Apple's decision on “tips” may undermine its prospects in China
bloomberg.com
bloomberg.com
The removal of tips happened a few months ago, and it has definitely affected people who rely on those tips in mainland. For example, in a Quartz article about this topic[1] it mentioned that one blogger went from making 1000 RMB to 100 RMB per day from tips after this policy was put into place, because even though iPhone users make up a small percentage of total phones, they generally have a lot more disposable income (having an iPhone is a status symbol).
It's really not as cut and dry as this article makes it seem because of that. Wealthy Chinese like iPhones because of the status and don't want to give it up if they don't have to, and Tencent probably makes a cut from being the middleman of the tipping feature, so Tencent is also probably annoyed at the loss of a revenue stream as well. However, Tencent will never remove WeChat from the App Store, and neither will Apple, for various (and obvious) reasons. There are likely negotiations going on, and there may be a pseudo Apple Pay system to handle tipping like this in China.
Also, nitpick: I don't think it's fair to say that Apple Pay is an "answer" to WeChat Pay. They may do the same thing (facilitate payments to merchants) but they do it in very different ways, and I would imagine a big reason it's not bigger in China is due to the pervasiveness of WeChat Pay (which works with QR codes, not card readers).
1: https://qz.com/973359/apple-aapl-may-be-gearing-up-for-a-gia...
For instance, after a year of wandering around, meeting merchants who did not support AliPay was a very rare occurrence but I frequently found several who did not use WeChat pay, although this is likely to change given the lightning speed at which these things seems to work in China. Even beggars on the streets have given me AliPay codes to scan.
This makes me wonder what the terms of the alliance between Apple and Alipay are. I don't use their appstore but would Apple be in trouble without it?
While I personally use either that applies, my observation is that WeChat Pay QR code is more frequently supported by grass-roots merchants like food vans etc. These WeChatPay QR codes are not for formal accounts that are supposed to receive purchase payment but personal accounts, rendering the payment a little shady, though AliPay also supports such transactions. I doubt some of these merchants do now own any AliPay accounts before they start WeChat Pay but they do have WeChat installed as it has been the dominant mobile social platform. An interesting rumor is that WeChat Pay is less ubiquitous in Hangzhou where the headquarter of Alibaba is located, and vice versa for AliPay in Shenzhen.
really? you can probably argue that in 2009, but if that is still true, how come Apple's revenue in China has been declining lately?
Do note however, that Apple’s customer retention rate, while significantly lower in China than in the rest of the world, is still higher that any other phone manufacturer’s in China.
Google on the other hand have (so far, touch wood) left us alone to handle our own processing and helps offset our incredibly thin margin from iOS. Unfortunately, iOS represents almost 80% of our gross revenue.
However it's equally frustrating in areas where it's very clearly not realistic, like the purchase of things like ebooks, etc. Some of which are even worse of a conflict since Apple has similar businesses and 30% is just too large a cut for most services where you're not the end retailer, e.g. an ebook/audiobook store.
Having said all of that, I don't have a good solution to weigh up those two things.
Apple is just not treating tips as different to anything else, since they don't support a separate tipping item in their payment system.
Wondering if it’s a “bullish strategy” to force people in Apple Pay. It's a really exaggerated percentage for a tip, or a transaction too.
What am I missing?
Now both operating systems are being subsumed by messenger apps as the vast majority of the experience, thus earning the future value and trust of users.
Can you expand on this??
How did chrome wrest the user experience?
Plan A (at least publicly) was that web apps were the only apps on the iPhone. Were these rules and the App Store a reaction to that or would have Apple kept web apps crippled in Safari?
(Marc Andreessen, 1995)
First, Apple's losing market share in the Chinese smartphone market and it's not simply due to cheaper phones. Apple was/is primarily a status brand, but what's the status advantage in having an $800 iPhone vs an $800 Samsung? There isn't one and everyone is starting to recognizes that.
Second, WeChat runs everything in China. Every. Thing. It's your WhatsApp, your Skype, your Yelp, your OpenTable, your Venmo, etc. Every cent that Apple tries to take out of WeChat "tips" is not a cent that it's snatched from another faceless corporation, it's a cent out of the hands of individuals who rely on those tips. It's money leaving the hands of individuals and going into the largest market-cap company in the world. Is it a surprise that people are going to be pissed?
Apple should be careful not to overplay its hand. China has already banished major American companies (Google + Facebook) for not playing by its rules and it could easily position itself to do the same to Apple.
Instantly we'd see Apple's stock crashes by 40%, wiping out over $300B in market cap, if not more, in a single day. AAPL is a heavily weighted member on the Dow, and it will trigger a chain reaction that will crash both S&P 500 and NASDAQ.
