I have never used WeChat Pay or the tipping function, since they're both only available in China, but I really don't like that this article essentially says that this issue is "iPhone vs WeChat" for Chinese citizens, because it really isn't. Tips are used by about 10% of WeChat users, and a large percentage only tip a few RMB per month. This is absolutely not on the scale of the actual WeChat Pay, even if this article implies it; it does mention that WeChat processed $1.2 trillion in transactions last year, but that's not tips, and I think it's disingenuous to not directly mention that.
The removal of tips happened a few months ago, and it has definitely affected people who rely on those tips in mainland. For example, in a Quartz article about this topic[1] it mentioned that one blogger went from making 1000 RMB to 100 RMB per day from tips after this policy was put into place, because even though iPhone users make up a small percentage of total phones, they generally have a lot more disposable income (having an iPhone is a status symbol).
It's really not as cut and dry as this article makes it seem because of that. Wealthy Chinese like iPhones because of the status and don't want to give it up if they don't have to, and Tencent probably makes a cut from being the middleman of the tipping feature, so Tencent is also probably annoyed at the loss of a revenue stream as well. However, Tencent will never remove WeChat from the App Store, and neither will Apple, for various (and obvious) reasons. There are likely negotiations going on, and there may be a pseudo Apple Pay system to handle tipping like this in China.
Also, nitpick: I don't think it's fair to say that Apple Pay is an "answer" to WeChat Pay. They may do the same thing (facilitate payments to merchants) but they do it in very different ways, and I would imagine a big reason it's not bigger in China is due to the pervasiveness of WeChat Pay (which works with QR codes, not card readers).
Tencent is the 10th largest company in the world, making it larger than (eg) Samsung, and they already have their own OS as well (Tencent OS), which is an Android fork. I expect it's a matter of time before they either arm-twist Apple into compliance, or Apple becomes irrelevant in the Chinese market when better integrated and shinier alternatives leave it in the dust.
Up until now, no known Chinese companies has ever achieved any phenomenal success in developing an operating system for the mass market from scratch. Most of them have a small team to hack and maintain forks of existing open source OSes. Alibaba tried to sell their Android replacement[1] but perhaps it has not reached any tipping point yet.
There are some stellar smartphones designed and made in China. I'm certain similar things were said about their smartphone ambitions. It's only a matter of time before smart, dedicated and focused people achieve what they are after.
That's quite interesting to hear. In my anecdotal experience, it seems Alipay is more integrated than WeChat in terms of online payments as it appears to have far more sophisticated features and support across a wide variety of merchants and institutions, even if WeChat is itself unassailable as a whole and is of course primarily a communication app rather than a payment one.
For instance, after a year of wandering around, meeting merchants who did not support AliPay was a very rare occurrence but I frequently found several who did not use WeChat pay, although this is likely to change given the lightning speed at which these things seems to work in China. Even beggars on the streets have given me AliPay codes to scan.
This makes me wonder what the terms of the alliance between Apple and Alipay are. I don't use their appstore but would Apple be in trouble without it?
> Even beggars on the streets have given me AliPay codes to scan.
While I personally use either that applies, my observation is that WeChat Pay QR code is more frequently supported by grass-roots merchants like food vans etc. These WeChatPay QR codes are not for formal accounts that are supposed to receive purchase payment but personal accounts, rendering the payment a little shady, though AliPay also supports such transactions. I doubt some of these merchants do now own any AliPay accounts before they start WeChat Pay but they do have WeChat installed as it has been the dominant mobile social platform. An interesting rumor is that WeChat Pay is less ubiquitous in Hangzhou where the headquarter of Alibaba is located, and vice versa for AliPay in Shenzhen.
Because the form factor hasn't changed since the iPhone 6?
Do note however, that Apple’s customer retention rate, while significantly lower in China than in the rest of the world, is still higher that any other phone manufacturer’s in China.
30% of app cost and IAP wasn't enough, so Apple wants 30% of tips as well? In summary, 30% of any money flow that even slightly involves the use of iOS? Even Visa and Mastercard aren't that greedy. I'm an Apple apologist way more than is healthy, and this leaves even me wondering, "sure that's the hill you want to die on?"
My team runs a paid chat app for Instagram models to monetize their fan base. Apple did a 180 on their own IAP rules and called us to insist we could not use the App Store without charging with IAP. Their app store rules clearly state that content, not peer to peer payments or something 'done by a person' (like spending time to chat with creepy dudes you wouldn't normally give the time of day to over a DM) does not fall under IAP. It's "Content" and "It takes place inside the app" so too bad. We were paying out the models 70% at the time. In short, they are enjoying all the profits we had earmarked for ourselves and now make 3x what we do from our app.
