The Battle Against App Store Monopolies: A Discussion with Christian Owens

00:00:00:05 - 00:00:10:08

Christian Owens

On Google is sitting there and saying, hey, you know, you're not allowed to do that. You have to use our version of this. You have to use our system. And for the privilege, we're going to take it out of your revenue.

00:00:10:10 - 00:00:21:00

Ben Hillman

This is Christian owned and he just helped take down a monopoly epic game, sued Apple and Google on the same day. Unfortunately, they lost the Apple case. But things went a bit differently with Google.

00:00:21:01 - 00:00:31:05

Christian Owens

Project Hug was basically we're going to write you really, really big checks, but hundreds of millions of dollars. It's kind of obvious this was to discourage people from creating their own stores or doing anything like that.

00:00:31:09 - 00:00:37:01

Ben Hillman

Epic beat Google and wow, good for Fortnite. This case highlights a major victory for all developers.

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Christian Owens

A lot of these guys are small businesses. We're not talking about people who are making hundreds of millions of dollars a year here. We're talking about people who are making hundreds of thousands of dollars, maybe a couple million dollars, and they have a small team.

00:00:47:10 - 00:00:52:01

Ben Hillman

Christian has a ton of insight into what went down, what it means and where we go from here.

00:00:52:03 - 00:01:02:16

Christian Owens

I think we'll see a complete reversal where they will open up all of this stuff to competition. They'll figure out some other ways to monetize and then they'll make everyone think it was their idea the whole time.

00:01:02:18 - 00:01:24:08

Ben Hillman

A week after we recorded this interview, Apple did just that from Paddle. My name is Ben Hillman and let's protect the Hustle. Christian, thank you so much for coming on. Protect the hustle. I'd be surprised if people don't know who you are already. But for the folks that don't. Do you mind giving us your name, your title, and just kind of a brief background of who you are and what you do?

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Christian Owens

I'm Christians. I founded Paddle in 2012, was running the company as CEO up until about a year ago, and that I stepped into the amorphous role that is exact chairman.

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Ben Hillman

I know you're much more heavily involved in working on the product specifically right now. What is your area of expertise? What's your what's your background in that sense?

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Christian Owens

I built the first version of Paddle kind of over ten years ago and sort of really just tried to stay as close as I can to the product that we build and how we help people. Building apps and software sell those apps and that software around the world. So still very focused on payments and kind of our core product and billing.

00:02:07:19 - 00:02:18:16

Christian Owens

And then the tax element to that and things like that. Really, how do we make kind of really great billing experiences for everyone all around the world?

00:02:18:16 - 00:02:35:13

Ben Hillman

We are recording this in January of 2020. For a little less than a month ago, a verdict was given in the Epic Games versus Google trial that you were a part of. You were a witness in that case. When did this trial start? How did it come about and what led us up to today?

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Christian Owens

For as long as the App Store has existed with this sort of 30% cut that that Apple and Google as well take there has been sort of developer pushback in some way or another around it. And there's been a ton of like false starts of people trying to contest this fee. And really what we see today with this kind of amping up kind of started in earnest and probably 2020 when Epic released a version of Fortnite, the the popular game with their own payment mechanism in it and then obviously this instantly within 24 hours or so was removed from the app stores, sort of both Google Play and the Apple App Store forcibly citing that

00:03:21:03 - 00:03:43:10

Christian Owens

they'd breached the developer agreement on these terms of service. And EPIC, I think anticipated this was going to happen and immediately sued Apple and Google and two separate federal lawsuits. And we've basically for the last three or four years just been seeing kind of these cases kind of play out. So there are obviously like civil cases between an epic and an app on Google.

00:03:43:10 - 00:04:11:04

Christian Owens

And then it kind of alongside that, various governments around the world have sort of taken notice of these cases and started their own proceedings, whether it's kind of antitrust stuff or whether it's pro-competition and kind of regulators around the world also kind of kind of stuck that that kind of foot in the race as well. And either Adam expressed an interest in doing something in this area or kind of actively pursuing kind of legislation.

00:04:11:05 - 00:04:20:15

Ben Hillman

I know. So there's two cases. There is epic games versus Google. There's Epic games versus Apple. And I think I'm remembering this correctly. You testified in both of the cases, correct?

00:04:20:18 - 00:04:26:21

Christian Owens

I think it provided evidence in both like testify in court in the Google one, but not not in the Apple one.

00:04:26:21 - 00:04:42:23

Ben Hillman

So there's these two cases, there's Google versus Epic Games, there's Apple vs Epic games. But primarily we're going to focus on the Google versus Epic games today because that we just had I believe it was the middle of December. The verdict came about for that case and it was a pretty swift verdict.

00:04:42:23 - 00:05:06:12

Christian Owens

And the verdict came down in Epic's favor, essentially kind of they have to rule on kind of a dozen different things all at once. They're all kind of like interdependent on each other and contingent on each other. But kind of, I think the TLDR is, is that the jury in that case ultimately decided that Google was exerting monopoly power over the play store.

00:05:06:12 - 00:05:28:00

Christian Owens

And I think as a part of that, they also determined that when thinking about like what is a monopoly, you have to define a market. So I think the big thing in this case was is the market. All software is the market, all software that runs on phones or is this is the market or software that runs on Android or is the market Google Play itself?

00:05:28:02 - 00:05:54:00

Christian Owens

And obviously Google was shooting for what is the biggest possible definition of this kind of that can exist of like we want it to be all software and epic was shooting for the narrowest possible version of this so like software and Google or the Android phones or on Google devices and I think so essentially the way that the verdict came down was that the the jury determined that actually this market is narrow.

00:05:54:02 - 00:06:17:10

Christian Owens

It is software that runs on Android phones. And that kind of when looked at sort of this question is of is Google a monopoly kind of with that lens on it. But yes, Google kind of do exert power over that market in that they kind of take a pretty large fee. They force a lot of developers to use the play store, even if some alternatives are available.

00:06:17:12 - 00:06:31:01

Christian Owens

And in the instances where there are alternatives available, they kind of make those pretty crappy with big warnings and sort of stickers and stuff like that. And they make it really difficult for actually developers to make that a viable choice for them to, to sell their app.

