Apple Takes Risk By Telling Chinese Chat Apps to Disable 'Tip' Functions

Apple has told several Chinese social networking apps to disable their "tip" functions to comply with App Store rules, according to executives at WeChat and other companies.

The tip functions in Chinese messaging platforms are free to use and allow people to send authors and other content creators monetary tips through transfers to mobile wallet accounts. However, according to The Wall Street Journal, Apple has decided that tips are equivalent to in-app purchases – similar to buying games, music, and videos – therefore Apple is entitled to a 30 percent cut of every transaction.

wechat app 2

WeChat on iPhone

The move by Apple appears to be a way to eke out additional revenue from Chinese iPhone users as part of a broader effort to increase its market share in the country. According to research firm IDC, Apple's market share in China dropped from 16 percent in Q1 2015 to 9 percent in Q1 2017, while the iPhone has fallen to fourth place behind Chinese brands Oppo, Huawei, and Vivo.

On the other hand, Apple's App Store revenue in China overtook its U.S. App Store revenue in 2016 and became the biggest App Store market in the world. Making the tip function an in-app purchase in China's wildly popular chat apps would seem to be a sure-fire way to increase Apple's revenue. However, Apple's pressure on messaging platforms like WeChat is a risk and threatens to alienate huge Chinese companies.

Some social-networking apps have likened Apple's tactic to arm-twisting, according to The Wall Street Journal. Apple is said to have told chief executives at two companies that if they refuse to make the change, updated versions of their apps won't be made available and they could be kicked out of the App Store. "We don't charge anything as the platform, but Apple gets 30 percent for doing nothing," one of the executives reportedly fumed.

The annoyance stems from the way the tipping culture is viewed in China. Chinese app developers see tipping as fundamentally different from in-app purchases because users only tip voluntarily as a mark of appreciation when they consume content. But the biggest worry for Apple could be whether the Chinese government decides to intervene and side with the tippers.

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. MIIT says it isn’t involved. The People’s Bank of China, which regulates electronic payments, didn’t respond to a request for comment.

Apple has suffered at the hands of Chinese state regulators before. But Apple also risks frustrating China's biggest company Tencent Holdings Ltd, the developer of WeChat, which has 938 million active monthly users. The messaging service works almost like an operating system all of its own, boasting multiple mini-apps that allow users to pay bills, book hotels, browse media, and more, without ever having to leave the chat platform. The nature of the system itself could be a threat to Apple's app revenue, while WeChat is arguably more important to Chinese smartphone users than any individual phone brand – iPhone included.

WeChat is in talks with Apple to try to find a new solution to the tipping problem and come to an alternative agreement, according to people familiar with the matter.

Tags: China, WeChat

Top Rated Comments

NexusUser Avatar
55 months ago
Pretty sure Apple needs WeChat more than WeChat needs Apple...
Score: 63 Votes (Like | Disagree)
oneMadRssn Avatar
55 months ago
What about apps like PayPal or Venmo? When I tell Venmo or PayPal to take $50 out of my bank account, and then transfer it to my buddy for pizza or to a seller on ebay, isn't that akin to an IAP too in the same way these tips are?

I think Apple needs to find a clearer line to draw, instead of doing this on an unpredictable case by case basis. Even if that line means a few more transactions occur without Apple getting a cut, so be it. Clarity and predictability should be top priorities for the ecosystem.
Score: 36 Votes (Like | Disagree)
lysingur Avatar
55 months ago
This could turn out really badly for Apple is they go through with it. It might be just posturing but they aren't going to be viewed favourably in the eyes of the Chinese consumers with this move. User-to-user money transfer isn't in-app purchase and shouldn't be charged a cent by Apple. It's just that simple.
Score: 36 Votes (Like | Disagree)
BigDO Avatar
55 months ago
I really hope that Apple gets a smack on their greedy wrists for trying to exploit a facet of Chinese culture and turn it into a revenue stream. I am sure they will as the China doesn't seem to take their corporate bullying as readily as US and EU.
Score: 30 Votes (Like | Disagree)
jimbobb24 Avatar
55 months ago
Not sure how that is increasing market share by increasing prices and decreasing features. Thats not usually how it works.
Score: 25 Votes (Like | Disagree)
Number-Six Avatar
55 months ago
What's next, taking 30 percent from money transfers in bank apps?

