In the past week, the topic of "choosing between Apple and WeChat" has continued to dominate the hot searches on various platforms, and even some media outlets have launched a vote on Weibo asking "If you choose between Apple and WeChat, would you choose iPhone or WeChat?" Of course, the result is that WeChat has won overwhelmingly.
According to the latest news, Apple has taken the lead in giving Tencent a step forward. According to Bloomberg on September 6th, Apple has approved Tencent's WeChat update for the iOS ecosystem submitted this week. Insiders also revealed that the new version has been optimized for functionality in WeChat Moments and live streaming. In addition, Apple has approved the latest version of Tencent Holdings' WeChat application to be launched on the upcoming iPhone 16 series, which has bought more time for the ongoing negotiations between the two parties on the issue of in app purchase fees. In response to the above news, Blue Whale News reporters have sought verification from Tencent, but have not received a response as of press time.
But this has at least temporarily eased the concerns of Chinese consumers, and Apple also needs to stabilize market sentiment before the latest press conference.
Returning to the starting point of the matter, the controversy between the two stems from the "Apple Tax" imposed by WeChat mini game developers, which is a commission from the official Apple App Store channel. In China, the proportion of the "Apple Tax" is about 30%, while the commission for some small businesses and new developers is 15%. That is to say, a portion of the applications downloaded by users from the Apple App Store for recharging will be given to Apple. It should be noted that the "tax rate" for recharging games and other applications in most domestic Android phone brand app stores is as high as 50%.
But under Apple's closed ecosystem, WeChat's revenue from small games can bypass the "Apple tax". This is equivalent to reducing Apple's revenue in the software services business and moving Apple's cake.
The specific operation method has also been reported in detail by the media. For example, when a WeChat mini game player recharges, the system will direct the user to a "customer service chat" interface. After the user sends a recharge instruction to the customer service, the customer service returns a payment link, and then the user can complete the recharge through WeChat Pay. In this way, it avoids Apple's commission.
In the past, this portion of income was so small that it was not worth mentioning, but since last year, the small game industry has flourished in the Chinese market, and the volume of this income has been increasing. One important reason why WeChat mini games have become the spark of controversy is that they have become an important business sector for Tencent. According to Tencent's financial report, the total revenue of small games increased by 20% year-on-year in the second quarter of 2024; The growth of high gross profit sources such as game revenue, video account revenue, small game platform service fees, and video account merchant technology service fees in the local market has driven Tencent's gross profit to increase by 21% year-on-year to 85.9 billion yuan.
At last month's Q2 earnings conference call, Tencent's management also responded for the first time that they are discussing revenue sharing issues with Apple regarding WeChat mini games. At present, we have not monetized mini programs on iOS through in app transactions. I believe that if this monetization can be achieved, it would not only be in our interest, but also in the interest of Apple, game developers, and users. However, we hope to achieve this goal under economically sustainable and fair conditions. Therefore, this discussion is ongoing, and we hope to achieve a positive outcome because it will be a win-win situation, "Tencent management said.
As early as 2017, Apple and WeChat had a dispute over the reward function of WeChat official account. At that time, WeChat launched the reward function of WeChat official account, and readers could reward creators through WeChat payment, but Apple believed that the function was content consumption and should be purchased after being connected to Apple's app store. After more than a year of communication, Apple agreed to allow users to give gifts to other users without the need for Apple to draw a commission as the end; In January of this year, Apple announced that it would support developers to integrate their cloud games, mini games, and mini programs into Apple's in app purchasing system. However, developers providing corresponding services must fulfill their review responsibilities and ensure that their experiences comply with Apple's App Store review guidelines. In August this year, foreign media reported that Apple had put pressure on Tencent and Tiktok to close the loopholes in the past few months, because the small game developers on WeChat and Tiktok platforms were leading users to external payment systems to avoid "Apple tax". Apple warned that if the vulnerability is not repaired, WeChat and Tiktok will be rejected for subsequent updates on the App Store.
The latest news indicates that Apple has agreed to approve the latest version update of WeChat iOS, but this does not mean that an agreement has been reached on the issue of in app purchase fees. In this chain of interests, Apple's pressure may be greater.
Firstly, from the perspective of Apple's revenue structure, the revenue from its service business has maintained a continuous year-on-year growth trend. According to Apple's financial report, in the second quarter of 2024, Apple's net sales of software services were $24.213 billion, an increase of 14% compared to the same period last year's $21.213 billion, mainly due to the "Apple tax" generated by the App Store. However, on the other hand, the revenue of its flagship product, the iPhone, continues to decline. In the second quarter of 2024, iPhone revenue was $39.296 billion, a year-on-year decrease of 0.9%.
Another factor is that due to the return of Huawei phones last year, Apple is facing increasing challenges in the Chinese market. According to market research firms IDC and Canalys, Apple has fallen out of the top five in the Chinese smartphone market in the second quarter of 2024. In the financial report, it can also be seen that Apple's market performance in Greater China in the second quarter of 2024 was disappointing, with revenue of $14.728 billion, a decrease of 6.5% from the same period last year's $15.758 billion. At the latest press conference, the iPhone 16 series equipped with "Apple Intelligence" will be released. However, on the same day, Huawei will also release its latest three fold screen phone product, which will face Apple head-on. How the market will react will depend on the joint appearance of the two companies next week.