00:06:31:04 - 00:06:46:22

Ben Hillman

Yeah, and I know that Google was trying to make it out that like, no, this isn't a monopoly. There are other choices. But in reality it was sort of a illusion of choice. I think what the Samsung Place or the Samsung Store and or Galaxy Store and other other stores, technically where there was available.

00:06:46:23 - 00:07:07:02

Christian Owens

There was a lot of stuff that kind of came out during this. And I'm sure some of it we'll get into. But there was some of this stuff and there were so many documents and so much kind of discovery that went on. It's kind of impossible for any one person to know it all. But like, I think the stuff to do with Samsung Pilot came down to like, this is a really popular store.

00:07:07:02 - 00:07:26:00

Christian Owens

But then we saw loads of documents that kind of evidence that Google had kind of tried to suppress that as a store. And even in the instances where like Samsung phones could come pre-installed with that, they had to also have Google play on them and things like this. And it became this this illusion of choice between those stores.

00:07:26:02 - 00:07:53:08

Christian Owens

And also it was really only kind of a choice if you are kind of the maker of a device yourself, because all of these kind of the big argument around sideloading or you can download an application directly from a developer kind of went out the window when you realize it's a 16 step process or something in order to actually install one of these applications on your phone and that included other app stores.

00:07:53:08 - 00:08:09:17

Christian Owens

So if you wanted to go a download an Alternative app Store to be able to install apps, you kind of had to go through this 16 step process as a consumer in order to get that thing. But store onto your device to begin with. Right. I think that the kind of with that the jury sort of saw right through it.

00:08:09:17 - 00:08:24:21

Ben Hillman

And so you spoke in front of the jury in the Google case, and you've given us your background and why you're qualified for this. Can you talk a little bit about your role in the trial? I know that it's been difficult for me to get my hands on like actual court transcripts or just been able to go off a verge.

00:08:24:23 - 00:08:30:11

Ben Hillman

Google wasn't painting you out to be like this altruistic individual, it seems like.

00:08:30:15 - 00:09:04:09

Christian Owens

But I think this is just like the case with with any of these. But giving evidence in a court or testifying in this way, there's obviously two sides that one side agrees with your point of view. The other side tries to discredit you in any possible way. And it's it sort of in this instance, I think, epic when they were questioning me, Epic definitely went in with a stance of like, let's kind of use Christian and paddle to demonstrate to the jury.

00:09:04:11 - 00:09:37:11

Christian Owens

But actually the idea that there are no alternatives or that it would be too expensive or too cumbersome or just too difficult for developers to use something other than this built in system, Let's show that that's kind of both. Like, let's show that that actually there are viable alternatives. And really the only restriction here is, is the fact that Google is either in some instances directly not letting people use them and in other instances sort of making it so difficult and substantially discouraging.

00:09:37:13 - 00:10:03:13

Christian Owens

And I think that they kind of wanted to portray that. And so that questions were really all along the the feasibility of a solution. Google's kind of what in the direction of wouldn't you and people like you make a ton of money if this happened. I didn't like my answer that was like, yeah, like no one's asking. We're not asking for anybody to kind of like back a truck full of cash up to our door and say, like, here you go.

00:10:03:15 - 00:10:26:04

Christian Owens

I think all we want in this and kind of obviously Epic's motivations are different, but kind of all have a wants in this instance is the ability to kind of try and make a bunch of money like there is not we're not asking for any any like favoritism or kind of some guarantee that that we're going to invest in building this product.

00:10:26:04 - 00:10:40:05

Christian Owens

And then tons of people are going to use it by default. We're kind of just asking for permission to play. And if Google builds a better product and someone else builds a better product, that product should win it. But it shouldn't win by default because nobody else's play the game.

00:10:40:08 - 00:11:01:08

Ben Hillman

Because I know that we this isn't unbiased reporting that I'm talking about here. We have a best you know, paddle does have a vested interest in this and this working out. But I know that you what you represent is I know I know you've had conversations with developers, with folks who you use paddle, who are kind of getting a little bit screwed by this scenario.

00:11:01:10 - 00:11:09:10

Ben Hillman

Are there? I mean, you don't have to give me like specific examples of folks that this has happened to. But I wonder what what has been the perspective from the developer in the.

00:11:09:10 - 00:11:32:00

Christian Owens

Sense I think there is a few different perspectives, like when you when you speak to developers, one is very much this frustration that they have to maintain in two or three different ways of selling their products across different platforms is like on the web. I use this one thing on Android to use this other thing. And on iOS, I have to use this different thing.

00:11:32:04 - 00:12:10:10

Christian Owens

Actually, it's just like the burden of like keeping all of those things in sync and then having to deal with these things in different places. That is like very kind of operational, pragmatic version of that. And then there are the other, the other reasons kind of and it kind of really depends business to business. But when you think that I don't know and say we're talking about a product and someone's selling us as products that ten bucks a month on the web and they have a pretty solid, thriving business and obviously that costs their infrastructure, their marketing.

00:12:10:10 - 00:12:36:10

Christian Owens

They have all of these things, but they're making 950 on every ten bucks they sell and they've built like I'm pretty sustainable business around that. It's profitable or it's breakeven or kind of they know how to model it. And then for a really arbitrary reason, just the platform that they happened to be selling on like take me seven bucks on every ten rather than 950 of every ten just because they're selling it on a phone.

00:12:36:12 - 00:13:01:03

Christian Owens

And it's exactly the same product in a lot of these instances. You buy it at one place and you can use it everywhere. And I think that sort of there is obviously the operational reasons of not wanting to have five different sources of like where the revenue is coming from and having to deal with that. This other one, it's like I've proven like I have a model where it only costs me $0.50 to take this transaction.

00:13:01:05 - 00:13:27:05

Christian Owens

Like I know that that's how much it costs and I'm driving the customers to go download my myself like I'm I'm still paying for that marketing. I'm still doing all of that work. But arbitrarily I have to pay another 250 to process that transaction just because it's all a different device. I think that that's just incredibly frustrating for these developers who are already a lot of these guys are small businesses.

00:13:27:07 - 00:13:45:22

Christian Owens

We're not talking about people who are making hundreds of millions of dollars a year here. We're talking about people who are making hundreds of thousands of dollars, maybe a couple million dollars, and they have a small team and it just feels like they're kind of building this business and building this product to make getting to a product market fit and figuring out that pricing and making all this stuff work is hard enough.

