Giant tech companies are already facing increasing pressure to lower their take rates. This ‘take rate’ is the amount of revenue they are keeping when customers buy software from other vendors on their cloud marketplace.
CNBC is reporting that Google Cloud Platform is slashing its revenue share to just 3 percent from a massive 20 percent.
Google, which lags behind Amazon Web Services and Microsoft Azure in cloud infrastructure is trying to attract independent software makers to sell their product’s on Google’s cloud.
“Our goal is to provide partners with the best platform and most competitive incentives in the industry,” a spokesperson from Google. “We can confirm that a change to our Marketplace fee structure is in the works, and we’ll have more to share on this soon.”
Epic Games, the creators of Fortnite, have definitely played a huge part in bringing into focus the huge cuts Google and Apple have been keeping from sales through their app stores while at the same time putting up roadblocks preventing developers from charging for their products through other avenues.
The lawsuit from Epic Games against Google and Apple has also attracted the interest of several governments’ competition watchdogs who are now putting pressure on the tech giants to create a healthy competitive environment and one of the results of this, is the reduction of the cut they will be taking from sales of other app developers.
In July, Google decreased the percentage it keeps from purchases through its Play Store to 15 percent from 30 percent for the first $1 million in revenue a developer earns each year. Apple also provided the same reduction for app developers with under $1 million annual sales. Microsoft on its end, lowered the percentage of sales it keeps from game purchases from its Windows app store to 12 percent from 30 percent.
As part of the ruling from the Epic Games lawsuit, Apple was prevented from blocking developers who wanted to provide links or other communications that direct users from Apple in-app purchasing.
AWS, the market leader, charges a listing fee of 5 percent, according to analysts at UBS (The Union Bank of Switzerland). This directly contributes to the $1 – $2 billion in annual revenue that is estimated for AWS’ cloud marketplace.
Microsoft like Google have their cuts at 3%, down from 20%.
“Our fees are only intended to offset our operational costs of invoicing and billing customers, and operating the marketplace,” Charlotte Yarkoni, chief operating officer for cloud and artificial intelligence at Microsoft, said in a statement. “We are not trying to take a share of our partners’ revenue. Our ecosystem is a channel for us to help partners sell their solutions, not the other way around, unlike other cloud vendors.”
Alphabet, Google’s parent company, is yet to turn a profit from its venture in the cloud marketplace despite massively investing in it. In the second quarter of this year, the tech giant took a blow of $591 million in operating loss from the cloud segment on $4.6 billion in revenue.
Advertising, which Google is best known for, stills makes the lion’s share of Alphabet’s revenue at 82%. This subsequently means all of Google’s profits come from advertising alone.