policy.
The solution proposed by the political circle is a revision to the Telecommunications Business Act proposed by Cho Seung-rae, a lawmaker of the Democratic Party of Korea, in 2021. The bill, also known as the Google Gapjil Prevention Act, was created to prohibit Google from profiting by specifying that app market operators cannot enforce certain payment methods against app developers. The problem is that Google easily bypassed the law with the trick of “three-way payment” because the bill was not meticulous. This is why some pointed out that the revised Telecommunications Business Act is not enough to prevent Google’s dominance.
Both Google and Kakao are making it clear that they will not back down. As of August 2021, Kakao Talk’s domestic share was 87%, which has long established itself as a national messenger. Even if the Kakao Talk app is deleted from Google Play, it is unlikely that Kakao Talk’s stronghold, which has already secured an overwhelming share, will be shaken. In addition to consumer opinion, the government is pressuring Google. An official from Kakao Talk said, “We would like to maintain the current policy of guiding users to payment methods other than in-app payments so that they can choose payment methods.”
Google is also tough. This is because disputes with domestic Kakao Talk could be an important precedent amid regulatory movements related to in-app payments in Europe and the United States. In fact, Google has turned a blind eye to Vietnam’s game companies, which have traded in the same way as Kakao Talk, but immediately responded to Kakao Talk in Korea by stopping the update.
Experts predict that negotiations will eventually take place. “It is Kakao that the political circle, the Korea Communications Commission, and the Fair Trade Commission will pressure Google, but it is a company that has only expanded its domestic business, but even global Google will not be an easy fight,” he predicted.”The longer the dispute, the greater the risk of damage to individual content creators than the two companies,” he said. “It is not desirable for the government to intervene quickly and make compromises because regulations can cause balloon effects.
SOPHIA KIM
ASIA JOURNAL
