📱 Apple and Google's big threat

Wednesday, September 1, 2021 by Robinhood Snacks | Disclosures
"Provide alternative payment method" [Yuri_Arcurs/E+ via GettyImages]

"Provide alternative payment method" [Yuri_Arcurs/E+ via GettyImages]

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Hey Snackers,

August is behind us (sigh), but we've still got 22 days of summer left. That didn't stop Starbucks from kicking off Pumpkin Spice Latte season early. The PSL drove record fourth quarter sales last year.

Stocks dipped yesterday, but posted gains for the month despite uncertainty around the surging Delta variant.


1. South Korea's new law is the first to dent Google and Apple's app store payments dominance

Doing some Seoul searching... Big Tech. Yesterday, South Korea passed the first law in the world to dent Apple and Google's dominance over app store transactions. Quick refresher: Apple and Google typically take a ~30% cut of in-app purchases, downloads, and subs. Those in-app purchases must flow through Apple/Google's own payment systems. Now…

  • Not just Apple and Google Pay: South Korea will require the tech giants to allow payment systems from other payment processors and developers.
  • That threatens the 30% "App Tax" that Apple/Google collect. If they don't comply, the tech giants could be fined up to 3% of their South Korea revenue.

BRB, going app shopping... Don't sprain a finger. Apple says its current app store policies help protect user safety. But given recent scrutiny, the Fruit halved its 30% fee for developers earning less than $1M/year, and Google said it would only take 15% of developers' first $1M. This South Korean law is the biggest threat so far to their app store dominance — but it's not the first.

  • Fortnite-maker Epic Games added its own in-app payment system to bypass the "App Tax." Apple and Google responded by expelling Fortnite from their app stores, leading to the ongoing Epic trial saga.
  • Last month, a bipartisan group of US Senators proposed legislation similar to South Korea's. In June, a House Committee approved major legislation to curb Big Tech's dominance. Meanwhile, Australia is considering new regulations for Apple/Google Pay.

Precedent is powerful... This South Korean law and its impact could be referenced by regulators in other countries to curb Apple and Google's dominance. Regulators will be watching to see how South Korea’s law pans out. For example: if it results in more fraud, as Apple has warned. Either way, Apple and Google’s app store payments dominance is no longer absolute.


Potato box delivery... coming in hot. Pinduoduo has surpassed Alibaba — aka: "the Amazon of China" — as China’s most popular ecomm platform by user count. Pindoudou's app connects farmers/distributors with Chinese consumers. The $120B "social ecommerce" platform doesn't really have a US equivalent: shoppers can play games to win prizes, like discounts or boxes of mangoes. Pinduoduo’s sales still trail Alibaba’s, but it’s growing faster — and its stock is up 10% over the past year, while Alibaba’s down 40%.

Mangoes > Louis Vuitton… The ruling Chinese Communist Party (CCP) has increasingly emphasized its goal of achieving “common prosperity” — and alleviating rural poverty. That's partly why it's cracked down on Big Tech this year, from fintech giant Ant Group to video game giant Tencent. Oh, and China fined Alibaba a record $2.8B for "anticompetitive practices." Think: preventing luxury merchants like Louis Vuitton from selling on other platforms.

  • Pinduoduo is on China's "better" side: Its agriculture-friendly biz model is better aligned with China's rural prosperity goals. Its quiet social presence and focus on low-income customers has helped it avoid Alibaba-level fines.
  • Pinduoduo wants to keep it that way: After turning its first profit last quarter, Pinduoduo announced plans last week to donate $1.5B in profits to Chinese farmers.

Beijing rewards compliance... China’s crackdown on Alibaba gave Pinduoduo room to grow. To keep growing, Pinduoduo wants to stay in China’s good graces by giving its profits away to farmers and supporting the government’s plans for agricultural development. Companies in other industries are making similar moves to avoid State restrictions. This month, Tencent, which got rocked by China’s gaming restrictions, pledged $7.7B to “common prosperity” initiatives.

What else we’re Snackin’

  • Social: The US says Social Security trust funds will run out of money in 12 years — one year sooner than expected.
  • Holmes: The criminal trial of disgraced Theranos founder Elizabeth Holmes kicked off yesterday.
  • Stormed: As the US struggles with all kinds of shortages, Hurricane Ida could make the supply chain disaster even worse.
  • Ditto: Walgreens said it'll raise wages for hourly workers to $15/hour by November 2022. Earlier this month, CVS said it plans to do the same by July 2022.
  • Outsource: Facebook reportedly pays consulting partners like Accenture to sift through the most toxic and disturbing content on its platform.
  • Startup: In its filing to go public at an expected $2B valuation, wool sneaker icon Allbirds reported growing sales and widening losses.

Snacks Daily Podcast

Our pod hosts will be back on the mics on Tuesday, September 7 with a fresh TBOY.

While Nick and Jack take some vacay to rest the pipes, catch up on some of our past snackable 15-minute episodes (still tasty).

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Snack Fact of the Day

The cost of Uber and Lyft rides has nearly doubled since 2018


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Authors of this Snacks own shares of: Apple, Google, Starbucks, and CVS

ID: 1822386