That’s Gentzkow, pointing out that Epic doesn’t seem to be biting the hand that feeds — it paid $471M to Sony, $260M to Microsoft, and $166M to Nintendo just from January to October of 2020, all platforms that impose a 30 percent fee.
According to the slide, it also paid $60M to Apple, a company it did sue — and $17M to Gearbox during the same period.
While we saw yesterday that big China phone makers are choosing Google’s RSA 3.0 “Premier Tier” — which gives them more money from Google in the form of shared revenue but also requires more compliance in return — Google’s economist suggests most phones have not gone that way.
Outside of China, only 7.4 percent of active Android devices are on the Premier Tier, according to one of the slides Google just presented, and roughly 27 percent of Android activations are on the Premier Tier as of July 2022.
(The latter does seem like a lot to me, though, particularly if you buy one of Google’s common arguments in this trial that it serves billions of people and so even small percentages add up to a lot.)
“Revenue sharing is a way of cutting the price by offering more back to the other party,” says Gentzkow, suggesting that Google’s special deals (presumably with OEMs, since that’s where Google was sharing a cut of Play revenue), were just another way to compete.
If he was referring to OEMs, I don’t quite follow the logic: who was Google competing with there? Google’s not competing to put Android on those phones, since OEMs couldn’t decide to put iOS on a phone instead.
Is Google Play the product that it’s discounting beyond free to pay those developers to carry? And if so, doesn’t that cut against Google’s argument that those developers needed Google Play and other Google apps to compete with the iPhone?
A pie chart from the earliest days of Android — or perhaps before it launched:
Symbian had 49.8 percent of the market, and BlackBerry had 15.9 percent, with 12.9 percent for Apple, 11.1 percent for Microsoft, 7.2 percent for Linux, and 2.1 percent for Palm.
I didn’t quite catch the full point that Gentzkow was trying to make, apologies. Google did point out that all those players have disappeared, save Apple.
We’ve moved on to an argument that Google’s MADA agreements are good for competition because they help Google compete with the iPhone, which helps sell phones, and in turn, helps developer sell more apps. “The more phones are sold the more things are going to be downloaded,” he says.
Continuing the “Macy’s and Nike” analogy where “Macy’s” is simply giving “Nike” a better deal in order to compete with “Galaxy Shoes,” Gentzkow says it’s natural that “Nike” wouldn’t be as likely to open its own store if it’s getting a good deal from “Macy’s” — that’s competition working, he suggests.
“Project Hug offers valuable things to developers in exchange for putting their apps into the store, and it’s natural” to expect the “Nikes” of the world to put their latest and greatest apps on Google Play right away as part of said deal, he argues.
Gentzkow suggests all the things that Google offered developers in its special Project Hug deals were simply the equivalent of giving them a “17% price cut,” and bid us imagine a Macy’s competing with a “Galaxy Shoes” for Nike’s business.
“Macy’s needs to compete for that business by offering Nike a great deal,” he says.
We’re now off for lunch.
“This was like a survey of users,” says Gentzkow, as Google presents a slide suggesting that 65 percent of Samsung Galaxy phone users have tried the Samsung Galaxy Store.
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.
“Zero,” says Gentzkow — compared to 68 percent of Android phones in the US and 65.9 percent worldwide as of July 2021.
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.”
We’re now hearing from Matthew Gentzkow, a Stanford professor of economics who also spent many years at the University of Chicago School of Business and says he publishes in all the top economics journals as well as Science and Nature. He also won an award.
He’s Google’s first economics expert and says he was tasked with answering two questions:
Did Google’s conduct create more value for consumers?
Did it block competition in a way that destroyed value for consumers?
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.
Earlier, we heard Google ask: “Square would charge more than Google would charge for that transaction, right?”
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.