All you need to know about the EU Digital Markets Act.
2022 was the year we started to address big tech’s monopoly seriously. While industry leaders have criticized these companies’ anti-competitive behavior for years, it wasn’t until recently that new regulations, lawsuits and investigations have forced them to comply.?
Among these is the EU Digital Markets Act (DMA), which was passed in spring of 2022. The landmark regulation targets digital gatekeepers, mandating they conduct their business in a fair and non-discriminatory way. Many of its policies are aimed specifically at the mobile ecosystem, ensuring competition between digital companies and breaking down Apple and Google’s grip on the mobile ecosystem.?
Before proceeding further, it is important to understand what and who mobile OEMs are, and the role that the DMA would and would not play in their business moving forward. Mobile OEMs, such as Xiaomi, Huawei, OPPO, and Vivo are mobile Original Equipment Manufacturers (OEM). These companies will not be significantly impacted by the DMA from a hardware business perspective. However, the DMA will cause these OEMs to focus even more on building their own app ecosystem.
The DMA will lead to the end of Google and Apple's monopoly, with phone manufacturers gaining more control over their advertising formats and search functions. Each phone manufacturer already has its own app store, but it was previously a challenge to install them as the default app store on their devices. Google unofficially abused its market power, discouraging OEMs from investing resources in building their own app ecosystems.
The DMA disrupts the current status quo, offering alternatives and promoting competition, resulting in greater freedom for app developers and less risk. In the past, if Google removed an app from their store, it meant the potential end for the developer, who would essentially be pushed out of the market. With more competition however, developers can rely on alternative app stores and avoid such a risk.
In short, it means that:?
The Apple and Google monopoly: The beginning of the end??
To better understand Apple and Google’s dominance, we need to go back to the advent of the App and Google Play Store over 15 years ago. From the start, both companies implemented a 30% cut on all in-app purchases made within their app stores. They also prohibited any third-party billing processing for apps looking to sidestep these fees. This has been one of the primary drivers of growth for both companies in recent years, but has had a real impact on app developers’ profits.?
Three years ago, game developer Epic Games sued both Apple and Google for taking such a large cut of their sales. Other industry leaders, including Facebook and Spotify, have also spoken out against the fees. Among growing resentment from companies and consumers alike against big tech, it was time for regulators to step in.
Enforcement of the European Union's DMA is expected to begin in mid-2024, and the big gatekeepers, as the law refers to them, face fines of up to 10% of annual global revenue for violations. Apple and Google have already outlined how they will comply with the EU’s new competition laws: in Apple’s case, the company is now preparing to allow alternative app stores on its iPhones and iPads from late-2023. Google will be required to do the same, meaning users can install apps away from the companies’ App and Google Play Store. However it is important to note that unlike Apple’s walled garden approach, which outright forbade alternative app stores, Google used their position as a market leader to gatekeep and essentially handicap mobile OEMs and their alternative app stores. Google did this by:
领英推荐
Neither company has yet outlined plans on how they will integrate alternative payment systems, but it’s clear that developers - and the law - will no longer tolerate app stores taking such big cuts of their profits.??
Opening the gates to mobile OEMs?
With the enforcement of the DMA, we can expect a huge increase in the adoption of alternative appstores - both by developers and consumers - in the next few years. Xiaomi is currently fast tracking it’s plan to roll out Xiaomis GetApps store world wide. By end of Q2 Xiaomi’s GetApps will be rolled out to all EU geos, by EOY world wide.
The legislation is a huge boon for users, who will be able to benefit from more choice and lower prices. Developers will have newfound freedom of choice, making it far easier to launch, scale and profit from their apps. While the regulation remains only EU-wide so far, mobile thought leader John Koetsier suggested that the Digital Markets Act could well “break the App Store model”. He also mentions that “while it may take years to establish trust and brand awareness [in mobile OEMs, eventually they will constitute a viable alternative to the platform defaults.”?
However, as alternative app stores gain more traction within Europe, it’s expected that mobile OEMs will also change their billing solutions. This could mean either making their proprietary payment models mandatory, or continue allowing the use of third-party payment solutions in return for a smaller revenue share.
There are already calls from industry leaders to extend the regulation beyond the confines of the European Union. Epic Games CEO Tim Sweeney showed support for the policy, tweeting that U.S. Congress should pass proposed legislation similar to DMA, or it "would leave American developers in serfdom”. India's Competition Commission recently announced it was fining Google $161.5 million for abusing its dominant position in multiple markets in the Android ecosystem and ordered the company to open it up to competition. South Korea passed a law that would force Apple and Google to allow developers to use third-party payment platforms, and in Japan, Apple had to agree to a major change in policy to end an investigation.?
With increasing pressure facing both companies, it’s clear that the new laws will significantly impact adoption of mobile OEMs - meaning it’s never been a better time to integrate alternative app stores into your marketing mix. There is a wealth of opportunity for marketers who tap the vast distribution opportunities offered by alternative app stores, and it’s only set to get bigger in the years to come.??
This article was also published in Mobile Marketing Magazine