September 28, 2021: -Google is reducing the revenue it keeps when customers buy software from other vendors on its cloud marketplace, as the top tech companies face surging pressure to lower their so-called take rates.
According to a spokesperson, the Google Cloud Platform is cutting its percentage revenue share to 3% from 20%, who asked not to be named to talk about internal policies.
It’s the cloud group’s latest effort to become competitive since Thomas Kurian joined as CEO in 2019 after a career at Oracle. Google trails Amazon Web Services and Microsoft Azure in cloud infrastructure to attract independent software makers to sell their products on Google’s cloud.
“Our goal is to provide partners with the platform and competitive incentives in the industry,” a Google spokesperson told CNBC. “We can confirm that a change to our Marketplace fee structure is in the works, and we’ll have more to share on this soon,” he added.
Big Tech companies, in the latest months, have been decreasing the amount of money they retain on their platforms if it’s for consumer apps or business products. Some of the pressure is related to competition, while regulatory and legal concerns are also mounting.
Google decreased its percentage from purchases through its Play Store, where consumers buy apps, to 15% from 30% for the first $1 million in revenue a developer earns per year.
Apple provided a similar reduction for app developers with under $1 million in annual sales. As part of a lawsuit filed by Epic Games, a judge in California has ruled that Apple will not be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing.
Meanwhile, Microsoft lowered sales from game purchases from its Windows app store to 12% from 30% in August.
Customers can search the products from prominent software companies on Google’s cloud marketplace, including Confluent, Elastic, MongoDB, and Twilio. But it lacks effects from Accenture, Equifax, FactSet, Freshworks, Hewlett Packard Enterprise, and Xilinx, all of which have listings in the AWS marketplace.
According to an estimate from analysts at UBS, AWS, the market leader, charges a listing fee of about 5%. The AWS marketplace generates about $1 billion to $2 billion in annual revenue, they said. Amazon declined to comment.
Microsoft said in July that it had cut its rate from 20% to 3%.
Google has to turn its cloud platform into a profit engine for parent company Alphabet. Google reports that a $591 million operating loss from its cloud segment on $4.6 billion in revenue in the second quarter. Alphabet still counts to advertise for about 82% of revenue and substantially all of its profit.
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