More from Epic v. Google: everything we learned in Fortnite court
This was the very first in Google’s internal list of “the most principled arguments” it could make to convince Epic to put Fortnite on the Play Store.
Another argument that Epic’s lawyer didn’t highlight but I spotted below: “the [Play] store will still attract billions of users who will search for Fortnite and run into deadends that aren’t clear how to resolve.”
I wonder if Google wound up making the latter argument!
Those are Kochikar’s words in an email she sent internally, adding, “Do you worry that most will not go through the 15+ steps?”
She wasn’t just talking about how many steps it took to sideload apps. In the same email, she wrote that “the user experience, and the security risks that come with it, is giving us some real concern.”
But she also admitted in an old deposition that the steps were definitely part of it — and that even a big company like Amazon would have trouble distributing their apps outside Google Play.
The context: Google was prepping to convince Epic to launch Fortnite on Google Play instead of as a sideloaded APK.
Epic lawyer John Hueston did quickly present the read-between-the-lines idea that it might be unfair that Spotify can use its own payments system while game developers cannot.
But we’re now looking at a painfully slow walkthrough of how many steps it took (in 2015) to sideload an app on a phone — far longer than it takes a user to actually do this themselves.
I wonder if Google will pull out a phone and show literally just how fast it goes. Still, I admit the sideloading process includes some scary warnings.
Spotify has a special rate, Kochikar agrees.
The BLANK rate on the page is that rate, right? Yes, says Kochikar.
There would be an adjustment to that number, right? “Spotify’s number would be adjusted up or down to reflect Google’s actual costs, right?” Yes.
Oh, but this part is going somewhere: “A games developer does not have the option to use its own payment system, correct?” Yes, except in Korea, she says.
Judge Donato telling the jury why we’re not going to say out loud what rate Spotify secretly negotiated with Google to use its own billing option alongside Google Play Billing.
Ah well, we tried.
The jury is now getting passed pieces of paper with the numbers on them.
“Our proposal is to price the service fee for devs not using [Google Play Billing] at 5% less than those using GPB — essentially replacement value,” Google wrote in a proposal.
“Of course, as we noted, at a reduction of 5%, we don’t think this solves the problems of any devs who are complaining about price,” reads another line from the same document.
Why? “A key element of this optionality proposal is we don’t want to give any artificial reasons to incent devs to switch off Play Billing.”
Excepting any sweetheart deals, Google wound up launching User Choice Billing at a 4 percent reduction, not even 5 percent. And in an old deposition, Kochikar admitted that devs wound up paying the same effective service fee in the end — apparently because they still have to pay an alternative payment processor in addition to Google’s rate.
“We would like to discuss mitigating that risk by offering 15% rev share to Match Group,” she wrote in one of them.
In another, she wrote that Google’s “value exchange models support the hypothesis that custom deals” like Project Hug would be enough to satisfy developers. It sounded like she was in favor of a “policy change without a public change to the business model.”
Kochikar keeps trying to suggest it’s more complicated than this, that Google looked at multiple factors beyond those “value exchange models,” but Epic lawyer John Hueston is reminding her to just answer the questions.
“During this case, you had your default setting to delete chats every 24 hours, correct?”
“That was the default.”
“And you didn’t take any steps to change deletion settings for your chat software, correct?”
“Yes.”
“Bumble is [average revenue per user] neutral since the enforcement,” one line reads.
“We have seen a decline in payers but an offsetting increase in ARPPU due to the removal of one-day subscriptions and alternative payment methods.”
Watts was also asked if he thought it was a pro-consumer change that Google notified subscribers that uninstalling the app didn’t cancel their subscriptions. He said yes.
We’re moving on to Purnima Kochikar, VP of Google Play Partnerships and formerly Director of Apps and Games.
My story about this morning’s kerfuffle over hiding Spotify numbers just went up, but a good portion of it just happened right after the lunch break: Epic, Google, and Spotify argued before the judge whether “two numbers” that may or may not be key to making Epic’s case should be sealed.
The judge wasn’t having it.
But we did learn that “there is a rate set much, much lower than the rates you’ve been hearing about at trial.”
What is Google trying to hide in its deal with Spotify?
But... was that because it charged more instead of totally absorbing Google’s fee? That’s not clear to me. The experiment was in 2017 and 2018.
It did forecast losses of $40 million to $50 million per year after the forced switch a few years later, though, so I suppose it was eating some.
The actual decline for Badoo on Android was 9.2 percent, it sounds like, but I missed some of the other important context there. One of the hits to Badoo was that Google Play didn’t support one-day subscriptions, Watts testified.
While this video deposition is from August 2022, it seems Google successfully tempted Bumble to try its User Choice Billing afterward.
Google announced three months later, in November 2022, that Bumble would be joining the pilot program to allow alternative payment methods on Android. That has since happened, Google spokesperson Dan Jackson reminds me. We’re asking how much revenue Bumble shares with Google.
