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

[tongxinshe]

I'm sure that this will be an unpopular opinion with the loudest Mac Rumors users. However, as a developer of one of the most popular social apps in the App Store, I completely agree with Apple doing this. The apps asking for tips say that Apple does nothing, however, those same apps would be nothing without the App Store. Apple takes care of some marketing, distribution (including bandwidth and storage), moderation, oh, and, let's not forget, the frameworks and tools that make it so easy to develop for the Apple ecosystem.

Developers asking for tips through the app are purposefully bypassing the mechanisms meant for this type of thing, in an effort to stop paying Apple. This not only gives them a leg up on the competition, it also bypasses protections that Apple provides to the consumer.

This is the equivalent to an illegal worker taking cash under the table to hide income from the IRS, while still using all of the public services that our tax dollars provide (like public parks, roads, police, fire, etc.). Then, screaming that they shouldn't have to pay taxes because the government didn't do the work. Disclaimer: I'm all for small government, it was just the most relevant example.

Your biggest mistake exists on your repeated word "asking". The tips are never asked. They are totally voluntary and the amount of each tip vary greatly, from $0.1 up to hundreds of thousand dollars (weirdos' show-off action once in a blue moon). They are very different from purchases.

On the other hand, your metaphor with IRS is also totally wrong, because in your metaphor, purchasing an item in a shopping app (Target, Walmart, etc.) will also falls into the same category.

To fix that metaphor, you need to replace "IRS" with "the company the worker represents". It's more like this, an onsite worker requires the customer to pay the service charge in two chunks, one as a check to the company the worker represents, and another as an under-the-table cash. In this case, this is definitely wrong.
Now, assume that there is a content provider app, it requires customer to pay pre-defined amount via PayPal first, go back to the app with a confirmation, then can the customer start the content consumption. This app would perfectly matches the metaphor and is an invalid app.
However, WeChat's "tip" doesn't work that way, the content provider doesn't define the amount of tip, neither does the content provider require the tip for the content consumption. Going back to the metaphor above, it perfects matches with a very happy customer gives the on-site worker an extra tip after his work, just to show his more-than-normal satisfaction. There is no standpoint for the company to asking for any portion of these extra tips.

 

[DevNull0]

The AppStore rules are quite simple: On one hand, Apple takes their cut for anything that ends up on the user's phone. On the other hand, an app must not use in-app purchases and therefore Apple gets nothing for things that don't end up on your phone. So: Tipping the pizza delivery man is free. Tipping the author of an eBook that arrived on your phone for free must be done through in-app purchases.

The person you're replying to said pulling this could make Apple look bad.

Your reply is that Apple is just following their own policies that they wrote all by themselves, therefore they're playing by the rules, therefore they're fine.

Do you not know there's a difference between corporate policies and what makes good vs bad PR?

 

[Zaft]

When asked about why Apple would do this to Wechat, Phil Schiller replied "Courage".

 

[tongxinshe]

The way I see why apple has to add this tax is: If they don't, all in app purchase will become a tip, nobody will pay the 30% ever.

"Want to unlock a level in a game? Send the game developer $5 via paypal and we will unlock it immediately."

Your imagination accurately shows the difference. It all goes back to the answers to two questions:
1. Is the payment mandatory or voluntary?
2. Does the payment have to happen before the content consumption?
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It sounds like many of you misunderstand the article. This isn't the tip system for tipping waitstaff or sending money to friends, the devolpers are using this as a way to get paid for their apps without having to share revenue, as they would if they charged say, $0.99.

So it's akin to wanting to use Apple's App Store to sell your app, without paying anything to Apple to do so.

No, you misunderstood, and you missed one important word in the article -- "voluntarily".

 

[lazard]

The way I see why apple has to add this tax is: If they don't, all in app purchase will become a tip, nobody will pay the 30% ever.

"Want to unlock a level in a game? Send the game developer $5 via paypal and we will unlock it immediately."

Comparing apples to oranges. The content is free for everyone regardless of whether or not you decide to tip. There is no paywall like you are suggesting.

 

[bennyf]

Your imagination accurately shows the difference. It all goes back to the answers to two questions:
1. Is the payment mandatory or voluntary?
2. Does the payment have to happen before the content consumption?

I think you've just answered the question why Apple has gone the over-broad route instead of trying to divine whether each and every "tip" in every app is really a tip (vs. IAP in disguise).

It should also be noted that if I made an app and gave it away for free, but received substantial tips from users, the end result is that I get paid while using Apple's infrastructure for free.

 

[caoxiang]

You biggest mistake exists on your repeated word "asking". The tips are never asked. They are totally voluntary and the amount of each tip vary greatly, from $0.1 up to hundreds of thousand dollars (weirdos' show-off action once in a blue moon). They are very different from purchases.