00:13:46:01 - 00:14:05:14

Christian Owens

Then they kind of have this extra kind of 25% tax on their revenue That is just a huge headwind. Right. And it's kind of really interesting to see people kind of especially like first time founders, they do all of this work and then they're like, wait, what? Like why?

00:14:05:16 - 00:14:36:13

Ben Hillman

And what I hear there is that there's there's an understanding that, yes, if you're charging $10 for for various number of many different reasons, whether it's tax and what have you, you're not necessarily going to get every single cent of those $10. There has to be a little bit of percentage giving away. But the issue here is that it's not only is 30% significant and 30% is a huge difference for these small businesses, between 10% even there isn't even competition allowed to bring that 30% down.

00:14:36:14 - 00:14:39:06

Ben Hillman

You know, that's that's seems to be my understanding.

00:14:39:06 - 00:15:07:17

Christian Owens

It it's people sitting there being like either I've done the work to kind of build this infrastructure myself or I willing to do the work to build this infrastructure myself. Hey, Apple, Hey Google. You don't actually need to do anything like, let me do it. I'll take this burden off of you, but you're going to charge me 30% for sort of in that instance where they'd be like, I'll do the work or invest the resources up on Google is sitting there and saying, Hey, you know, you're not allowed to do that.

00:15:07:19 - 00:15:14:19

Christian Owens

You have to use our version of this. You have to use our system. And for the privilege, we're going to take, it's out of your revenue.

00:15:14:23 - 00:15:38:00

Ben Hillman

And I guess the realization I'm having right now is this is where these sort of like what what you're speaking to is not necessarily there's there's even this will apply to folks that won't even be using paddle and may never even be a fit for paddle. It's folks that are still just across the board. Anyone not even if they're like a target customer of paddles 30 that 30% can be debilitating.

00:15:38:00 - 00:16:10:14

Christian Owens

I am not concerned if nobody if anybody who ever like listens to this sort of doesn't use paddle at all, obviously, I'd love them to, but it's just like excluded obvious bias 5 seconds and just be and just like think about it objectively and it's like, okay, wait, I can take this payment over the internet via a mechanism isn't just because the app was downloaded from the app store via a mechanism that isn't there.

00:16:10:16 - 00:16:39:12

Christian Owens

And it costs me 5%. But just because the person pushed the button in this other place, no other reason. It's 30% and it applies to everybody. And then this is where it gets like really absurd. Like this is where it gets super crazy, which is all of the apps that you use that just so happened to not be a digital product, not be a subscription or a streaming service or something like that.

00:16:39:14 - 00:17:10:13

Christian Owens

None of them any of this applies to the when you buy something on Amazon or you order food for DoorDash or you take an Uber or like whatever it is, like none of those transactions apply, even though they're kind of they're using that button there in the app there, it's downloaded from the App Store. They're able to utilize all of this infrastructure that they built elsewhere on the Web wire to take these transactions at lower cost, because I think Apple and Google and others recognize that it would be too difficult.

00:17:10:13 - 00:17:35:00

Christian Owens

It would either be too difficult for them to provide a competitive service and for those types of products, or alternatively, that actually it would destroy those businesses. Like if you think that sort of maybe DoorDash makes like two bucks when you kind of spend 50 like taking 30% by revenue, just kind of mathematically isn't going to work anymore.

00:17:35:02 - 00:18:04:12

Christian Owens

DoorDash doesn't exist. So they exclude those businesses from even though the actual underlying mechanism of how these payments are processed is exactly the same. So it's really and then goes from absurd to kind of a little bit malicious. You're like, okay, it's absurd that you were kind of charging -30% anyway, and now you find out that there are this whole swathe of businesses that it doesn't even apply to you and actually only applies to me because I'm selling software because you can.

00:18:04:14 - 00:18:20:17

Christian Owens

Well, it's like, this is it. This is like this is you're just sort of charging me this money because you can charge it to me, not because you need to, because you've proven for all of these other applications that actually you don't need to and you're fine with the safety and everything else of all of these other payment systems.

00:18:20:19 - 00:18:22:12

Christian Owens

It's literally just because you can.

00:18:22:16 - 00:18:39:09

Ben Hillman

That was the impetus to like get involved here is that this just just that 30% if we want to like be reductive about that 30% of loan is this is crazy like it should be this is lower. I know there's a number of other facts that we've talked about, but what I specifically want to get into is it gets worse than just you're charging higher than you should be.

00:18:39:09 - 00:19:02:00

Ben Hillman

From what I understand, this came out in discovery or it came out during the trial, that project hug. And for our listeners, if you're not familiar, Project Hog was this initiative by Google where they approached to game developers Activision Nintendo Riot games with huge sum of money to keep them in the in the play store you could launch on other app stores, but you had to launch on Google the same day.

00:19:02:00 - 00:19:25:01

Ben Hillman

And they even offered Epic $147 million to launch Fortnite there. It's sounds to me like a blatant bribery right there. I know that in a similar sense, this I don't think this is a part of project code, but Spotify also cut a deal in which they process their own payments and they only pay Google 4%. Yeah, there's a lot to get angry about in what I just mentioned beyond just that, that 30%.

00:19:25:01 - 00:19:33:06

Ben Hillman

There's also this talk to us about why Epic games characterization of a bribe. It didn't ultimately pan out in the proceedings.

00:19:33:09 - 00:20:10:09

Christian Owens

Yeah I think there is I think there's a there's a couple of kind of like pieces sort of below the surface here, I think one is, is that for all intents and purposes, it looks a lot like a bribe. It was effectively, effectively what they were doing is, is giving these developers huge sums of money usually. And the whole idea of this, this project hug kind of came from the fact that they were kind of hearing rumblings from some of these developers that they were going to start their own app stores, competing app stores, two to Google Play.

00:20:10:11 - 00:20:39:03

Christian Owens

I think Activision was one of the larger ones, but I'm not 100% sure they were thinking Activision. Obviously has a huge portfolio of different games they own and they've been acquiring a number of game developers and they are essentially if you're at Activision, you're thinking, Hey, like we already have hundreds, millions people. We play our games. Like why wouldn't we just launch our own store where you can buy all of our games from and kind of we can market it to the hundreds of millions of people and we don't have to pay these 30% fees anymore.