Where does the greed end?
Score: 18 Votes (Like | Disagree)

Top Stories

iOS 14 on iPhone feature emergency

Apple Releases iOS and iPadOS 14.7.1 With Fix for Touch ID Apple Watch Bug

Monday July 26, 2021 9:48 am PDT by
Apple today released iOS and iPadOS 14.7.1, minor bug fix updates that come just a week after the release of iOS 14.7, software that introduced new Apple Card features and support for the MagSafe Battery Pack. The iOS and iPadOS 14.7.1 updates can be downloaded for free and the software is available on all eligible devices over-the-air in the Settings app. To access the new software, go to...
iPad mini pro feature 2

iPad Mini 6 to Feature 8.3-Inch Display With No Home Button and Narrower Bezels

Monday July 26, 2021 12:26 pm PDT by
The sixth-generation iPad mini that's in the works will have an 8.3-inch display, according to display analyst Ross Young. That will be larger than the current 7.9-inch display, with the larger size due to the removal of the Home button and a narrower bezel design. Rumors about the iPad mini 6 have been picking up in recent weeks ahead of its prospective launch this fall. Apple analyst...
iphone 12 pro gold

Report: iPhone 14 Pro Models to Feature Tough Titanium Alloy Chassis

Monday July 26, 2021 1:12 am PDT by
Next year's "iPhone 14" series is expected to feature high-end models with a new titanium alloy chassis design, claims a new investors report by JP Morgan Chase. According to the report, the use of titanium alloy will be one of the biggest changes to the case design in the 2022 iPhone series, and Foxconn will be the exclusive manufacturer of the titanium frames for the high-end models....
nothing ear 1 buds 1

Nothing 'Ear (1)' True Wireless Earbuds Launch to Take on AirPods Pro With ANC and Unusual Design for $99

Tuesday July 27, 2021 7:57 am PDT by
Nothing, a new brand from OnePlus founder Carl Pei, has today officially launched the "Ear (1)" true wireless earbuds after months of anticipation around the company's AirPods Pro rival. The Ear (1) features an in-ear design, Active Noise Cancelation, Bluetooth 5.2, IPX4 water resistance, and a charging case with Qi-compatible wireless charging and a USB-C port. Fast pairing is supported on...
apple mac business page

Apple Shares 11 Reasons Why Business Users Should Choose Macs

Monday July 26, 2021 11:35 am PDT by
Apple today updated its Apple at Work website with a new section dedicated to the Mac, which offers up 11 reasons why "Mac means business." On the webpage, Apple highlights the M1 chip as the number one reason why business users should choose a Mac, offering up an M1 overview [PDF] that explains the benefits of the M1 chip. The information isn't new, but it does provide a look at all of...
imac with accessories

Larger Redesigned High-End iMac Rumored to Launch Next Year

Monday July 26, 2021 3:45 am PDT by
Apple's larger redesigned iMac will arrive sometime in 2022 rather than later this year, according to the leaker known as "Dylandkt." On Twitter, Dylandkt claimed that Apple's "high end iMac" is not expected to release in the fourth quarter of 2021 alongside Apple's "M1X Macs" – a reference to Apple's redesigned MacBook Pro models – because "Apple simply does not want their devices to...
General iOS 14

iOS 14.7.1 and macOS Big Sur 11.5.1 Patch Security Vulnerability That May Have Been Actively Exploited

Monday July 26, 2021 11:55 am PDT by
Apple today released unexpected iOS 14.7.1 and iPadOS 14.7.1 updates to the public, and according to a newly released support document, the software addresses a serious security vulnerability that may have been exploited in the wild. Apple says that an application may have been able to execute arbitrary code with kernel privileges due to a memory corruption issue. "Apple is aware of a report ...
apple bitcoin hack

Is Apple Really Buying Bitcoin?

Monday July 26, 2021 3:07 am PDT by
A large number of websites and posts on social media are stoking rumors that Apple has purchased $2.5 billion worth of bitcoin in the company's first move into cryptocurrency, but is there any validity to the claims? Many people are citing the fact that Apple was looking for a Business Development Manager with experience in alternative payments, including cryptocurrency, earlier this year as ...
tesla red orange bg feature

Tesla CEO Elon Musk Takes Shots at Apple During Earnings Call

Monday July 26, 2021 4:53 pm PDT by
During a Tesla earnings call that took place today, Tesla CEO Elon Musk spent time sniping at Apple, reports CNBC. Musk criticized Apple's "walled garden" and made comments on the company's cobalt use. In a discussion about plans to allow Tesla competitors to use the Tesla electric vehicle charger network, Musk said that Tesla does not want to create a walled garden to "bludgeon" Tesla...
FaceID iMac REREREREMIX

Gurman: Face ID on the Mac Coming Within a 'Couple of Years'

Sunday July 25, 2021 7:09 am PDT by
Apple plans to bring Face ID to the Mac within the next "couple of years," respected Bloomberg journalist Mark Gurman said today in the latest edition of his Power On newsletter. In the newsletter, Gurman says that he believes Apple's ultimate goal is to shift all of its products to Face ID, including the lower-end iPhones such as the iPhone SE and the iPad Air, which feature Touch ID....