Apple is trying to pressure Chinese tech giants Tencent and ByteDance to make fundamental changes to China’s most popular mobile apps, a standoff that could heighten tensions in the world’s largest smartphone market, Bloomberg reports.
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In recent months, the iPhone maker has demanded that the two companies close loopholes used by developers of mini-apps inside their super apps – they direct users to their own payment systems, thus bypassing Apple’s standard 30% commission on each transaction, sources tell Bloomberg .
In May, Apple already warned Tencent that it could reject important updates to WeChat if it did not prohibit developers of mini-applications inside the messenger from posting links to accept payments, bypassing the Apple platform. Apple has also asked the company to disable the ability for mini-app developers to communicate with users, and Tencent has no plans to do so. In June, iPhone maker ByteDance warned it would stop approving updates to Douyin, the Chinese version of TikTok, unless the company closed similar loopholes in the app.
Apple strives to tightly control its mobile ecosystem as part of its efforts to ensure quality and safety around the world, but this year it has become overly aggressive in China. By doing so, it risks alienating its Chinese partners, and its other policies have already attracted unwanted attention from regulators around the world.
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Huawei, Apple’s most dangerous competitor in China, will soon begin charging fees to developers in its Harmony mobile ecosystem, and Tencent’s WeChat will be exempt. It’s not just a messenger – the app has more than a billion Chinese users who use it constantly, from paying bills to booking movie tickets. Apple has waived most of these fees, but transactions within mini-apps and purchases of content within Messenger are still subject to fees.
Unlike the United States, Apple is no longer the largest player in China—at the end of the second quarter, it even fell out of the top five in smartphone sales. And local tech giants Tencent and ByteDance still dominate the market for internet content, including games and videos, and continue to charge their own fees to developers who create content in the WeChat and Douyin ecosystems. Mini-games became very popular, their developers began to monetize them, and many of them found a way to bypass Apple’s commission to increase their margins.
Tencent has already agreed to Apple’s request to disable links to third-party payment systems in mini-apps, but now the American company is asking to disable in-game chats between developers and users, because links to alternative payment services are now distributed through them. Tencent has not yet agreed to comply with this request, since such a change would reduce the quality of service for players – and warned developers that their business was at risk.
Douyin launched an in-app purchase program in June, but was forced to impose a fee on Apple because otherwise the US manufacturer would have blocked the app update and the e-commerce campaign planned for June 18 would have been derailed. “If you look at the iPhone in Greater China, the install base showed a record. And so we remain confident about the long-term prospects in China. I don’t know what each chapter of the book will be, but we are confident in the long-term prospects,” Apple CEO Tim Cook said in a conversation with analysts after the quarterly report.