00:20:39:05 - 00:21:07:10

Christian Owens

So Google created this thing called kind of ominously and ominously called Project Hog. And Project Hog was basically we're going to write you really, really big checks, the hundreds of millions of dollars to encourage you to distribute your apps or games on Google Play at the same time or earlier or kind of kind of on par with anyone anywhere else you distribute them.

00:21:07:12 - 00:21:34:02

Christian Owens

This was it's kind of obvious this was to discourage people from creating their own stores or doing anything like that. I think in the case itself and sort of subsequent kind of their arguments were these are sort of like pre payments or kind of marketing credit. So some of these, when you hear $150 million or whatever it is, sometimes it's $75 million in cash and then $75 million in co-marketing.

00:21:34:02 - 00:21:54:21

Christian Owens

And so for every dollar you spend, we also spend a dollar on marketing your game. But effectively, it was kind of subsidizing the cost of this 30% for these developers. So you could say, and all these deals were over certain period of time. So you can pretty easily go actually that game mix of $1,000,000,000 a year on Google Play.

00:21:54:23 - 00:22:15:09

Christian Owens

It's they're paying $300 million a year in fees. We're going to pay them $200 million a year in these incentives, which effectively kind of depends on how you put it in Excel does that they're paying 10% rather than 30 because you're giving them a bunch of money back or budget kind of feedback. So that's how it became kind of not a not a bribe.

00:22:15:09 - 00:22:28:11

Christian Owens

And I think they pointed to other industries where things like this happen, like when you maybe do a Netflix deal and you get a bunch of money upfront or you sign a book publishing deal and you got a bunch of money like a like a.

00:22:28:11 - 00:22:30:02

Ben Hillman

Signing bonus if you saw.

00:22:30:04 - 00:22:48:05

Christian Owens

Like kind of stuff like that. The argument was that this doesn't actually make a big difference. These are marketing incentives for big thing. So big things like kind of like you can sort of giving them all of the benefit of the doubt in the world. You can kind of get that. I mean, got to be like co-marketing. They're going to be spending money.

00:22:48:09 - 00:23:12:18

Christian Owens

The developmental selves have to spend money on this stuff. But then you see some of these other deals that were cut, like the Spotify deal, where Spotify is effectively paying 0% transaction fees on some of their revenue and only having to pay three or 4% of that their revenue for transactions that they process themselves. This is outside of any kind of kind of true sanctioned program that was available to all developers.

00:23:12:18 - 00:23:37:17

Christian Owens

And throughout this whole thing, Google denied any of these things were happening. There was a big kind of drama kind of during the case itself. So it's well, it's Google trying to not get the or to get the percentage that Spotify was paying was 4% excluded from the record. So it would never be released that we wouldn't be having this conversation.

00:23:37:17 - 00:23:57:10

Christian Owens

And I think the quote I'm going to get the quote wrong, but it was like this would materially harm our ability to negotiate with people. So people knew that Spotify was paying 4%. There's there's something in that of like, you don't want anybody to know about this deal or the terms of the deal or anything like you're willing to go to these lengths to prevent that from getting out and happening.

00:23:57:12 - 00:24:06:15

Christian Owens

Like, maybe there's something going on there that sort of is a slightly different tack the way that you're presenting it to everybody and how this is working.

00:24:06:15 - 00:24:25:07

Ben Hillman

And this if we can compare this a bit to the Apple case for a second, because this seems where the like exact difference is that or when one of the one of the differences, basically the reason that the Apple case Apple won in that instance and in this case, Google lost is because it is a closed system, it's a walled garden.

00:24:25:07 - 00:24:43:13

Ben Hillman

From what we can tell, they don't have any of this like kind of paper trail of these not actually bribes, but these payments, these discounts, if you will, to these other companies. Can you speak to a bit why I mean, feel free to correct me on any of that. But why why Apple was the victor in that case And Google was the loser in this case.

00:24:43:16 - 00:25:17:03

Christian Owens

I think there are three core reasons that Google lost in sort of Apple. One, I think one is this was a jury trial in the instance of Google, and it was a bench trial, kind of just a judge in the instance of Apple. So I think that actually sort of the level of of of argument that you go into sort of and also, by the way, that you kind of communicate this to a jury of people who maybe don't the maybe they're not as clued up on exactly all of these market definitions and things like this.

00:25:17:03 - 00:25:41:12

Christian Owens

I think that actually in the instance of of a jury trial, like you get down to the real essence of the argument as opposed to these kind of legal technicalities and things such as this, that I think you can rely more on when it's just a judge who's sort of been doing this for 20, 30, 40 years and kind of you can make those those sort of technical arguments, too.

00:25:41:14 - 00:26:08:22

Christian Owens

I think the second this was I think it was a quote in an article from from someone at Epic, but Apple didn't write anything down, I think was the quote of like there was far less actual documentation and evidence of of of things that were happening kind of things like Project Hog not only we have project COG but we had all of the internal like motivation behind it, which made itself transparent, that they were trying to stop competition.

00:26:08:22 - 00:26:31:22

Christian Owens

And I think the third thing is Google. It was actually pretty shocking, kind of watching kind of some of the trial and reading through some of the coverage of kind of how Google kind of conducted business internally. There was all of this and good two or three days of the trial was spent on the fact that Google was effectively deleting evidence.

00:26:31:22 - 00:26:55:18

Christian Owens

All of this documentation about all of these programs that were like auto deleted inside Google, even after they got the subpoenas for the trial, they were still deleting chat logs and evidence and sort of all of these things. And they were kind of marking documents as legally privileged, even if they wanted. They were sort of just basically everything that was happening, everything that they were creating were getting mocked as legally privileged.

00:26:55:20 - 00:27:17:14

Christian Owens

And I think that that whole set of scenario played out in front of a jury. And then the judge said sort of effectively, like you could assume that all of the stuff that they deleted would necessarily look favorably on Google. Like you can't you can assume that the things that they deleted like would have helped Google in that case.

00:27:17:14 - 00:27:36:06

Christian Owens

Right. Or wouldn't have helped them. It may be right. It would have looks bad on them. But I think that sort of that was actually a surprisingly large portion of the trial itself was sort of the sort of bad behaviors that Google had, bad hygiene that they had internally around, like deleting documents and evidence and things like that.

