Sean Hollister

I wonder if Epic will challenge the source of that data and what it tells us. Yes, the Galaxy Store is right on the homescreen, so I suspect some users interacted with the icon, but a single user survey is not great data, and I wonder if the survey asked what they actually did with the store — and why.

(I recently bought a Samsung phone, and the first time I was pushed to interact with the Galaxy Store was when it sent a notification asking if I wanted to update a preinstalled Samsung app. I said yes.)

I feel better about Gentzkow’s arguments that Samsung and Amazon didn’t really produce compelling, consistent experiences and that Google had a substantial first-mover advantage with Play.

He says that, according to Google data, there were 3.2 billion monthly app installations outside of Google Play, 189M of them in the US as of May 2021 — and that those numbers went up 58 percent and 88 percent, respectively, compared to two years prior (July 2019, to be specific).

“It’s absolutely true that the number that happens through Google Play each month is quite a bit bigger... but I’m asking has this channel been blocked, do users not have the opportunity to use it,” he says.

“This level [of off-Play installs] shows lots and lots of people go out every month and are able to do this on their Android phones.”

He’s Google’s first economics expert and says he was tasked with answering two questions:

His answers, as you’d expect: yes, and no.

He says that if one company is doing better than two other companies, it might simply mean it’s offering a better value — creating competition, says Gentzkow, not blocking it.

That’s because Google discovered that Square doesn’t have a special lower rate for microtransactions on digital platforms — developers wind up paying quite a bit for 99 cent transactions if they choose Square (not that they necessarily would).

But Epic just flipped that back onto Google with one incisive question:

“Does Square currently have any incentive for developing a schedule for microtransactions while there’s a tie in place that doesn’t allow it to provide microtransactions for digital goods?”

“Absolutely no incentive,” says Tadelis.

Tadelis agreed.

Incredibly, Tadelis seemed to know what he was talking about: “That is one of many pieces of evidence in my reports.”

I checked the live transcript, and this exchange seemed to be a complete non sequitur. What... were they talking about? It came right after a statement about how much Tadelis is getting paid.

Tadelis’ replies are getting amusingly snippy, by the way. Mach asked if Google “might have to charge fees for the other services it doesn’t charge for today.”

“It might not,” Tadelis replied. Then Mach and Tadelis went back and forth with “it might?” and “it might not” several times.

(Historically and currently, Google only charges when a developer charges for an app or an in-app purchase, something it’s brought up repeatedly during the trial — it’s the “we only get paid when you get paid” argument, and I personally find it moderately compelling.)

Google’s making a host of other little points right now, alleging that Braintree is only available in a handful of countries, Square isn’t available in some big countries like Germany and India, PayPal fees vary across countries, and Tadelis gets paid $1,200 an hour plus a revenue share of his own. (Yes, another paid-to-be-here card played by Google, though Tadelis tells me afterward he wasn’t paid by Google to present his research but, rather, to testify. I’ll try to figure out the nuance later, but he’s not contesting he was paid for his work.)

We’re looking at a chart from Tadelis’ report that shows that for a 99 cent in-app purchase, the second most common price set by developers, there are definitely worse options than Google.

Braintree and PayPal would eat 52.1 percent of that transaction, and Stripe and Square would take 33.2 percent — unless you went with one of their micropayment rates instead, which work out to low as 14.1 percent for a 99 cent transaction via PayPal and 10.1 percent for Stripe. (Tadelis admits he couldn’t find a micropayment rate for Square.)

At $4.99, the most common in-app purchase price, the highest effective rates of alternative payment processors are 13.3 for PayPal (or 6.8 for its micropayment fee) or 12.4 percent for Braintree. Others are quite a bit lower.

We’re now looking at Tadelis’ bar graph again — the one that unfavorably compared Google’s nearly 30 percent fee to the 6–10 percent fees of payment processors — but now with Apple and Samsung’s stores added. Those bars reach much higher than Stripe and PayPal’s, of course, making Google’s look more normal.

Google once again makes its point: stores aren’t just payment processors. They have additional value. Tadelis concedes they’re not exactly the same but says it depends on what you’re using them for.

It included a graph that suggested many developers would change to a rival payment processor right away — “some large developers would take advantage of billing optionality no matter the price,” wrote Google — but that most others wouldn’t pick Google until or unless it offered a substantial discount.

Tadelis showed us that Google’s User Choice Billing, which nominally offers a mere 4 percent discount (though secretly goes far lower), wouldn’t come close to the place on the graph where it would convince developers to pick Google.

Tadelis says User Choice Billing is not a good deal, and Google knows it.

I wish I could show you a picture of the graph since it’s difficult to describe. No cameras in the courtroom; we should get a copy after the trial concludes.

It’s Google’s turn to question Tadelis now.