Today at Google I/O, we launched the developer API of Google In-App Payments for the web. In-App Payments enables any web application to receive payments from users and keep them engaged in your application. It is available to all US developers in sandbox today and will be followed by a consumer launch and an international rollout over the summer.
via The Official Google Code Blog – Making money with Google In-App Payments for the Web. The most interesting part of this is the 5% fee, most payment services charge 2-3%, so double that for Google to cover their hosting costs and such and it seems pretty reasonable. Here is where it gets interesting this puts Apple at a distinct dis-advantage. Apple charges 30% on everything (purchase an app, music, in-app purchases, etc). For ebook readers this creates a non-existent business model due to the agency model that publishers now require all books sold to recieve 70% of the purchase price (ie not wholesale price but what the customer actually paid). So 30% to Apple and 70% to the publisher means nothing get’s left over for the middle-person. That 70% cut could be argued as a problem, but the publisher is one paying for the advertising, development and writing of the book itself, 70% seems like an acceptable cut.
Google is really demonstrating what seems like the fairer margin for the service that serves, stores, builds the store, etc. Apples cut feels too high. Apple does valuable work and important work and it’s a fair argument that without all of Apple’s work there wouldn’t even be this store or platform for developers and publishers to sell their content. But the margin that Apple takes doesn’t seem right, especially when looking at e-books. Etsy is a great example of where the fees seem much more realistic, 20 cents per item listed and 3.5% sales fee. There is a business model that is working and doing much the same as Apple currently is with their App Store. Apple’s cut is so out of portion to everything else comparable is the real problem.
I’ll agree that this is defiantly a subjective claim as it’s hard to state what is and isn’t a viable or reasonable business model, and certainly Apple can charge a 30% or 5% or 90% fee and they are within their rights to do so. The argument can also be made, that a business shouldn’t bet their model on Apple treating them fairly cause that’s never a good idea, Apple defiantly does what is right for Apple. However if Apple doesn’t change their stance I can defiantly see Amazon just pulling out of the App Store and launching their service as a web app. It’s not the best solution for them, but it’s better than Apple taking every penny they make on e-books, especially when the competing smartphone platform takes only 5%.