00:27:36:06 - 00:27:56:20

Christian Owens

So I think that that in compare and in combination with things like Project Hog, things like the Spotify deal thing, all of these things together, it's sort of like you kind of paint a picture of Google, which is like these guys are really looking out for themselves and no one else. And kind of then the jury kind of came to that conclusion on their own.

00:27:57:00 - 00:28:20:16

Christian Owens

In the Apple case, it was a lot more kind of like technical argument. So I think that one of these technical arguments that did come through in that case that actually was ruled that Epic's favor was this sort of anti steering provision, which basically said that Google wasn't allowed to tell developers that they weren't able to communicate with their customers, that you could buy this outside of the App Store for less, which was one of the things that they were doing before.

00:28:20:18 - 00:28:38:16

Christian Owens

I think in in the Google case, we saw a much more holistic kind of argument towards or against the monopoly as a whole. In the Apple case, it was much more like the technical details of of different behaviors in different terms within the contract. And they were sort of ruled on individually.

00:28:38:18 - 00:29:02:21

Ben Hillman

From what I've seen, this is like one of the most significant victories in a monopoly case since like Microsoft in the early 2000. So late nineties. I don't know if you want to go off of what the result of those cases were or if maybe you have some more you think like insight into into this. But the release of this podcast will be either right after or around the time when because we have the verdict but we don't have the punishment yet.

00:29:02:22 - 00:29:10:09

Ben Hillman

Yeah, I know that the expectation is that there's going to be an appeal. Do you have any insight or ideas on what you think that the punishment that they're going to hand out is going to be?

00:29:10:11 - 00:29:12:14

Christian Owens

I think I don't. I know it's.

00:29:12:14 - 00:29:13:11

Ben Hillman

Fine. No is the.

00:29:13:11 - 00:29:30:04

Christian Owens

Only thing I know the only. Yeah. No, I think the only thing that we can really look at is sort of what's happened in almost like in terms of how Epic's going to react and how Google's going to react to whatever the the kind of punishment is. I think we can probably look to the Apple case and the Apple case.

00:29:30:04 - 00:29:54:07

Christian Owens

It was immediately appealed by then sort of has been through this process of kind of like legal ping pong between different courts and different things trying to. And I think that that same thing's most likely going to happen here as well. I think Google's just going to roll over and be like, nope, like all bad, you got us kind of we'll do whatever you say.

00:29:54:09 - 00:30:29:00

Christian Owens

I think this legal ping tolling is going to happen as well in terms of like what the actual punishment will be. I'd only say what I hope, which is I hope that the the judge takes into consideration both the fact that the jury did determine that this was a monopoly and that Google were acting poorly. And also kind of Google's bad behavior around kind of these sort of bribe payments, that what bribes and secret deals that were secret deals with Spotify and others and actually, I think, like it doesn't need to be a complex verdict.

00:30:29:00 - 00:30:50:11

Christian Owens

I think it can be one that's quite simple, which is allow developers to use third party payment mechanisms. If you need to change the pricing model or the billing model of of Google play for developers. So they maybe pay a subscription fee or something to be listed in the play store and maybe that fee is waived if you use Google's payment, like whatever it is.

00:30:50:13 - 00:31:14:09

Christian Owens

I think it can be quite simple, but I'm just hoping that ahead of the real crux of all of this stuff is allow these developers to use alternative payment methods or payment systems. This all these products that don't come with a 30% fee. And I think hopefully as long as that that piece of that makes it, then I think it's it's we don't have to overcomplicate this.

00:31:14:09 - 00:31:32:23

Ben Hillman

The one big win that came from the Apple case like there was actually a one good thing that came out of it, which was that Apple is required to allow these external payment links, something that we provide. I Paddle and it seems like epic knew this and was trying to show how a company like paddle can actually like stand up to a company like Google.

00:31:32:23 - 00:32:04:22

Christian Owens

I think one of the that was one of the big things that came out of like a win that came out of the Apple case was this anti steering provision, which was essentially as part of the developer agreement that the developers had with Apple. Not only do they have to use Apple's payment system for kind of transactions that occurred with apps downloaded from the App Store, but they also had to like pretend that you couldn't buy the apps any other way, like you couldn't.

00:32:05:00 - 00:32:24:03

Christian Owens

Not only could you not like link help from an app to like a website to pay for something, but you could you couldn't even like mention it in the app to say you can go to our website to buy this thing. Right? Sort of. That was one of the things that was that was still upheld kind of through the kind of the the Apple case itself.

00:32:24:05 - 00:32:50:01

Christian Owens

I think that they still haven't been required to comply with it yet because it's still going through that kind of legal ping pong appeals process. But really kind of that was that demonstrated, I think that actually there can be a solution here, that it is as simple as allow these developers to use whatever payment system or mechanism that they use elsewhere and just be able to link to it.

00:32:50:03 - 00:33:18:19

Christian Owens

Even if you can't do it in an app, even if you can't sort of do it directly with like Apple Pay or Google Pay or whatever, the the the kind of default system is like just like these developers direct customers to another place that they can buy this stuff. And I think Paolo is sort of used as an example of there are hundreds of developers on paddle who sell through, paddle on the web or they sell through, paddle on kind of desktop on Mac and PC.

00:33:18:21 - 00:33:44:15

Christian Owens

And they also have iOS and Android apps as well. In the case of those developers, they can't even tell those people in those apps that you could also go and buy it on the web. So I think that if nothing else happens, I think that that because it's like you you lost that and because it sounds so absurd that you can't even be like, by the way, guys, you can go buy this somewhere else that you can't even mention it.

00:33:44:17 - 00:34:05:16

Christian Owens

So I think that that will kind of be upheld either way. It it feels like that's the direction it's going and even though Epic lost this Apple case, for all intents purposes, they lost it like that, that still kind of made it through. So I think there are hundreds of examples of developers who are who would love to be able to do that, who are existing public customers.

00:34:05:18 - 00:34:17:21

Christian Owens

And this doesn't just apply to paddle, it applies to kind of any mechanism that they use to take these these payments sort of online. Today, these developers aren't even allowed to acknowledge the fact that that happens. And that just seems seems crazy.

