Apple Takes Risk By Telling Chinese Chat Apps to Disable 'Tip' Functions

Discussion in ' News Discussion' started by MacRumors, May 18, 2017.

  1. MacRumors macrumors bot


    Apr 12, 2001

    Apple has told several Chinese social networking apps to disable their "tip" functions to comply with App Store rules, according to executives at WeChat and other companies.

    The tip functions in Chinese messaging platforms are free to use and allow people to send authors and other content creators monetary tips through transfers to mobile wallet accounts. However, according to The Wall Street Journal, Apple has decided that tips are equivalent to in-app purchases - similar to buying games, music, and videos - therefore Apple is entitled to a 30 percent cut of every transaction.

    WeChat on iPhone

    The move by Apple appears to be a way to eke out additional revenue from Chinese iPhone users as part of a broader effort to increase its market share in the country. According to research firm IDC, Apple's market share in China dropped from 16 percent in Q1 2015 to 9 percent in Q1 2017, while the iPhone has fallen to fourth place behind Chinese brands Oppo, Huawei, and Vivo.

    On the other hand, Apple's App Store revenue in China overtook its U.S. App Store revenue in 2016 and became the biggest App Store market in the world. Making the tip function an in-app purchase in China's wildly popular chat apps would seem to be a sure-fire way to increase Apple's revenue. However, Apple's pressure on messaging platforms like WeChat is a risk and threatens to alienate huge Chinese companies.

    Some social-networking apps have likened Apple's tactic to arm-twisting, according to The Wall Street Journal. Apple is said to have told chief executives at two companies that if they refuse to make the change, updated versions of their apps won't be made available and they could be kicked out of the App Store. "We don't charge anything as the platform, but Apple gets 30 percent for doing nothing," one of the executives reportedly fumed.

    The annoyance stems from the way the tipping culture is viewed in China. Chinese app developers see tipping as fundamentally different from in-app purchases because users only tip voluntarily as a mark of appreciation when they consume content. But the biggest worry for Apple could be whether the Chinese government decides to intervene and side with the tippers.
    Apple has suffered at the hands of Chinese state regulators before. But Apple also risks frustrating China's biggest company Tencent Holdings Ltd, the developer of WeChat, which has 938 million active monthly users. The messaging service works almost like an operating system all of its own, boasting multiple mini-apps that allow users to pay bills, book hotels, browse media, and more, without ever having to leave the chat platform. The nature of the system itself could be a threat to Apple's app revenue, while WeChat is arguably more important to Chinese smartphone users than any individual phone brand - iPhone included.

    WeChat is in talks with Apple to try to find a new solution to the tipping problem and come to an alternative agreement, according to people familiar with the matter.

    Article Link: Apple Takes Risk By Telling Chinese Chat Apps to Disable 'Tip' Functions
  2. NexusUser macrumors member


    Aug 24, 2016
    Pretty sure Apple needs WeChat more than WeChat needs Apple...
  3. lysingur macrumors regular


    Dec 30, 2013
    This could turn out really badly for Apple is they go through with it. It might be just posturing but they aren't going to be viewed favourably in the eyes of the Chinese consumers with this move. User-to-user money transfer isn't in-app purchase and shouldn't be charged a cent by Apple. It's just that simple.
  4. litmag01 macrumors regular


    Jul 16, 2009
  5. ArneK macrumors regular

    Aug 19, 2015
    This could backfire really really badly for apple. If it comes to them pulling the app Chinese users won't buy iPhones anymore. Apple really doesn't have a good hand here
  6. BigDO macrumors 6502a


    Dec 9, 2012
    I really hope that Apple gets a smack on their greedy wrists for trying to exploit a facet of Chinese culture and turn it into a revenue stream. I am sure they will as the China doesn't seem to take their corporate bullying as readily as US and EU.
  7. jimbobb24 macrumors 6502a

    Jun 6, 2005
    Not sure how that is increasing market share by increasing prices and decreasing features. Thats not usually how it works.
  8. DragoniteD macrumors member


    Jun 18, 2013
    Wechat has more users than iPhone... and it dominates 1 of Apple's most important markets. It was really un-wise choice for Apple to choose fight instead of cooperate. Plus that this move looked ridiculous for Apple, it's not reasonable. As a huge Apple fan, and a previous Tencent hater (well, years ago, not really now), I'm with Wechat & Tencent this time.
  9. gnipgnop macrumors 65816

    Feb 18, 2009
    China is a heavily protectionist market to begin with. Apple probably has very little to lose in the long run by doing this.
  10. DragoniteD macrumors member


    Jun 18, 2013
    True, even being a huge Apple fan and sticked to Apple's eco-system, I can't really tell whether I need Wechat more or iOS+MacOS combined more.
    Since it was Apple's fault on this issue, I would probably leave Apple before they go even more insane & greedy.