On the other hand, your metaphor with IRS is also totally wrong, because in your metaphor, purchasing an item in a shopping app (Target, Walmart, etc.) will also falls into the same category.

To fix that metaphor, you need to replace "IRS" with "the company the worker represents". It's more like this, an onsite worker requires the customer to pay the service charge in two chunks, one as a check to the company the worker represents, and another as an under-the-table cash. In this case, this is definitely wrong.
Now, assume that there is a content provider app, it requires customer to pay pre-defined amount via PayPal first, go back to the app with a confirmation, then can the customer start the content consumption. This app would perfectly matches the metaphor and is an invalid app.
However, WeChat's "tip" doesn't work that way, the content provider doesn't define the amount of tip, neither does the content provider require the tip for the content consumption. Going back to the metaphor above, it perfects matches with a very happy customer gives the on-site worker an extra tip after his work, just to show his more-than-normal satisfaction. There is no standpoint for the company to asking for any portion of these extra tips.

But IRS does require you to pay tax for tips right?

 

[alphaod]

But IRS does require you to pay tax for tips right?

Apple is not the IRS.

And the IRS does not have jurisdiction in China. In China, in case you didn't realize, has different tax laws.

 

[VulchR]

Apple: expanding market share by annoying consumers (who'll wind up paying more after Apple takes its 30% cut) and developers alike. Makes sense.

 

[apolloa]

It'd be like telling PayPal or Amazon to disable their "purchase" or "send-money" functions. Good luck with that!

But you can't buy anything in Amazons Prime app? Purely because Apple will demand and take a 30% cut. That's why you have to go to the website to buy or subscribe for Amazon products.

 

[tongxinshe]

Fair is fair. Apple has consistently insisted on getting their 30% vig for all digital purchases done through an app. They don't apply that to physical purchases or inter-bank money transfers. That is why I can purchase physical goods all day long through the Amazon app but I can't purchase an ebook. To avoid the vig Amazon has disabled digital in-app purchases and forced customers to go through the website. They can't even link to the website through the app. Microsoft used to do the same thing. At on time they had a button in their Office apps that would open a browser window to facilitate the purchase and Apple made them take it out. It doesn't matter if the charge goes through a user's Apple account or through an outside system, if the purchase is initiated anywhere in the app Apple wants its cut.

If the "tip" is for good service for a digital product then Apple should consistently apply their rules to which they subject other vendors and charge the 30% assessment. The tip button was an exploit by the developer to get around Apple's rules.

Again, the big difference is whether the payment is required at the beginning.
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Correct me if I am wrong, but Apple gets a cut of any ad-derived revenue from apps, right?

I suppose we could argue until the cows come home about just how big a cut Apple deserves, but I suspect that from Apple's perspective, tipping represents a way of circumventing its existing IAP rules. I don't think this is about raising revenue; it's simple Apple enforcing what they believe are app-store rules which developers are contractually bound to adhere to.

No, if the ad-network is not iAd (not sure whether iAd still exists), Apple doesn't get any cut.

 

[caoxiang]

Apple is not the IRS.

And the IRS does not have jurisdiction in China. In China, in case you didn't realize, has different tax laws.

My point was Apple is just like IRS for the app store. They can do whatever they want.

 

[alphaod]

But you can't buy anything in Amazons app? Purely because Apple will demand and take a 30% cut. That's why you have to go to the website to buy or subscribe for Amazon products.

Of course you can buy stuff in Amazon's app. I do it all the time. You can buy in the Best Buy, B&H, Target apps just off the top of my head.

My point was Apple is just like IRS for the app store. They can do whatever they want.

Well the IRS cannot just do whatever they want even though it may seem like it, though they can flexibly allow one person to pay different taxes compared to another based circumstance, needs, deductions, etc.

 

[bennyf]

Again, the big difference is whether the payment is required at the beginning.

That's just an opinion over where Apple should draw the line. Apple sees it differently and it's pretty easy to understand why. An app that is "free" but encourages tips can generate revenue while using Apple's infrastructure for free.

 

[mytdave]

Looks like the greedy behavior of a large company when they get to be too big for their britches. Nothing more threatening to Apple's future than their own arrogance.

 

[tongxinshe]

The content is displayed and consumed on the device. People aren't displaying the content and then ordering a physical copy of the artwork, article, or book. Money transfers don't generally fall under the in-app purchase guidelines because generally you are using things like Square to pay for something you consumed or purchased in person like a meal, a painting, or something similar.

You can bet your bottom dollar if someone set up an outside payment ecosystem using an Apple app that was primarily designed to facilitate payment for digital content like ebooks, apps, or games that Apple would enforce the 30% assessment on that too. It all depends on what your are purchasing. Digital goods delivered to the phone are subject to Apple's surcharge.