Google on the other hand have (so far, touch wood) left us alone to handle our own processing and helps offset our incredibly thin margin from iOS. Unfortunately, iOS represents almost 80% of our gross revenue.
I understand why Apple generally has this policy, because it's easy to move from having an App-price to purchasing "something" in the app where they no longer get their cut.
However it's equally frustrating in areas where it's very clearly not realistic, like the purchase of things like ebooks, etc. Some of which are even worse of a conflict since Apple has similar businesses and 30% is just too large a cut for most services where you're not the end retailer, e.g. an ebook/audiobook store.
Having said all of that, I don't have a good solution to weigh up those two things.
This is the tipping point Jobs was afraid of: The AppStore rules were created to ensure no single developer could become the portal that wrestled control over the user experience from the OS the way Chrome did for windows.
Now both operating systems are being subsumed by messenger apps as the vast majority of the experience, thus earning the future value and trust of users.
Not really chrome -- it didn't exist yet when this started to happen. But web applications in general. And the whole Web 2.0 movement. As people spent more time in browsers and those browsers became more standards compliant it weakened MS' dominance and let others, like OS X, start to compete. As developers, especially for in house applications, saw it was much cheaper to publish to a common platform rather than have to worry about local installs they changed where they were spending money. The browser effectively killed MS' complete dominance.
I'm confused (and have never really heard this theory). Is there anything to support this from Apple or Jobs?
Plan A (at least publicly) was that web apps were the only apps on the iPhone. Were these rules and the App Store a reaction to that or would have Apple kept web apps crippled in Safari?
Initially Jobs was against all apps, and wanted just mildly useful webapps running in their crippled JavaScript engine. Then they allowed apps but with many UX restrictions like no drawing UI outside the view etc. Nothing that could infringe on the core interaction models of iOS.
First, Apple's losing market share in the Chinese smartphone market and it's not simply due to cheaper phones. Apple was/is primarily a status brand, but what's the status advantage in having an $800 iPhone vs an $800 Samsung? There isn't one and everyone is starting to recognizes that.
Second, WeChat runs everything in China. Every. Thing. It's your WhatsApp, your Skype, your Yelp, your OpenTable, your Venmo, etc. Every cent that Apple tries to take out of WeChat "tips" is not a cent that it's snatched from another faceless corporation, it's a cent out of the hands of individuals who rely on those tips. It's money leaving the hands of individuals and going into the largest market-cap company in the world. Is it a surprise that people are going to be pissed?
Apple should be careful not to overplay its hand. China has already banished major American companies (Google + Facebook) for not playing by its rules and it could easily position itself to do the same to Apple.
I would be quite happy to see Apple fail, not because of Schadenfreude (Honest, I swear!) but because it could have a normative effect on other tech companies to reduce the amount "late-stage capital"-type behavior they engage in.
Yep, let's imagine if the Chinese government bans Apple products tomorrow in China, what happens?
Instantly we'd see Apple's stock crashes by 40%, wiping out over $300B in market cap, if not more, in a single day. AAPL is a heavily weighted member on the Dow, and it will trigger a chain reaction that will crash both S&P 500 and NASDAQ.
Apple pissing off the Chinese can literally trigger a US recession in the short term.
The silver lining is that WeChat/Tencent != Chinese Government, and I think Apple isn't crazy enough to be pissing off the CPC yet.
Apple does not make nearly as much money in china as you seem to think. More importantly 1/3 of their stock price is from cash on hand. Further one company even AAPL taking a 3-10% hit is small potatoes.
Second if China suddenly dumped AAPL manufacturing most companies would quickly pull out of Chinese manufacturing which would destroy their economy and likely result in civil war within a decade. Banning products has no such risk.
>Apple does not make nearly as much money in china as you seem to think.
I don't know how much you think Apple makes from China, but I know it's a bit more than 20% of their total revenue as of last quarter. It's almost as much as the entire Europe combined.
>Further one company even AAPL taking a 3-10% hit is small potatoes.
3-10%? AAPL goes down like 5% all the time on a rumor that they may miss their iPhone shipment forecast, if the Chinese government bans AAPL products tomorrow you think they'd only go down 3-10%?
>Second if China suddenly dumped AAPL manufacturing most companies would quickly pull out of Chinese manufacturing which would destroy their economy and likely result in civil war within a decade. Banning products has no such risk.
