Google Play Slashes Minimum App Prices In Emerging Markets
Google Play announced new minimum app prices equating to approximately 26 cents, just over a quarter of the US and European minimums. The decision includes 17 emerging markets. (See the complete list here). Although it took some time, Google Play’s move acknowledges the differences in consumers’ purchasing power around the world. In this way Google continues with their strategy of monetizing through their growing scale.
Although iOS has a significantly smaller user base than Android, Apple App Store often monetizes better per user, to the extend that App Store revenue still exceeds that of Google Play in many countries. This is mainly because of the differences in the consumer mix between iOS and Android. Apple users have a higher disposable income than Android users. Given the relatively larger disparity between household incomes in emerging markets, app pricing represents a larger problem for Google Play than for the Apple Appstore:
Why Apple Is Unlikely To Follow Suit
Slashing app prices is not viable for Apple. Although app prices play a role in smartphone user experience, the main reason why iOS’s user base is lagging behind Android is the higher price of its hardware. According to Forbes, the average iPhone cost was $687 in Q4 2014, compared to $254 of Android, with the latter offering many devices under the $200 mark. Note, that neither Apple nor Google sell apps as their core business. Instead they use them to improve impact on their respective endgames. Android devices are more affordable for the general public in emerging markets and lower app prices will significantly expand the user experience of those who already own the Android device in emerging territories. Furthermore, it will allow Google to target ads better as more user data will be collected from the increase in app use. All this without making a dent to its core business. For Apple to meaningfully follow suit it would have to slash prices of its hardware products first; i.e. make a significant dent in its core business. That’s not in their interest. Apple knows that although middle classes are growing in many emerging countries, it will take a considerable amount of time before those who have not been able to afford Apple products until now will be in a position to do so. Apple will continue on its mission to provide excellent user experience and create brand loyalty to resell new hardware to existing users.
Because of the differences in hardware prices, apps were actually relatively more expensive on Android until now. While the minimum price of 99 cents represents a 0.14% of an average iPhone price, on Android this translates to 0.39% per app. This ironically means, that even though Apple users are richer on average, they get apps for comparably less. With the new pricing however, Google Play’s ratio decreases to only 0.1% positioning itself beneath that of Apple.
iOS and Android Brands Will Become Even More Polarised
Slashing app prices on Google Play will lead to further polarisation between the iOS and Android brands. In the short to mid term Google, as well as Android developers who will be more able to appeal to local audiences will clearly benefit from this. The MIDiA App Economy Forecast states that average developer revenue per app will grow more than twice as fast on Android than on iOS between 2014 and 2020. But the further polarisation and resulting emergence of brand image of products for the ‘richer vs. the poorer’ could create a consumer state of mind whereby users will see Android devices as a ‘ necessity anyone can get’ while Apple hardware will be a luxury ‘to aspire to’. Disposable income is on the rise in many emerging markets, so the future challenge for Google will be to find a way of keeping users loyal, once their disposable income allows them to switch.