The Digital Markets Act is a document that eliminates a long-standing hegemony in the tech industry. In the article, we take a closer look at what changes to the App Store and Google Play Store are associated with the introduction of these regulations in the European Economic Area.
The Digital Markets Act is a document that eliminates a long-standing hegemony in the tech industry. In the article, we take a closer look at what changes to the App Store and Google Play Store are associated with the introduction of these regulations in the European Economic Area. Carry on reading and brace yourself for a March revolution for mobile app developers.
If you have one or more apps on Google Play or the App Store, you should prepare yourself for the changes that are looming as a result of the law amendments introduced by the European Commission. The Digital Markets Act (DMA) requires tech giants to comply with several regulations, from privacy rules to preventing abuse of their market position.
One of the provisions generating the most excitement is the elimination of exclusivity for the Google Play Store and App Store as the only official app retailers. EU users rejoice because of new opportunities to reach customers and the possibility of introducing alternative payment methods, while the hegemons threaten to raise their already high fees for choosing competing options. What is it all about, and what does it mean for you? Find out below.
The Digital Markets Act is a document that requires digital companies doing business in the European Union to make changes that will equalize the playing field for smaller companies while limiting the unfair advantages of tech giants such as Google and Apple. Besides, the Digital Markets Act introduces a significant change in user privacy issues, processing of user data, targeted advertising, and much more.
As a result, designated gatekeepers will lose their dominant role in the mobile app market. Users will be able to download apps from sources other than Google and Apple stores, choosing the best deal for themselves. The biggest tech companies will no longer be able to force a single payment option, as the DMA mandates allowing users to choose from several methods. The European Commission is also demanding a precise legal basis for using app users’ data. The Digital Markets Act takes effect on the 6th of March 2024.
The European Commission has clearly defined which companies should limit their monopoly in the European digital market. The gatekeepers, that is, businesses with a very strong position and a large influence on shaping the market, were identified as:
In the mobile application field, gatekeepers are Google parent Alphabet and Apple. Google and Apple, through their business strategies and internal regulations, effectively limit the development of any competitive app marketplace. Digital Markets Act intends to reduce the expansion opportunities of large digital platforms, allowing similar services to emerge and gain digital sector share.
“A fair marketplace is part of every democracy” – the words of Margrethe Vestager, the EU’s antitrust chief, perfectly capture the spirit guiding the creation of the Digital Markets Act. Major tech companies that provide core platform services are taking advantage of their positions and pushing the boundary of the legality of their operations further and further to increase profits. Users have few viable alternatives. In some cases, they are forced to use gatekeepers and bear huge costs if they want to earn money on their products.
The main goals of the EU Digital Markets Act include alternative payment methods in the largest app stores, other application distribution options, sharing data with third-party app stores, and introducing other than default web browser search engines. DMA also gives more possibilities to manage their data by users and changes in the ad targeting. The modifications are expected to benefit primarily monopoly-weary users, app developers, and many other businesses previously blocked by the actions of tech giants.
The adoption of the Digital Markets Act within the European Union is positive news for app developers and end users, who have been forced to pay more and more for helpful and entertaining apps. The planned opening of the digital market means more and more customer benefits, bigger opportunities for European businesses, and a change in the way gatekeepers think. Check out the following paragraphs to see what possibilities the change in European law brings for the tech industry.
One of the objectives of the Digital Markets Act, crucial for mobile app developers, is the ability to use app stores other than those from Google and Apple. New rules force gatekeepers to allow users to install apps from sources other than the official app stores.
iOS devices in the 17.4 update received new APIs (including those for creating new app marketplaces), processing of alternative payment methods, on mobile devices, functionality for non-default browser engines, and much more. At the same time, Apple device makers threaten that greater freedom for iOS app users and developers may come with lower security.
Apple is also trying to discourage iOS developers from taking advantage of the European law’s benefits with changes to its price list. Those who don’t choose other marketplaces for their mobile apps will see reduced fees – a 10 percent lower commission and 17 percent lower transaction fees. There is also a new controversial charge known as the Core Technology Fee – €0.50 for each first annual install per year over a 1 million threshold for developers of iOS apps on the App Store and other stores.
A major change introduced by the Digital Markets Act (DMA), with a significant impact on the payment issue, is the possibility of using payment methods other than Google Pay and Apple Pay. Inside the European Economic Area, you can skip Google services and use alternative methods, such as Stripe. But despite this, Google still expects to pay a commission to process payments. It is lower, but by only 3%, than when using Google Pay. iOS apps on the App Store can use the App Store’s payment processing for an additional 3 percent fee. App developers can use a payment service provider within their product or link users to a specific website to process payments for no additional fee to Apple.
The European reform on the app marketplaces is a revolution because, in other countries such as the US, India, South Korea, Brazil, Japan, Indonesia, and Australia, another payment processing option is only possible in addition to Google Pay as the first choice. The situation changes if you add a contactless payments method like NFC. Then, getting rid of Google Pay is possible worldwide.
If you struggle with the new fees and payment complexity, you can use the fee calculator tool for EU users to help you choose the most favorable option. For more information on the additional fees required by Google and Apple, see our dedicated article, entirely focused on financial issues related to mobile app development based on the Digital Markets Act.
Under the new regulations, the gatekeepers must create an entirely new integration architecture that allows them to share data with third-party app stores. The DMA forces big tech companies with new software features that will foster innovation and competitive services in the area of EEA. It also means more control over their data by EU users, who will be able to acquire and export it to other platforms at any time.
Every app developer can now submit a request for additional interoperability with hardware or software features included in iPhone and iOS. If the Apple team decides that interoperability with a feature is possible, they will prepare a solution with documentation describing the changes on the app developer’s side.
Numerous changes in data access and the cutting down of unfair practices by monopolists will also result in restrictions on data sharing between core platform services. Users will pass independent verification and decide whether they provide access to their data for ad targeting.
This is a change that may affect you if your app earns money from ads. Denied access to data means worse reaching people who are really interested in specific products. However, this is not completely confirmed, as the exact impact of DMA on ad targeting is not yet known.
A default web browser is becoming a thing of the past. New rules of European reform allow app developers to use online search engines different than the core platform services such as Safari or Google Chrome. The ability to choose any search engine other than the manufacturer’s suggested one will positively impact the experience of those who previously disliked opening default browsers inside the apps.
Starting in March, most digital industry players (except big tech companies) are waiting for the biggest and fastest possible changes brought about by the market’s opening to broader offerings. Google and Apple are making some moves that indicate they are adjusting to the DMA’s regulations but are still challenging many of those with adverse impacts on their current revenues and market share.
In the long run, they will be left to adapt gradually to the prevailing rules due to the possible exodus of vendors and end users to the alternative app marketplace. Over time, large digital platforms providing core services will learn constructive lessons from this situation, which will allow them to implement innovations in their own services and promote transparency to users.
The Digital Markets Act aims for a new world with opportunities for app developers and end users. The DMA and similar regulations in the European Union could turn out to be good for the tech industry in the following years. Startups and smaller businesses receiving more market share will increase competition, drive innovation, and shape the sector for the better.
With more options on the table when developing your app, you’ll be able to provide your potential customers with personalized experiences and lower prices. Changes are happening right now, so follow them closely and don’t fall behind with updates that improve security, privacy, and related topics important for your users.
Hi, I’m Marcin, COO of Applandeo
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