Apple controversially taking 30% cut of donations sent via Chinese social network apps to content creators

Apple is courting controversy in China by announcing that it will take a cut of donations sent to content creators via social media apps in the future …

WeChat and other Chinese social media apps include a ‘tip’ function which allows users to reward content providers by sending them a donation of anything from 1 yuan (15 cents) up. Donations are transferred by the chat app between mobile wallets.

Apple last month told developers that they should disable this functionality in order to comply with App Store rules, but the WSJ reports that the company appears to have had a change of heart, and now sees tips as a revenue opportunity.

Now, those tips will be considered in-app purchases, just like buying games, music and videos, entitling Apple to a 30% cut.

The piece notes that the decision comes at a time when Apple’s revenue in China is falling.

The company is at a critical juncture in China. Its revenue is sliding. Its market share dropped from 16% in 2015’s first quarter to 9% two years later, according to research firm IDC, and the iPhone has fallen to No. 4 in the market behind three homegrown brands.

Apple is also concerned that WeChat has effectively become a platform rather than just an app, potentially reducing the need for Chinese users to buy apps.

WeChat is a super app that increasingly acts like an operating system. Its “mini- programs” allow businesses to plug in their own simple apps that can be accessed within WeChat, so that users don’t have to leave the platform. Users, for example, can open WeChat, find a nearby KFC and order food without having to download KFC’s app.

However, the move could be seen as culturally tone-deaf, say some, as tipping is seen as a means of expressing personal appreciation, and is viewed very differently to a purchase. It also risks further conflict with the government.

In China, Apple needs to tread carefully to avoid the traps that befell other foreign companies slow to adapt to the unique features of Chinese internet culture, including the government’s frequently heavy hand.

One executive says his company is talking to the Ministry of Industry and Information Technology, a regulator, about whether Apple is imposing unfair rules by turning tipping into in-app purchases.

Apple has already seen iBooks and iTunes Movie services temporarily shutdown by the government, been forced to remove the New York Times apps from iTunes and is currently facing pressure to ‘tighten checks’ on live-streaming apps.

Photo: Bloomberg