00:34:18:00 - 00:34:37:01

Ben Hillman

It seems like that this is going to be unfortunately, a long ongoing battle and and hopefully there's going to be consistent, you know, wins. But it it sounds like that is going to be sort of small wins. Something that really stuck out to me when you talked about this earlier was the providing that good billing experience, billing and tax finances.

00:34:37:01 - 00:34:52:02

Ben Hillman

I'll speak from myself. It's like it's always something that is sort of aggravating the the loopholes that you have to jump through, even even just like from the customer side or even doing your own finances or anything like that. In this case, yes, the ideal would be to do it in the app. You don't actually have to leave or anything like that.

00:34:52:02 - 00:35:12:09

Ben Hillman

Let's start with just being able to open on the web, just being like, yes, you can pay this other place and then you can come back here and confirm. That's still not a excellent experience because you have to go elsewhere and then come back. But in the grand scheme of things, it is a small incremental step that can hopefully lead to eventually this getting resolved.

00:35:12:09 - 00:35:17:00

Ben Hillman

But it doesn't sound like it's going to be resolved soon.

00:35:17:02 - 00:35:45:06

Christian Owens

If if I had to make a prediction on what I think's going to happen, I think that there's really two players who matter in terms of making these decisions. And it's Apple and Google like we can talk about other people who have app stores and things like this, but really they're they're so insignificant in rounding errors in comparison to these two two kind of behemoths, and they kind of follow each other like when one does more.

00:35:45:06 - 00:36:03:10

Christian Owens

So Google following Apple. But like when Apple does something or sets a precedent to do something, Google tends to follow suit. That's why kind of we see Apple's fee is 30%, Google's fee is 30%. Apple has, a small business program that if you do less than a million bucks a year, you can kind of get that fee reduced to 15.

00:36:03:10 - 00:36:22:20

Christian Owens

Google having a small business program that if you do less than a billion bucks a year, you can get like these things tend to mirror each other. So I think what's going to happen is we're going to sort of see this like tit for tat in the legal system with these kind of judgments in various cases in like the Epic versus Google Apple instance.

00:36:22:22 - 00:36:48:10

Christian Owens

We'll see. Maybe they say that. And if developers should be able to link out to their websites or whatever it is, we'll see this kind of gradually chip away at some of this power. And I think we'll probably see Apple and Google kind of mirror each other on this. I think that if it happens to one, it's sort of inevitable that if there could be legal action that makes it happened the other and it's probably cheaper for them to just implement the same thing than it is to kind of go through another legal battle.

00:36:48:12 - 00:37:19:08

Christian Owens

I think we'll see that for a while. And then I think we're going to see at the same time is end of governments coming. We have like the Digital markets Act in the the EU. We have kind of there's an app fairness bill kind of in the U.S. there's sort of a handful. We'll see some of these things start to stick like we obviously saw it with kind of Apple caving to kind of the EU on like on the door, on the new iPhone and things like that.

00:37:19:10 - 00:37:52:07

Christian Owens

I think that stuff will start to happen. And then I think that I don't know whether this is going to be a year from now or three years from now or whatever. I think we'll see a complete reversal probably from Apple rather than from Google, where they will open up all of this stuff to competition. They'll figure out some other ways to monetize, and then they'll make everyone think it was their idea the whole time because they do this with everything you see this with like usb-c now, like kind of you saw this with EU mandating that the phone has usb-c and then we have an Apple announcement where they're like, We've created this great

00:37:52:07 - 00:38:19:21

Christian Owens

new innovation of Usb-c and it's the best thing ever and sort of you're welcome world and they're just reacting to some regulation. But I think that in a few years time like it will start to chip away at this stuff. The regulators will come in and kind of they'll water it down some more and then there will be a CEO, one of these keynotes from Apple or Google or somebody where they flip this whole thing and and sort of they open everything up.

00:38:20:03 - 00:38:43:14

Christian Owens

But it'll be like kind of where the best company in the world because look at what we did we opened this up and sort of innovation and freedom and sort of all of this stuff and great if they want to take credit for it, cool. As long as I think kind of developers get to kind of a better way to sell their products and we can build these great building experiences and kind of we can open this up to kind of true competition.

00:38:43:15 - 00:38:45:21

Christian Owens

I think it would be a great, great win.

00:38:45:21 - 00:38:55:20

Ben Hillman

So the title of the article you wrote for panel is the Shift from app to Web. Can you tell us a bit about that shift and what it means for developers and payment companies specifically.

00:38:56:01 - 00:39:17:04

Christian Owens

Sort of is timely that we're doing this now because like there's been like a I don't know if you remember like a year ago or a year and a half ago, there was this big trauma that was that was happening around 37 signals. The folks who make base camp, the new email app called Hey and they were trying to get that the iOS.

00:39:17:04 - 00:39:31:21

Christian Owens

So then the mobile version of this email app kind of in the App Store, right? They didn't want to pay Apple's 30% and they said fine, like we won't sell. We won't even take any money in the app ever. Like, we won't take any payments in the app, but we do want to be able to offer an app.

00:39:31:21 - 00:40:12:04

Christian Owens

And if you're an existing customer, you should be able to log in and kind of kind of read your email and stuff. That happened like a year and a half, two years, whatever it was ago, and Apple, they they caused such a storm on like Twitter and everything else that Apple actually changed their developer guidelines to specifically of account for this sort of use case and it's been a longstanding thing that it's for like enterprise products that if you're sure Salesforce just because you just gave Salesforce a software and it costs several hundred thousand dollars a year, Apple's not expecting that the average Salesforce user downloading the app is going to do an in-app purchase

00:40:12:04 - 00:40:33:20

Christian Owens

for $300,000 for their salesforce license. And if it's a kind of client only thing, you have to have an account log in. You can you can use it. And we're seeing the same thing right now happen again with hey as well, trying to get their calendar out. They just released a calendar app trying to get this calendar app in the App Store and Apple's doing the same thing again.

00:40:34:01 - 00:41:03:12

Christian Owens

I'm saying like you don't allow the payments in in the applications. So David, they're one of the founders of of of base camp and notorious like Twitter poster is kind of like going on this rant at the moment and it's kind of very related to this kind of app to web kind of thing of like and he's one of the good the kind of main contributors or early founders of Ruby on Rails, the kind of programing framework as well.

