In-app purchases

Cost analysis of lack of transparency when purchasing an app that has in app-purchases.

Outline:
App-Store Demonopolization

• Freemium games
  • Mcommerce
  • Addiction/gambling tactics
    • Loot boxes
    • Incentivising investment
    • Increasing gameplay
• Rise in market value
  • Largest monopolies in online games
  • App-store policy and commission
    • Ethics concerns in unequal data sharing, commission, search results, competition-creating apps by tech giants to wipe out third party competition
• Tech Giants and Antitrust Laws
  • Notable laws (by country)
    • Concerns over not allowing users to choose the data they share and not letting them know that their data is shared (India)
    • One payment method option at the cost of third party developers (South Korea, Russia).
• Open App Markets Bill
  • What it is and why it’s happening
    • Pro-bill argument
    • Anti-bill argument
• References

Articles used and notable quotes:

Questioning ethics behind lack of transparency in notifying the user of in-app purchases.

Jeffrey D. Shulman, Xianjun Geng (2019) Does It Pay to Shroud In-App Purchase Prices?. Information Systems Research 30(3):856-871. https://doi.org/10.1287/isre.2019.0835

Steve Jobs originally opposed in-app purchases

Apple takes 30% commission

"Addicted: Fifteen Years Ago this Week, Apple's Steve Jobs Unveiled a Handheld Device that would Change our Lives for Ever. but for all its Benefits, the iPhone has been Dubbed as Addictive as Cigarettes - and Kicking the Habit Now Seems Impossible. Io Dodds Reports." Telegraph Magazine, Jan 08, 2022, 16, https://proxy.lib.umich.edu/login?url=https://www.proquest.com/magazines/addicted/docview/2617618740/se-2?accountid=14667.

M-commerce

$700+ Billion by 2025

"Mobile Commerce Sales Expected to Double to $700+ Billion by 2025." PR Newswire, Jan 13, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/wire-feeds/mobile-commerce-sales-expected-double-700-billion/docview/2619219777/se-2?accountid=14667.

Loot boxes are considered addictive and regulated in countries such as China, Belgium, Japan, and Australia.

"Gaming Market to Grow by USD 125.65 Billion from 2020 to 2025|56% Growth to Originate from APAC|17000+ Technavio Reports." PR Newswire, Jan 13, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/wire-feeds/gaming-market-grow-usd-125-65-billion-2020-2025/docview/2619298001/se-2?accountid=14667.

App Store bill passed on Feb. 4th, 2022

Created to avoid monopolization caused by increased fees by Apple (up to 30%) and, in turn, to encourage innovation by independent app developers

"App-Store Bill Passed by Senate Committee -- WSJ." Dow Jones Institutional News, Feb 04, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/wire-feeds/app-store-bill-passed-senate-committee-wsj/docview/2625422980/se-2?accountid=14667.

India investigates Apple abuse of its dominant position over third-party developers

Apple creates apps in competition with third party developers

Apple charges up to 30%, making third party developers spend more on appeasing a tech giant than their own innovation

"CCI Orders Probe Against Apple [Front Page]: APP STORE POLICYAnti-Trust Regulator to Investigate 'Abuse' of Dominant Position by Co; DG Asked to Submit Report in 60 Days." The Economic Times (Online), Jan 01, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/cci-orders-probe-against-apple-front-page/docview/2615527176/se-2?accountid=14667.

US Senate’s bill “if enacted would usher in the most significant restrictions that Congress has ever placed on the tech giants' practices.”

Tech giants and politicians alike claim that it is rushed

Changes have already been implemented, trying to dodge misinformation

Criticized for focusing on a handful of large American tech companies

Apple is facing antitrust lawsuits in the US and other countries over competition and restrictive business practices. Violates antitrust laws in India.

30% markup for commission

Lima, Cristiano and Aaron Schaffer. "Senate’s Tech Antitrust Push Notches a Win, but Major Hurdles Loom." WP Company LLC d/b/a The Washington Post.

15%-30% markup for commission

A Russian tech company joins an antitrust lawsuit over developers not being able to let users know that there are in-app purchases outside of the app store.

Apple violates Russia’s anti monopoly laws. “We decided to participate in the process because the decision on this case can have a big impact on both users and developers. We believe that users should be able to learn about different payment methods and make in-app purchases in any way that is convenient for them. If developers can inform [the public] about various payment methods directly inside applications, this will improve the user experience and open up new opportunities for the development of the mobile application market”

Russia: Yandex Joins Russian Federal Anti-Trust Case Against Apple." Asia News Monitor, Jan 13, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/russia-yandex-joins-russian-federal-anti-trust/docview/2618919513/se-2?accountid=14667.

Microsoft recently purchased a gaming company called Activision Blizzard. This puts them in the ring for mobile gaming.

Mahendra, Vainavi. "How Microsoft-Activision Acquisition Will Impact the Indian Gaming Ecosystem." Financial Express, Jan 21, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/how-microsoft-activision-acquisition-will-impact/docview/2621613715/se-2?accountid=14667.

