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
66 months ago
Pretty sure Apple needs WeChat more than WeChat needs Apple...
Score: 63 Votes (Like | Disagree)
oneMadRssn Avatar
66 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
66 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
66 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
66 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
66 months ago
What's next, taking 30 percent from money transfers in bank apps?

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

Popular Stories

apple ar headset concept 1

Apple's Headset Said to Feature 14 Cameras Enabling Lifelike Avatars, Jony Ive Has Remained Involved With Design

Friday May 20, 2022 6:50 am PDT by
Earlier this week, The Information's Wayne Ma outlined struggles that Apple has faced during the development of its long-rumored AR/VR headset. Now, in a follow-up report, he has shared several additional details about the wearable device. Apple headset render created by Ian Zelbo based on The Information reporting For starters, one of the headset's marquee features is said to be lifelike...
iPhone 14 Purple Lineup Feature

Will the iPhone 14 Be a Disappointment?

Saturday May 21, 2022 9:00 am PDT by
With around four months to go before Apple is expected to unveil the iPhone 14 lineup, the overwhelming majority of rumors related to the new devices so far have focused on the iPhone 14 Pro, rather than the standard iPhone 14 – leading to questions about how different the iPhone 14 will actually be from its predecessor, the iPhone 13. The iPhone 14 Pro and iPhone 14 Pro Max are expected...
sony headphones 1

Sony's New WH-1000XM5 Headphones vs. Apple's AirPods Max

Friday May 20, 2022 12:18 pm PDT by
Sony this week came out with an updated version of its popular over-ear noise canceling headphones, so we picked up a pair to compare them to the AirPods Max to see which headphones are better and whether it's worth buying the $400 WH-1000XM5 from Sony over Apple's $549 AirPods Max. Subscribe to the MacRumors YouTube channel for more videos. First of all, the AirPods Max win out when it comes ...
studio display 3

Apple's Rumored 27-Inch Mini-LED Display Now Said to Launch in October

Friday May 20, 2022 8:07 am PDT by
Apple now plans to release a new 27-inch display with mini-LED backlighting in October due to the Shanghai lockdown, which has resulted in production of the display being delayed, according to display industry consultant Ross Young. In a tweet, Young said Apple is in the process of moving production of the display from Quanta Computer to a different supplier and/or location, resulting in a...
HomePodandMini feature green

Kuo: Apple to Release New HomePod in Late 2022 or Early 2023

Friday May 20, 2022 8:55 am PDT by
Apple is working on an updated version of the HomePod that could come in the fourth quarter of 2022 or the first quarter of 2023, according to Apple analyst Ming-Chi Kuo. Kuo says that there "may not be much innovation in hardware design" for the new HomePod, and there is no word on what size the device will be and if it will be a HomePod mini successor or a larger speaker. Apple would ...
airtag purple

Best Apple Deals of the Week: Save on AirTag, AirPods 3, and iPads

Friday May 20, 2022 8:01 am PDT by
Solid markdowns on the AirTag, AirPods 3, and a few iPad models were introduced this week, and below you'll find all of the best deals of the past few days that are still available to purchase. AirTag Note: MacRumors is an affiliate partner with some of these vendors. When you click a link and make a purchase, we may receive a small payment, which helps us keep the site running. What's the...