Richard Watts, VP of product for revenue at Bumble and general manager of Badoo, was recorded in a video deposition on August 4th, 2022, that’s now playing for the court.
Watts says the apps used to pay 3–6 percent per user transaction with alternative payment methods — compared to 15–30 percent now. He says the web versions count for less than 10 percent of the company’s revenue and claims no alternative Android store is a viable alternative.
“Customers are used to finding apps within the Play Store, and that’s core to our business.” The Galaxy Store “doesn’t have the same scale,” he says.
While Epic was able to point out Paddle charges 10 percent or less for its app payments platform and isn’t allowed on Google Play, Google quickly turned things around:
“Paddle has a financial interest in Epic winning its lawsuit, doesn’t it? If Epic wins, you’d be able to compete to win tens or hundreds of millions of dollars, right?”
“That would be my hope,” says Owens.
Google went on to use Paddle to help advance its argument that app platforms deserve more money than simple payment processors, having Owens admit that it charges more than PayPal or Stripe because it offers more services.
And that Paddle, unlike Google, doesn’t offer parental controls, budgets, and the ability to save payment info from different developers.
Speaking of interesting bits from exhibits the public can’t see until the trial is over:
One internal Google slide titled “Google-wide ROI shows positive contribution of $1.2B” suggested that Google would spend $1.78 billion from 2019–2022 on “Play Risk Mitigation.”
It showed Google spending a projected $95M in 2019, $294M in 2020, $588M in 2021, and $803M in 2022.
There was also a field called “total cost to serve,” where Google would spend a projected $994M over that same period: $50M in 2019; $340M in 2020; $316M in 2021; and $288M in 2022.
The district court’s director of courtroom operations has confirmed this to The Verge. There will be no document dump before the jury has reached its verdict, no giant cache of emails for us to dig through.
I can see some of the exhibits in the courtroom as they’re entered into evidence, though, and I’ll do my best to highlight any particularly interesting bits for now.
Specifically, Paddle founder Christian Owens, the latest witness on the stand, who is describing how he created an alternative platform for billing.
Epic will likely try to use Owens to show how easy it is to stand up such a system and, thus, that Google doesn’t deserve so much money for Google Play. But we haven’t gotten that far yet.
In fact, even the August 2019 document had two different models, “CPI” and “LTV,” and one model suggested that even Tinder’s value was not negative.
Google took $83M in revenue share from Tinder that year, while providing $98M in value under one estimate and $54M in value in the other.
Marchak also says the model has had “numerous evolutions” since 2019 and that while Tinder was likely paying 28 or 29 percent in 2019, it would be paying 15 percent today due to Google’s reduced fee for subscription services.
In a document titled “Tinder Play Value Estimate,” Google’s director of Play partnerships bolded this phrase:
“Tinder is now deriving only 10% of the revenue share value versus the 30% they pay.”
Google alleges Tinder was deriving just 10 percent “value” under Google’s model, while paying 30 percent.
We’re now looking at emails where Marchak tells his bosses at Google that “this seems to justify Tinder’s decision” and where he suggests they use his model of negative value to justify giving Tinder a better deal.
“This is so negative we think we need to use this internally to justify giving Tinder a 15 percent deal or better?” Google’s lawyer asks.
“Yes, we think about the value we’re creating for developers all the time,” answers Marchak.
King, Machine Zone, NCSoft, Aniplex, DeNA, Com2US, CyberAgent, Webzen, Colopl, and — I think it’s Playa or Playla, but it’s hard to make out on the screen — these developers all appear in an internal August 2019 document as receiving less value compared to the 30 percent Google charged ’em.
Google estimated the average value the “top 100 most negative” devs were getting was just 19 percent. Simple math based on other slide deck numbers suggests the 100 devs overpaid $1.43 billion per year — Epic’s attorney had Marchak try it out on his own calculator in the courtroom.
Google will try to argue these calculations later turned out to be wrong.
The jury wasn’t there when I entered the courtroom — but Google and Spotify lawyers were, and they’re asking Judge Donato to seal a document that would reveal the terms of Google’s “User Choice Billing” deal with Spotify which lets the music app bypass Google’s billing system in exchange for a still-substantial share of revenue.
This surprised Judge Donato: “Right now, Google is allowing users to post its own billing system?”
It also surprised me: Google doesn’t have a standard rate for User Choice Billing? It’s making special deals for certain companies? “Disclosure of the Spotify deal would be very very detrimental for the negotiation we’d be having with these other parties,” argues Google attorney Glenn Pomerantz.
Epic v. Apple has come and gone, but now it’s Google’s turn to face the Fortnite maker.
Verge senior editor Sean Hollister is reporting from the courthouse, but I sat down with David Pierce earlier this week to discuss what all this could mean for the Play Store.