App store bill limits Apple and Google Play’s ability to charge app developers fees and create rules just for using the consumer-app stores.

Apple forces developers to use their in-app payment systems, instead of letting developers use their own.

Apple promotes their own apps first in search results.

Apple is whining about hackers and fraud, blah blah blah

Bill does not create anarchy, just regulation.

South Korea requires app stores to allow other options for payment systems.

Ryan, Tracy. "App-Store Bill Targeting Apple, Google is Approved by Senate Panel; Tech Giants Object to Measure that would Set New Rules Aimed at Ensuring More Competition on their Consumer-App Platforms." Wall Street Journal (Online), Feb 03, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/app-store-bill-targeting-apple-google-is-approved/docview/2625007461/se-2?accountid=14667.

“The Competition Commission of India (CCI) is investigating the tech giant for alleged unfair business practices with respect to Google Pay as well as Google Play's payment system.”

Choudhary, Shrimi. "CI to Seek Details on Google's Payment Policy from App Makers [Tech & Internet]." The Economic Times, Jan 11, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/ci-seek-details-on-googles-payment-policy-app/docview/2618285182/se-2?accountid=14667.

“(CCI) ordered an investigation into Apple’s business practices for suspected violation of several provisions of Section 26(1) of the Competition Act, 2002.”

"CCI Orders Probe into Apple’s App Store Business Model." Businessline, Jan 01, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/cci-orders-probe-into-apple-s-app-store-business/docview/2615540771/se-2?accountid=14667.

Information Technology and Innovation Foundation wrote open letter to senators regarding US bill, Open App Markets Act, stating concerns over bill making things worse.

Reasons cited

damage to app economy, decrease quality, decrease choice, increase consumer costs.

"App Markets Bill would have the Opposite of its Intended Effect, Says Information Technology & Innovation Foundation in Open Letter to the Senate Judiciary Committee." Targeted News Service, Jan 25, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/wire-feeds/app-markets-bill-would-have-opposite-intended/docview/2622499352/se-2?accountid=14667.

(CCI) on Friday ordered an investigation into Apple’s business practices for suspected violation of several provisions of Section 26(1) of the Competition Act, 2002.

​​:"CCI Orders Probe into Apple’s App Store Business Model." Businessline, Jan 01, 2022. https://proxy.lib.umich.edu/login?url=https://www-proquest-com.proxy.lib.umich.edu/newspapers/cci-orders-probe-into-apple-s-app-store-business/docview/2615540771/se-2?accountid=14667.

Antitrust laws

dominance, abuse and competition.

Imbalance in information and research.

Pages 39-64

Veljanovski C. (2022) Algorithmic Antitrust: A Critical Overview. In: Portuese A. (eds) Algorithmic Antitrust. Economic Analysis of Law in European Legal Scholarship, vol 12. Springer, Cham. https://doi-org.proxy.lib.umich.edu/10.1007/978-3-030-85859-9_2

Monetizing gaming has created M&A boom

https://global-factiva-com.proxy.lib.umich.edu/ha/default.aspx#./!?&_suid=164463988357405263127981560196

Retention rate, player interests, etc. are used to determine whether or not gamers are going to be continued investors in app-store gaming and in doing things like making in-app purchases.

Flunger R., Mladenow A., Strauss C. (2022) Game Analytics—Business Impact, Methods and Tools. In: Kryvinska N., Poniszewska-Marańda A. (eds) Developments in Information & Knowledge Management for Business Applications. Studies in Systems, Decision and Control, vol 377. Springer, Cham. https://doi-org.proxy.lib.umich.edu/10.1007/978-3-030-77916-0_19

Explanation of Antitrust laws

https://global-factiva-com.proxy.lib.umich.edu/ga/default.aspx

American monopolies

https://global-factiva-com.proxy.lib.umich.edu/ga/default.aspx

Are mobile games worth it?

What is the alternative to in-app purchases (ads)?

Valaei, N., Bressolles, G., Khan, H. and Low, Y.M. (2022), "Ads in gaming apps: experiential value of gamers", Industrial Management & Data Systems, Vol. 122 No. 1, pp. 78-106. https://doi-org.proxy.lib.umich.edu/10.1108/IMDS-11-2020-0660

Freemium games + how in-app purchases work

Syahrivar, J., Chairy, C., Juwono, I.D. and Gyulavári, T. (2022), "Pay to play in freemium mobile games: a compensatory mechanism", International Journal of Retail & Distribution Management, Vol. 50 No. 1, pp. 117-134. https://doi-org.proxy.lib.umich.edu/10.1108/IJRDM-09-2020-0358

Freemium games are fastest growing

Statistics on monetization rates

Lifei Sheng, Christopher Thomas Ryan, Mahesh Nagarajan, Yuan Cheng, Chunyang Tong (2020) Incentivized Actions in Freemium Games. Manufacturing & Service Operations Management 24(1):275-284. https://doi-org.proxy.lib.umich.edu/10.1287/msom.2020.0925