00:41:03:15 - 00:41:21:10

Christian Owens

Say that like this whole idea of native applications and all of this stuff happening natively in these apps you have to download from the App Store is kind of bullshit. And it's and it's like we should tell this like the web and web technologies and things like this have come along so much that you can build really great experiences.

00:41:21:10 - 00:41:44:17

Christian Owens

You can build really great software that runs in the browser on the phones. Like it's, it's when all at this point now kind of and like things like functionality on the device sort of just doesn't work unless it's native like you can have you can use the camera you can send notifications, you can do all of these things that previously you needed a native application for.

00:41:44:18 - 00:42:06:19

Christian Owens

You can now do with all of these web based technologies. So this idea of like the shift from from an app to web, I think initially started in the realm of of of actually all of these like payment related things and kind of account management and administration things are going to shift from the applications to the web. And I actually think that that is true.

00:42:06:19 - 00:42:43:23

Christian Owens

And we're starting to see companies kind of either to get around these 30% kind of fees or things like that shift a lot of back infrastructures to the web. But I think that like the our scoop initially when I kind of wrote that the scope that we were talking about was probably too narrow. But actually now what we're seeing and it's really been playing out over the course of two weeks, is companies like 37 Signals and hey, say like we can build as good of an app, like an email app or a calendar app, like using these web based technologies that feels like a mobile app that feels native.

00:42:43:23 - 00:43:09:01

Christian Owens

It feels all these things like we can build all of that stuff and just bypass all these systems completely and provide just as good an experience. And I think that like we're going to increasingly see that more and more. And I think companies are going to start with this shift from app to Web for for the stuff to kind of get around a lot of these these fees and or it makes kind of economic sense to that business to do so with like billing infrastructure and things like that.

00:43:09:03 - 00:43:42:02

Christian Owens

But I think eventually I think we're seeing this kind of reversal of everything has to be a native application and kind of folks like, hey and others are going to have to lead that charge into sort of how do we make kind of web based experiences and applications feel like native kind of first class citizens? And I think it's it's all of this stuff is born out of frustration as these folks who are building these businesses and building these apps being like, why the hell do I have to put up with this this stuff, whether it's paying 30% or having to have every version of my application that I want to give to a customer

00:43:42:02 - 00:43:57:14

Christian Owens

kind of reviewed by someone else to make sure that it meets their kind of arbitrary guidelines. When I can build an equivalent product that is as good, if not better, because it's more flexible and distributed directly. And I think that we're going to increasingly see more and more of that.

00:43:57:14 - 00:44:21:23

Ben Hillman

I have a bit of a theory on this myself. Based on something you mentioned previously, is there a downside or risks to opening this up if Apple and Google came together and Kumbaya tomorrow, we're like, all right, fine. We're doing this for the developers. Like, is there a downside to there being more open competition that perhaps would hurt developers and this in this case where as they are protected now?

00:44:21:23 - 00:44:46:04

Christian Owens

I don't think so. And it's really easy to say that when you kind of have a horse in the race. But I think that like the web itself and software and SAS generally has thrived from kind of open competition by companies like it's as much of a struggle for companies to get a new customer or acquire a new customer on the way up as it is in these app stores is like these apps to solve that problem completely.

00:44:46:04 - 00:45:08:08

Christian Owens

There is be harmful websites that exist that you shouldn't go to that sort of kind of try and scam old people and those apps still exist like with these even with these review process and things like that. Like it's not like everybody's immune to kind of this in this the safest environment that exists all of these problems exist in both places.

00:45:08:10 - 00:45:29:16

Christian Owens

And I think that my my feeling is that if this is opened up to competition, like whether that's competition and payments, whether it's competition more broadly, if like actually these app stores sort of cease to be gatekeepers, I think we have an app environment that just looks a lot like the web environment we've existed in for kind of 20, 30 years and has been pretty great.

00:45:29:16 - 00:45:48:16

Christian Owens

And hopefully it's just that with fewer gatekeepers, with fewer of these, like egregious fees that developers have to pay and really just a kind of a more fruitful environment for these people to build applications and build businesses without sort of some strange overlord telling them what they can and can't do.

00:45:48:17 - 00:45:53:10

Ben Hillman

What advice would you give the new developers that are entering this market in light of all these changes?

00:45:53:12 - 00:46:16:08

Christian Owens

I think that now more than ever, we sitting in this very weird moment where it's sort of like it's like shooting is verdict. Like we don't know whether it's going to go down in one direction or the other. We don't know why that's going to happen. We don't know how extreme it's going to happen sort of or even if these punishments sort of come down and open this stuff up.

00:46:16:08 - 00:46:42:19

Christian Owens

We don't know how long the appeals process is going to take. We don't know what the implementation that then Google or Apple goes away and creates like is going to look like. So I would say like the biggest thing is, is just building with optionality, like building with flexibility in mind, building with sort of trying to abstract away kind of a lot of this sort of your reliance on different kind of providers to do stuff.

00:46:42:19 - 00:47:06:03

Christian Owens

Don't rely on the App Store version of doing something. Don't rely on the play store version of doing something. I think that there are a lot of instances you're still going to have to use that solutions, especially in the short term. But it's like I think unfortunately in the short term there is going to be a greater kind of impetus on developers to have to build their own kind of pieces of infrastructure that kind of bridge these different things.

00:47:06:03 - 00:47:35:01

Christian Owens

But the main piece of advice would be like build in such a way that gives you optionality for whatever the scenarios have happen. And whenever they happen, there is a version of this where kind of like for the next couple of years until sort of the regulatory piece happens, but the the judgment and the Google case doesn't really stick and that the the actual kind of like punishment or remedy for this isn't something that actually has much teeth to it.

00:47:35:01 - 00:47:53:04

Christian Owens

And Google find a way around it very quickly. And then we have to kind of go through this whole thing again of somebody suing somebody until this happens. So it would be a case of don't build this in a way where you're banking on that being the outcome, being that you're going to be able to take payments in any way you like equally, don't bank that not happening.

00:47:53:04 - 00:48:20:08

Christian Owens

So I think just build with flexibility and optionality in mind and and sort of kind of really think through some of these decisions that you're going to make, especially if you're building for the long term. And yeah, I think sort of experiment and hopefully when when folks like like us like paddle or are able to to help developers in this instance, we can do that in such a way that that makes it as easy as humanly possible to kind of replace one thing for another.

