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 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

(View all)
Avatar
40 months ago
Pretty sure Apple needs WeChat more than WeChat needs Apple...
Score: 63 Votes (Like | Disagree)
Avatar
40 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)
Avatar
40 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)
Avatar
40 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)
Avatar
40 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)
Avatar
40 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

Apple Doubles the Price of RAM Upgrade on Entry-Level 13-Inch MacBook Pro

Saturday May 30, 2020 4:00 pm PDT by
Apple today doubled the price for upgrading the RAM on the entry-level 13-inch MacBook Pro, with customers in the United States now being charged $200 to move from 8GB to 16GB compared to the previous $100 upgrade price. Similar increases are seen in other countries, such as moving from €125 to €250 in Germany and from £100 to £200 in the United Kingdom. Current pricing on RAM upgrade for ...

Tim Cook Addresses George Floyd's Death and Ensuing Protests and Riots as Apple Temporarily Closes Some U.S. Stores

Sunday May 31, 2020 8:04 pm PDT by
Amid unrest in numerous U.S. cities following last week's killing of George Floyd by police in Minneapolis, Apple CEO Tim Cook has shared an internal memo with employees (via Bloomberg) addressing the pain that many are feeling and urging others to commit "to creating a better, more just world for everyone." Cook also announced that Apple is making donations to several groups challenging...

Apple's First MacBook Pro With a Retina Display Will Become 'Obsolete' in 30 Days

Monday June 1, 2020 7:50 am PDT by
If you are still hanging on to a Mid 2012 model of the 15-inch MacBook Pro with a Retina display, and require a new battery or other repairs, be sure to book an appointment with a service provider as soon as possible. In an internal memo today, obtained by MacRumors, Apple has indicated that this particular MacBook Pro model will be marked as "obsolete" worldwide on June 30, 2020, just over...

Top Stories: macOS 10.15.5, New Powerbeats Pro Colors, iPhone 12 and 13 Rumors, and More

Saturday May 30, 2020 6:00 am PDT by
This week saw an interesting mix of news and rumors on the Apple front, led by the release of macOS 10.15.5, which brings a new battery health feature to newer Mac notebooks, while we also saw the official announcement of new colors for the Powerbeats Pro earphones. On the rumor front, we heard a few tidbits about not just this year's iPhone 12 but also next year's iPhone, while we saw...

8 Mac Tips and Tricks You Might Not Know

Friday May 29, 2020 12:36 pm PDT by
There are tons of hidden features and shortcuts for Macs that Apple has built into macOS over the years, ranging from shortcuts to keyboard commands to other little hacks to make Mac usage just a bit simpler. In our latest YouTube video, we highlighted several of these tips and tricks, and some of them might just be new to you. Subscribe to the MacRumors YouTube channel for more videos. Tr...

6.1-inch 'iPhone 12' Production to Begin in July Ahead of Other 2020 Models

Monday June 1, 2020 2:36 am PDT by
Volume production of Apple's forthcoming 6.1-inch "iPhone 12" models will start in July-August ahead of the rest of the company's flagship iPhone lineup this year, according to a new report by DigiTimes. Apple is widely rumored to be launching four new ‌iPhone‌ models in the usual September or October timeframe, although supply constraints and delays in production ramp-up could cause a...

Apple Releases iOS and iPadOS 13.5.1 With Fixes for Recent 'unc0ver' Jailbreak Vulnerability

Monday June 1, 2020 9:58 am PDT by
Apple today released iOS and iPadOS 13.5.1, minor updates that come a little over a week after the release of iOS and iPadOS 13.5, major updates that brought the Exposure Notification API, FaceTime changes, mask-related unlocking updates and more. The iOS and iPadOS 13.5.1 updates are available on all eligible devices over-the-air in the Settings app. To access the updates, go to Settings >...

Apple Introducing New Internal USB-C Diagnostic Tool

Sunday May 31, 2020 7:26 pm PDT by
Apple is introducing a new internal USB-C Diagnostic Tool as a successor to its existing Serial Number Reader, which can be used to both collect a device's serial number directly from its logic board and test power on a device itself. Image via Giulio Zompetti With only a Lightning version previously available, images have surfaced of a new USB-C Diagnostic Tool (UDT) that appears to be known ...

Powerbeats Pro Debut in Four New Colors: Spring Yellow, Cloud Pink, Lava Red, and Glacier Blue

Friday May 29, 2020 10:00 am PDT by
Following a couple of leaks in recent weeks, Beats today is officially announcing four new colors for its Powerbeats Pro wireless earphones: Spring Yellow, Cloud Pink, Lava Red, and Glacier Blue. The new earphones will go on sale June 9 and sell for the same $249.95 price as the existing color options. Aside from the colors, the new Powerbeats Pro models are otherwise identical to the...

Apple Releases macOS Catalina 10.15.5 Supplemental Update With Security Fix

Monday June 1, 2020 10:56 am PDT by
Apple today released a supplemental update for macOS Catalina 10.15.5, the fifth update to the macOS Catalina operating system that was released in October 2019. The supplemental update comes a week after the release of the macOS Catalina 10.15.5 update. ‌macOS Catalina‌ 10.15.5 is a free update that can be downloaded from the Mac App Store using the Update feature in the System...