What? You don't just pull out of China for manufacturing. Where are you gonna go? In fact Apple can't even pull out of China for manufacturing in a short amount of time. That's right, Apple would still make iPhones in China even if the Chinese government bans them from selling it there.
Additionally, why would anyone care about what the Chinese government do to Apple? Did Yahoo or Microsoft leave China after the CPC banned Google?
So why do you think half of Apple's market cap would disappear?
> Where are you gonna go?
Anywhere? Apple has $200B in cash, they could have factories in Manhattan if they wanted to.
> Did Yahoo or Microsoft leave China after the CPC banned Google?
Google hadn't made investments on the scale Apple has. Lots of investment would be scared off by China effectively nationalizing Apple's massive capital investments. A more immediate impact would be the retaliation against Chinese exports to the US.
The whole thought exercise is ridiculous, why is China going to risk it's own economy and stability for WeChat tips?
This is what I think Apple is hoarding cash for, they'll want to move a shit load back to the US if they can get the tax break for it and then I think we'll see them spend big on automated manufacturing in the US and, to some degree, Europe.
China is already getting a little expensive for some types of manufacturing. Indonesia is often the go to destination for really cheap labor in a reasonably stable country, but there are others.
So, if China starts looking less stable that's plenty of incentive to jump ship and likely save some money.
Your scenario will never happen because Apple indirectly employs millions of Chinese workers. Tencent has 38k employees.
The government's interests are more aligned with Apple than they are with Tencent.
Also President Xi Jinping is relishing the opportunity to "lead" on the global stage in terms of climate change, trade and globalization in general. He's never going to allow a ban of Apple over an inconsequential business dispute.
A crash in a stock market index is not a recession. The accepted definition of a recession in an economy is two successive quarters of contraction in the GDP.
This is what happens with you don't account for human nature in corporate spreadsheets. This is a situation where even a 0.0001% apple tax would have caused great harm since people would object to that on principle alone.
This is not a battle that Apple can win. Removing WeChat from the AppStore would cost Apple far more than it would cost Tencent and they both know it, so that is no credible threat.
Is that true even when taking into account the possibility of WeChat wanting to expand globally? If that's the case, being shut out of iOS seems like it would be an unsurmountable obstacle.
Isn't iOS marketshare outside of the US and Europe essentially non-existent? Even in Europe iOS is far less prevalent that the US. I imagine most of WeChat's global expansion would be centered around other parts of Asia, South/Central America, Africa, and the Mid East.
Apple only charges its 30% fee for digital content, and specifically not for physical goods, like things you buy from Amazon.
So are tips considered digital content, even though you receive nothing in return? Or is Apple adding a 3rd class of transaction that specifically covers tips?
I can't tell from the article. Are "tips" being used as something mandatory in order to receive a good/service? Or are they things that are optional for receiving those goods/services?
Tips are literally tips. For example, you read a blog post from someone's official account and tap 'tip' to give a few rmb in appreciation of the writing.
Optional as far as I know (there might be some mandatory use cases that I'm unaware of). A common use case is bloggers put a barcode at the end of their blog posts, so the reader could tip them.
The thing is it's not "within-app" revenue. Tencent doesn't make any money from the tips; it's completely passed through. If Tencent were directly profiting from the tipping process it would be understandable. But tipping in WeChat is essentially a transaction between a send and receiver that is just facilitated by Tencent. This is akin to Apple asking for 30% of all transactions made by Venmo rather than just 30% of Venmo's fee.
An Uber ride is a “physical good” so to speak. So no. Really, people ought to read the Apple IAP docs, including the author of the story and perhaps the folks at WeChat.
A “tip” is really a payment for a virtual good – a blog post, a video, etc. It’s not the same as a person-to-person money transfer. Framing it like it’s a person-to-person money transfer transaction is ridiculous. It’s a payment for a virtual good no matter how one parses it. No content, no tips from consumers of that content. Apple doesn’t take any percentage when I use my Chase app to send a Quickpay to someone.
Without the content, would the transaction have occurred? No. So that “tip” is just a voluntarily payment in exchange for some virtual good. The fact that these content creators make a business out of selling their content via “tips,” and there is really no legitimate argument against Apple’s 30% fee unless one wanted to challenge the overall concept of the IAP itself. WeChat doesn’t have to allow IAP and users don’t have to use Apple if they aren’t happy with it.
However tipping functionality is hardly going to influence a consumer’s purchase choices.