Apple pissing off the Chinese can literally trigger a US recession in the short term.
The silver lining is that WeChat/Tencent != Chinese Government, and I think Apple isn't crazy enough to be pissing off the CPC yet.
Second if China suddenly dumped AAPL manufacturing most companies would quickly pull out of Chinese manufacturing which would destroy their economy and likely result in civil war within a decade. Banning products has no such risk.
I don't know how much you think Apple makes from China, but I know it's a bit more than 20% of their total revenue as of last quarter. It's almost as much as the entire Europe combined.
>Further one company even AAPL taking a 3-10% hit is small potatoes.
3-10%? AAPL goes down like 5% all the time on a rumor that they may miss their iPhone shipment forecast, if the Chinese government bans AAPL products tomorrow you think they'd only go down 3-10%?
>Second if China suddenly dumped AAPL manufacturing most companies would quickly pull out of Chinese manufacturing which would destroy their economy and likely result in civil war within a decade. Banning products has no such risk.
What? You don't just pull out of China for manufacturing. Where are you gonna go? In fact Apple can't even pull out of China for manufacturing in a short amount of time. That's right, Apple would still make iPhones in China even if the Chinese government bans them from selling it there.
Additionally, why would anyone care about what the Chinese government do to Apple? Did Yahoo or Microsoft leave China after the CPC banned Google?
So why do you think half of Apple's market cap would disappear?
> Where are you gonna go?
Anywhere? Apple has $200B in cash, they could have factories in Manhattan if they wanted to.
> Did Yahoo or Microsoft leave China after the CPC banned Google?
Google hadn't made investments on the scale Apple has. Lots of investment would be scared off by China effectively nationalizing Apple's massive capital investments. A more immediate impact would be the retaliation against Chinese exports to the US.
The whole thought exercise is ridiculous, why is China going to risk it's own economy and stability for WeChat tips?
China is already getting a little expensive for some types of manufacturing. Indonesia is often the go to destination for really cheap labor in a reasonably stable country, but there are others.
So, if China starts looking less stable that's plenty of incentive to jump ship and likely save some money.
The government's interests are more aligned with Apple than they are with Tencent.
Also President Xi Jinping is relishing the opportunity to "lead" on the global stage in terms of climate change, trade and globalization in general. He's never going to allow a ban of Apple over an inconsequential business dispute.
Apple is already losing share in China.
So are tips considered digital content, even though you receive nothing in return? Or is Apple adding a 3rd class of transaction that specifically covers tips?
A “tip” is really a payment for a virtual good – a blog post, a video, etc. It’s not the same as a person-to-person money transfer. Framing it like it’s a person-to-person money transfer transaction is ridiculous. It’s a payment for a virtual good no matter how one parses it. No content, no tips from consumers of that content. Apple doesn’t take any percentage when I use my Chase app to send a Quickpay to someone.
Without the content, would the transaction have occurred? No. So that “tip” is just a voluntarily payment in exchange for some virtual good. The fact that these content creators make a business out of selling their content via “tips,” and there is really no legitimate argument against Apple’s 30% fee unless one wanted to challenge the overall concept of the IAP itself. WeChat doesn’t have to allow IAP and users don’t have to use Apple if they aren’t happy with it.
However tipping functionality is hardly going to influence a consumer’s purchase choices.
WeChat is integral but the tipping feature is used by a small fraction of users and isn't relevant to WeChat's bottom line.
If they dropped support of iOS, iPhone sales in China would drop so low as to be effectively 0.
Yes, in principle you can keep using your phone for as long as it is able to turn on. In practice cheap phones have worse built quality, often ship with versions of Android that are obsolete on arrival and/or do not receive updates. And in general, items that cost more are better taken care of. In the aggregate all of these mean that cheaper phones have a shorter expected lifespan than iPhones.
Sort of a huge misunderstanding of culture.
The dispute is about buying virtual currency with IAP, to be gifted to streamers, bloggers etc. It's no different from buying virtual in-game currency or items, and therefore Apple would like to treat them the same as all other IAP and take their 30% cut.
Generally Uncle Donald is right on trade. China's great firewall is a major trade barrier. China's Internet industry does not have foreign competition. Uncle Sam should be much tougher on trade deals.
Tencent has the power to singlehandedly kill off Apple in China, as a Chinese, I really wish they had the balls to do it.
Imagine someone born in China who moved to canada when young, and grew up there until after university, then went back to china to take advantage of their western education with their Chinese heritage.
Is that person Canadian or Chinese? The answer is likely both.
Your comment is fairly funny too. Tencent's balls are in Chinese government's hands. You are wishing the Chinese government had the balls.