I can use Kindle app to watch the eBooks I purchased on Amazon, without Apple getting a 30% cut from my eBook purchases.

 

[VulchR]

I can use Kindle app to watch the eBooks I purchased on Amazon, without Apple getting a 30% cut from my eBook purchases.

Excellent point - indeed, I can use the Amazon app to order things without Apple taking a cut....

 

[taiwuchiang]

I guess we only need to ask one question: do the tips we gave to waiters get taxed by the restaurants?

 

[tongxinshe]

I think you've just answered the question why Apple has gone the over-broad route instead of trying to divine whether each and every "tip" in every app is really a tip (vs. IAP in disguise).

It should also be noted that if I made an app and gave it away for free, but received substantial tips from users, the end result is that I get paid while using Apple's infrastructure for free.

Well, in WeChat's "tip" case, WeChat developer is not the one who receives the money, instead it is just doing the same service as PayPal.

 

[69Mustang]

It should also be noted that if I made an app and gave it away for free, but received substantial tips from users, the end result is that I get paid while using Apple's infrastructure for free.

If you made a free app and required a "tip" then I'd see the validity in your argument. Also, that wouldn't be a tip. If the tip was a voluntary expression of satisfaction, like ya know... a tip, then your argument doesn't stand up to scrutiny. Voluntary and arbitrary payment is not a great business plan. What happens if you don't receive substantial tips from users? The end result is you don't get paid much of anything while still paying for using Apple's infrastructure.

Also, please stop with the "using Apple's infrastructure for free." Developers pay a yearly fee to use Apple's infrastructure.

 

[Soccertess]

I think this is a great idea. Hopefully wechat pulls it's app from IOS and people realize can how much a fool Tim Cook really is.

So yes, Apple please try and bully them. Please do, so then we can get a new CEO as soon as possible

 

[Moorepheus]

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.

Actually, IMO, a TIP is not. When you go out to dinner and you have a great experience, you CHOOSE to tip well. However, lets say your experience is horrible, again you CHOOSE not to tip.

No, because the App Store rules say that this app cannot use in-app purchases and therefore isn't even allowed to give Apple a cut. Apple takes a cut for things that end up on your device. They do not take a cut for things that don't end up on your device.

Actually, not's not entirely true. Lets look at Audible for a minute. You can't purchase any Audible book via the app on the iPhone/iPad, etc, but you can purchase it any where else, including via Safari on your iPhone (do it all the time). Once you do, you can then download that same book to the iPhone. This is the problem I have in general with Apple's 30% TAX on IAP. It is exactly that a TAX.

But you can't buy anything in Amazons app? Purely because Apple will demand and take a 30% cut. That's why you have to go to the website to buy or subscribe for Amazon products.

I have purchase plenty from Amazon.com app, Sears App, BestBuy app. If apple was taking a 30% cut, we would not have these apps.

That's just an opinion over where Apple should draw the line. Apple sees it differently and it's pretty easy to understand why. An app that is "free" but encourages tips can generate revenue while using Apple's infrastructure for free.

What infrastructure? You mean the one that stores they app? Allows the app to be downloaded. Doesn't the developer already pay a YEARLY fee? This 30% Apple cut is just a TAX, it's that simple.

I guess we only need to ask one question: do the tips we gave to waiters get taxed by the restaurants?

Absolutely they do. My step daughter is a waitress, every year, her TIPS are on her W2 and they are taxed.

 

[tongxinshe]

But IRS does require you to pay tax for tips right?

I am not sure whether you cannot read or your care is only on "winning" instead of "finding out what is really reasonable". I've answered this question of yours in my previous post. Your "IRS" metaphor is totally wrong from the very beginning. IRS requires tax paid by the shopping stores for all purchases made in the stores, Apple cannot require the 30% cut for the purchases in shopping apps.
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That's just an opinion over where Apple should draw the line. Apple sees it differently and it's pretty easy to understand why. An app that is "free" but encourages tips can generate revenue while using Apple's infrastructure for free.

Paypal, Square, Amazon, etc. already do that.

 

[Stevez67]

Another ignorant comment, even after multiple posters explained that WeChat is not making any revenue and that this is basically a user - user transfer.

Nonesense. If a user sends a tip to WeChat or a content creator, WeChat or the content creator gets revenue. Dressing it up as anything other than an In-App payment is living in convenient denial.

 

[tongxinshe]

Absolutely they do. My step daughter is a waitress, every year, her TIPS are on her W2 and they are taxed.

You answered without CAREFULLY reading the question. The question was "... taxed by the RESTAURANT?".