00:48:20:10 - 00:48:43:19

Christian Owens

But I think that given that we don't know exactly how the likes of Apple and Google are going to implement whatever their solution is to whatever order is that they're told to do, I think you just have to assume sort of the worst and thus kind of plan for as much flexibility and non reliance on any one party as you possibly can.

00:48:43:23 - 00:49:09:19

Christian Owens

And I think there are some interesting tools like speaking not in an unbiased way. I think there's an interesting tools like revenue cap who kind of provide this this sort of bridge between a developer who wants to implement in-app purchases, for example, could implement revenue cap and then they do all of the the the kind of implementation behind the scenes with whatever underlying kind of provider of monetization in use.

00:49:09:21 - 00:49:31:06

Christian Owens

So I'm hoping that the tools like that will be able to make this much easier for developers along down the line where like you've integrated with a revenue kind of abstraction layer. And if you want to swap out Apple for hopefully paddle or hopefully something else in the future, you'll be able to it out kind of fully ripping kind of your business to pieces.

00:49:31:10 - 00:49:34:10

Christian Owens

But yeah, I think just built with optionality in mind.

00:49:34:10 - 00:50:04:01

Ben Hillman

Correct me if I get the percentages wrong here, but I know that paddles reposing in rather than the 3015 to 30% charges that Google and Apple would make, paddle would charge. I think it's like 10%. I know that as this you know, with the institutional knowledge of working at paddle what you get but that optionality that you were just talking about what are developers getting from paddle from that 10% whereas maybe that might be more alluring of like 4% like something the Spotify gets what, what, what are they getting with that extra percentage?

00:50:04:03 - 00:50:27:09

Christian Owens

On the pricing specifically, we decided to make it kind of like a sort of bifurcated price. So for transactions that are $10 or less, it'll be 10%. For transactions over $10, it will be 5% $0.50, which basically means that you pay sort of the lesser of 5%, $0.50 or 10%, depending on kind of the size of the transaction.

00:50:27:11 - 00:51:06:17

Christian Owens

So the vast majority of developers will actually pay much less than 10% kind of when they actually start kind of processing through paddle. I think the main reasons are kind of like, what do you get with paddle that you don't get with the observer or kind of vice versa, I think is we want to provide these developers with flexible infrastructure that solves all of these kind of like business headache challenges that come associated with taking payments from people around the world, taxes and compliance and to all this stuff like give them completely remove them from the scope of having to deal with all of that complexity in a similar way to that are completely removed

00:51:06:17 - 00:51:38:13

Christian Owens

from the scope of dealing with that complexity with an app store, but give them full flexibility around things like price points, like with with the App Store, you can actually how much your product costs. Like you can't actually set a price. You have to choose a price from a list of price tiers. So like if you go on the App Store, you'll notice that everything is like $0.99 or 199 or 299, you know, like whatever it is, you can't actually choose like how it was all for 150 or I want to sell for ten bucks flat like it has to.

00:51:38:18 - 00:52:02:10

Christian Owens

There has to be a pre-defined price that Apple is specified and you choose one of those tiers. So kind of flexible pricing is like one of them. But like when you really think that through, it's not the difference between selling something for 199 versus two bucks is actually the ability to charge in a way that's like commensurate with with the way that people use your product.

00:52:02:10 - 00:52:23:23

Christian Owens

So one of the things that we do a lot of parallel I think we speak a lot about as well as is value based pricing and usage based pricing and things like this. Like there is a mechanism for being able to do any of those kinds of things in any of these app stores. So you're kind of given very blunt instruments in order to like how you monetize and sort of things like that.

00:52:23:23 - 00:52:54:11

Christian Owens

So we want to give all of that kind of compliant infrastructure for people to be able to run their business, but with infinite amounts of flexibility of how they price billing models they use, we want to give access to more payment methods than would otherwise be available to them using kind of these stores as well. Totally improve conversion and have helped them improve retention as well over time, as well as giving them a a bit more of a direct relationship with that end customer as well.

00:52:54:13 - 00:53:19:08

Christian Owens

Things like cancellations, like cancellations in the App Store, like the developer has no control over. They can like you have to if you ever tried to cancel something on the app. So you actually have to go to the settings on your phone and kind of just cancel it from that. So like you call you, there may be a way to kind of kind of do a like an interstitial version of that in app, but it's certainly not like a customizable experience.

00:53:19:10 - 00:53:40:00

Christian Owens

A developer can go and maybe offer you a discount will be ability to pause a subscription if like. And this is a big thing for something like Imagine you had a travel on these periodic is like ten bucks a month, but you use it periodically. Well, maybe like over, over the the winter you're not going to all like over Christmas or something like that.

00:53:40:00 - 00:54:06:12

Christian Owens

You're not going to travel so much. So they see a ton of cancellations of this subscription. Then when people are traveling, there's no ability for them to offer any alternative to cancellation. There's no Well, but he paused there. So like, we'll give you about free or whatever it is. So like, there is just this inherent lack of flexibility that I think that we want to give to these developers when it comes to the ability to really just own their own business.

00:54:06:12 - 00:54:19:08

Christian Owens

Like you said, it shouldn't be on them to figure out which one of Apples or Googles boxes that they fit into and rather kind of let's give them the infrastructure to be able to do whatever it is that they want to do.

00:54:19:10 - 00:54:37:13

Ben Hillman

Well, we could talk I feel like another hour or so about how paddles trying to solve some of these problems and Google and Apple are creating. But thanks so much for coming on. Christian, is there anything you know, should we send folks to your LinkedIn or Twitter? Is there anywhere, anything you want to plug at this point other than paddle?

00:54:37:15 - 00:55:07:21

Christian Owens

Yeah, I'm going to plug paddle. But no, I mean, I'm on Twitter. I'm a LinkedIn. Kind of feel free to follow me there. Or if you want to speak more about this or you're a developer and kind of you're trying to figure out how you navigate this whole situation of billing in the App Store and everything. I'm just Christian a of dot com if you want to reach out I'm more than happy to spend time with with anybody or kind of hop on a call or if you happen to be at the same place at the same time, kind of meet up and have a coffee and sort of hopefully help you navigate some of

00:55:07:21 - 00:55:08:18

Christian Owens

some of the stuff.