Google has long dominated the Android app distribution market through its Google Play Store, which comes preinstalled on most Android devices. However, new information revealed during the high-profile antitrust lawsuit between Epic Games and Google has shed light on just how Google maintains its grip on Android app distribution – to the tune of $8 billion paid to Samsung over 4 years.
The revelations came during testimony by James Kolotouros, Vice President for Partnerships at Google on November 14th, 2023. Kolotouros revealed that Google and Samsung had signed an agreement in which Google would pay the South Korean electronics giant up to $8 billion over 4 years to ensure that Google’s apps – Search, Play Store, Maps and others – would be preinstalled and set as defaults on Samsung Android devices.
This deal, codenamed Project Banyan by Google, was initiated to discourage Samsung from promoting rival apps and its own app store. Samsung’s smartphones and tablets account for more than half of all revenue from the Google Play Store. Hence, Google feared that if Samsung started preinstalling and promoting alternatives like the Samsung Galaxy Store, Google could potentially lose billions in Play Store revenues.
The Backstory Behind the Deal With Samsung
Google’s monopoly over Android has been the subject of multiple antitrust lawsuits. The company licenses Android for free to smartphone makers but with some caveats. Google requires phone makers to preinstall its suite of apps if they wish to access Google Play Services, which enables key functionalities like push notifications and location services.
Google also prohibits phone makers from promoting alternative app stores over the Play Store. Epic alleges that such tactics help Google maintain an illegal monopoly over Android app distribution. Google counters by saying such agreements are necessary to compete with Apple’s locked down iOS ecosystem.
Before Project Banyan, Samsung posed the biggest threat to Google’s Play Store revenues. The electronics giant has attempted to build its apps and services ecosystem over the years, including the Samsung Galaxy Store.
How Project Banyan Strengthened Google’s Hold Over Android
In 2019, Google tried a new tactic called Project Banyan to cement Play Store’s position on Samsung devices. It proposed paying Samsung $200 million over 4 years to feature the Galaxy Store within the Play Store rather than preinstalled on devices. This would limit Galaxy Store’s reach while benefiting from Play Store’s dominance.
However, the companies eventually compromised on a deal totaling a whopping $8 billion over 4 years. The terms included preinstalling Google’s apps, setting them as defaults, and prominent placement of Play Store on Samsung devices. In return, Samsung would get a revenue share from searches and Play Store purchases generated on its devices.
Deal With Samsung Extends Its Monopoly
This deal clearly illustrates the lengths Google goes to block competition in Android app distribution. The $8 billion paid to Samsung cements Play Store’s position and edges out rivals. Preinstalling Google apps also advantages them over competitors by instinctively training users to use them by default.
Google’s agreements make it exceedingly difficult for newer app stores to gain traction. Even large companies like Amazon and Epic have struggled. Smaller app stores don’t stand a chance, allowing Google to leverage Play Store’s dominance to collect up to 30% commissions from all transactions.
Google also uses these deals to influence Samsung against improving its own apps. Development of Bixby, Galaxy Store, and Samsung Messages has notably slowed down. This directly benefits Google by reducing competition.
The Costs of Monopoly
Google’s aggressive tactics to block competition in app distribution harms innovation and consumer choice. With limited competition, Google has no incentive to improve Play Store policies. Google has faced backlash for its high commissions and arbitrary policy enforcement.
Developers also suffer from the status quo. Rival stores could potentially charge lower commissions and offer developers greater flexibility. But Google’s contracts suppress such competition through its sheer market power over Android.
Consumers too lose out from limited choice. Innovative new app stores with different models can’t gain ground. Exciting Samsung apps that could differentiate its devices are deprioritized. Ultimately, everyone suffers under monopolies except the monopolists themselves.
The Outcome of This Lawsuit is Crucial
Google’s deal with Samsung provides invaluable insights into how the tech giant maintains its stranglehold over Android apps. The outcome of Epic’s lawsuit against Google will have huge ramifications for the future of app distribution on the world’s most popular mobile operating system.
If Google wins, its playbook of aggressive deals and tactics will continue unabated. But if Epic succeeds, we may finally see a more open Android ecosystem. The era of Google Play’s unquestioned dominance will end. Consumers, developers and even phone makers will reap the benefits of innovation fueled by genuine competition.