The Chinese can do without Apple easily, but they cannot do without WeChat. It is far more integrated into society than Facebook ever was. Not having a Facebook account will get you weird looks in the West but not having WeChat will make people stare at you in disbelief unless you are a foreigner or very old.
Can you explain how you get to that conclusion? WeChat seems to be an integral part of Chinese society. If WeChat keeps ignoring Apple, what can Apple do? Pull the app from the App Store and risk people migrating to other phones that have WeChat? I bet that Apple will not take 30% of tips going through WeChat.
Apple really isn't in a position to negotiate or bully TenCent. They have 16% market share in China (as of Apr, 2017) and any attempt to threaten TenCent by removing WeChat from the China App Store would backfire spectacularly.
Be careful when drawing conclusions based on market share. Usage share is the more relevant statistic, although unfortunately more difficult to measure. Apple's usage share is almost certainly significantly higher than their market share, because iPhones are premium devices that get used for many years, whereas many Android phones are cheap devices with a significantly shorter lifespan as useful devices.
You can also buy many premium Android phones at half or a third of the price of an iPhone depending on the specifications you want. I also don't know where you get this idea that cheap Android devices have a significantly shorter lifespan. These phones don't just suddenly die or expire by a certain date. I have an old Galaxy S2, a phone released in 2011, that works well to this day.
Yes, in principle you can keep using your phone for as long as it is able to turn on. In practice cheap phones have worse built quality, often ship with versions of Android that are obsolete on arrival and/or do not receive updates. And in general, items that cost more are better taken care of. In the aggregate all of these mean that cheaper phones have a shorter expected lifespan than iPhones.
Ultimately if Apple allows WeChat to be the app platform they lose the ability to differentiate themselves from their competitors. That said the hype around WeChat sounds like a too good to be true dream for marketing people. I wouldn't be surprised if it all suddenly blew over.
Apple has been known to be a greedy company when it comes to vendors etc. ... feel it's on the wrong side of time ... many other brands are catching up ...
Why can I send money to my friends via FB messenger or Snapcash without apple taking a cut, but the same thing is not possible for WeChat? Something doesn't add up here.
You can transfer money in WeChat without Apple taking a cut too. This is not what the dispute is about.
The dispute is about buying virtual currency with IAP, to be gifted to streamers, bloggers etc. It's no different from buying virtual in-game currency or items, and therefore Apple would like to treat them the same as all other IAP and take their 30% cut.
Because these companies are not taking commission right now. Once they start taking commission on these transaction Apple will jump right in to take their share of that profit.
Apple will win this battle. WeChat is tightly monitored by the Chinese government for any sensitive info, and heavily censored. It's losing appeal. The problem has grown more and more serious recently since there is a hot political war going on, and messages published on Twitter and YouTube are propagated on WeChat. The YouTube attack on 6/16 is part of the war.
Generally Uncle Donald is right on trade. China's great firewall is a major trade barrier. China's Internet industry does not have foreign competition. Uncle Sam should be much tougher on trade deals.
WeChat is integral to Chinese culture right now. If you go to China, there are a lot of businesses that only use WeChat Pay and nothing else. WeChat isn't losing appeal, rather, it's essential to living in China.
Imagine someone born in China who moved to canada when young, and grew up there until after university, then went back to china to take advantage of their western education with their Chinese heritage.
Is that person Canadian or Chinese? The answer is likely both.
The removal of tips happened a few months ago, and it has definitely affected people who rely on those tips in mainland. For example, in a Quartz article about this topic[1] it mentioned that one blogger went from making 1000 RMB to 100 RMB per day from tips after this policy was put into place, because even though iPhone users make up a small percentage of total phones, they generally have a lot more disposable income (having an iPhone is a status symbol).
It's really not as cut and dry as this article makes it seem because of that. Wealthy Chinese like iPhones because of the status and don't want to give it up if they don't have to, and Tencent probably makes a cut from being the middleman of the tipping feature, so Tencent is also probably annoyed at the loss of a revenue stream as well. However, Tencent will never remove WeChat from the App Store, and neither will Apple, for various (and obvious) reasons. There are likely negotiations going on, and there may be a pseudo Apple Pay system to handle tipping like this in China.
Also, nitpick: I don't think it's fair to say that Apple Pay is an "answer" to WeChat Pay. They may do the same thing (facilitate payments to merchants) but they do it in very different ways, and I would imagine a big reason it's not bigger in China is due to the pervasiveness of WeChat Pay (which works with QR codes, not card readers).
1: https://qz.com/973359/apple-aapl-may-be-gearing-up-for-a-gia...