Apple’s App Store commission might be under threat in multiple countries around the world, but the company has just gained a huge new source of commission thanks to a WeChat deal struck in China.
The situation arises because the way most Chinese iPhone users buy apps is very different to anywhere else in the world …
How Chinese iPhone users buy apps
As we’ve noted in the past, the vast majority of Chinese residents all use a single app called WeChat. With more than a billion users, it effectively acts more like a second iPhone operating system than a standalone app.
WeChat is the only app opened by a typical Chinese iPhone user. Almost everything they do with their phone is performed through an enormous range of mini-apps within it. This includes messaging, paying bills, booking a taxi, ordering food online, buying movie tickets, playing games, checking in for a flight, sending money to friends, booking a doctor’s appointment, getting a bank statement, searching for a book, dating, and even donating to charity.
A survey of more than a million Chinese iPhone users back in 2020 found that 95% of them would abandon iPhone rather than give up WeChat.
The problem for Apple is that purchases made through these mini-apps don’t usually generate commissions for the company. Instead, most app creators direct users to external payment systems.
WeChat deal gives Apple a 15% commission
Apple has long been demanding that WeChat creator Tencent prevent mini-app developers from avoiding its commissions. Bloomberg reports that after a year of negotiation, the two companies have finally reached agreement.
Tencent Holdings Ltd. has struck a deal with Apple Inc. that will see the iPhone maker handle payments and take a 15% cut of purchases in WeChat mini games and apps, resolving a high-profile dispute that’s dogged the world’s largest smartphone arena. The agreed-upon rate is far lower than the iPhone’s typical 30% commission, but opens a new revenue stream for Apple and takes pressure off Tencent, which operates the WeChat app at the center of most Chinese people’s lives.
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