    And that does not only affect Apple's Chinese market, but worldwide where there are people sticked to Wechat, particularly Chinese outside their motherland.
  11. 69Mustang macrumors 604


    Jan 7, 2014
    In between a rock and a hard place
    Very little to lose?o_O What happens to Apple's revenue and profit if this leads to a ban in the Chinese market? China is their largest market. Very little to lose.:rolleyes:
  12. Zaft macrumors 68040


    Jun 16, 2009
    Brooklyn, NY
    Why would Apple do this when their market share is already taking a hit in China..
  13. RickInHouston macrumors 65816

    May 14, 2014
    I think you actually should type 'want' in place of the word 'need'.
  14. BB8 macrumors regular


    Jan 26, 2016
  15. gnipgnop macrumors 65816

    Feb 18, 2009
    Why would you think it would lead to a ban? Apple has probably looked at all the angles in China and has come to the conclusion that EITHER getting the cut OR simply dropping apps that tip from the App Store is better than continuing with things the way they currently are. Apple isn't a company that bluffs that often.
  16. oneMadRssn macrumors 601


    Sep 8, 2011
    New England
    What about apps like PayPal or Venmo? When I tell Venmo or PayPal to take $50 out of my bank account, and then transfer it to my buddy for pizza or to a seller on ebay, isn't that akin to an IAP too in the same way these tips are?

    I think Apple needs to find a clearer line to draw, instead of doing this on an unpredictable case by case basis. Even if that line means a few more transactions occur without Apple getting a cut, so be it. Clarity and predictability should be top priorities for the ecosystem.
  17. adamjackson macrumors 68000

    Jul 9, 2008
    "The move by Apple appears to be a way to eke out additional revenue from Chinese iPhone users as part of a broader effort to increase its market share in the country."​

    Not sure if the author is wrong or Apple. How could enforcing this lead to an increase in market share. What if WeChat ends up supporting tipping in Android and not iOS. People would switch in droves, no?
  18. DragoniteD macrumors member


    Jun 18, 2013
    "A need is something that a person must have in order to thrive. Without it, that person will suffer either physically or mentally."

    "A want is a choice. A desire which a person may or may not be able to get. Life will continue if a person doesn’t get what they want."

    I am pretty sure it is "need" for me.
    I suffer by losing either one of them, and it would be extremely inconvenient for me.
  19. JackZah macrumors newbie


    Aug 10, 2016
    Apple has to deal with Apps becoming significantly more feature rich. The iPhone is a computing platform more powerful than laptops from just a few years ago. Apple shouldn't be surprised that a single App can do so much. Look out how Instagram and Snapchat are becoming messaging and news apps respectively.
  20. gnipgnop macrumors 65816

    Feb 18, 2009
    Probably not, because you're not paying someone that is directly connected to content use within an app.
  21. bennyf macrumors regular


    Mar 29, 2011
    Apple really had no choice but to close up this loophole. It's an exception that undermines the rule.

    A tip is exactly the same as an IAP, just with a different name. To treat it as anything else undermines the foundation of how Apple pays for the infrastructure that serves up apps: the datacenters, transaction processing, etc.

    Makes total sense. If it leads to regulatory action against Apple, they are in no worse position than losing a huge portion of revenue to the loophole.
  22. 69Mustang, May 18, 2017
    Last edited: May 18, 2017

    69Mustang macrumors 604


    Jan 7, 2014
    In between a rock and a hard place
    Admittedly, a ban is on the more extreme end of possibility. In hindsight, I should have been a little less hyperbolic since it detracted from my intent. Ignore the ban. My point was to question you're assertion that they have little to lose. Ban aside, they potentially still have a lot to lose. Say the app makers refuse to disable tip functions and refuse to pay the vig to Apple. Then what? Does Apple remove the apps? Especially and app like WeChat. Mmmm, Imma go wit no. That Chinese market is a huge part of Apple's overall revenue. Is this worth the risk? I personally think Apple's history in the Chinese market says they will back down. They already established a history of making concessions to remain in the Chinese market. Why? Plenty to lose. Which brings me back around to my disbelief in your "little to lose" quote. How do you figure they have little to lose?
  23. Fzang macrumors 65816


    Jun 15, 2013
    Come on. That's a photo of the app some 5 years ago? That's lazy.
  24. mateytate macrumors regular

    Apr 10, 2014
    Its a good point, you're using an app to transfer money to a friend so why is it different? I'm sure someone on here will enlighten us to the technical differences, but really its the same thing
  25. Urban Joe Suspended

    Mar 19, 2012
    Greedy miser CEO. Really good way to tick people off.

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