Apple has told several Chinese social-networking apps, including WeChat, that the popular “tip” functions in their apps are in violation of App Store policies, according to a new report by the Wall Street Journal. Executives at WeChat and other companies have told the WSJ that Apple has deemed the “tip” feature in their apps, which allows users to send money to content creators, to be equivalent to in-app purchases, thereby entitling Apple to a 30 percent cut of the revenue involved. As most of the social networking apps involved typically offer these capabilities for free to encourage user engagement, Apple’s decision is naturally not sitting well with industry executives, who feel that Apple “gets 30% for doing nothing” when even the companies themselves aren’t making any money directly from the feature. Apple has informed at least two of the developers that unless they make the necessary changes, no further updates of their apps will be accepted, and the apps in question may even be removed from the App Store.
The move comes as Apple is facing challenges with declining market share in China, leading many to question the wisdom of alienating Chinese iPhone users and developers. Although the sums of individual tips are often relatively small, they can range anywhere from a few yuan to hundreds, and a thirty percent cut would likely add up to quite a bit considering how frequently the features are used by the large Chinese population — WeChat alone has 938 million monthly active accounts. With China having become the biggest market for Apple’s App Store in the past year — over $2 billion in in-app purchases were made by Chinese users alone — Apple presumably feels it can mine the App Store for additional revenue, and is possibly concerned about the “tips” feature being used to bypass its in-app purchase system for goods and services that would otherwise be handled as traditional IAPs. On the other hand, the Chinese app developers are quick point out that tipping is different from making other virtual purchases as it’s voluntary and occurs after users consume the content, making it a way to show appreciation rather than a sale, and describing it as more of a “fun” thing rather than a business transaction.
Developers are likely to turn to Chinese regulators to attempt to address the issue, which could spell more trouble for Apple in China, particularly with the Chinese government’s tendency in the past to lean toward supporting its own home-grown companies; at least one executive notes that his company is already talking to the Chinese Ministry of Industry and Information Technology about whether Apple is “imposing unfair rules,” however the MIIT noted that it hasn’t gotten involved at this point. The People’s Bank of China, which regulates electronic payments, didn’t respond to the WSJ’s request for comment. Apple also declined to comment.