Apple vs. Tencent & ByteDance: The Battle Over In-App Payments

Apple is reportedly turning up the heat on two of China's tech giants, Tencent Holdings Ltd. and ByteDance Ltd., demanding they shut down loopholes that allow in-app creators to bypass Apple's payment system. This move is a part of Apple's ongoing effort to enforce its policy that all digital goods sold through iOS apps must go through Apple's payment system, which takes a 30% commission.

The Conflict

According to a Bloomberg report on August 2, Apple has threatened to reject updates for WeChat, owned by Tencent, and Douyin, the Chinese counterpart of TikTok owned by ByteDance, unless these companies comply. Specifically, Apple wants Tencent and ByteDance to eliminate external payment links and other methods that circumvent its payment system.

Tencent has reportedly accepted Apple's demand to eliminate such links used by mini-game developers on WeChat. However, it has resisted disabling an in-game messaging feature crucial to the user experience, and it is also used for alternative payments. ByteDance, on the other hand, has already closed similar loopholes on Douyin.

Apple's Position

An Apple spokesperson emphasized that the company's guidelines clearly state that all digital goods sales must go through its system, and violations can lead to app submission rejections. Apple's strict control over its app ecosystem aims to ensure quality and security, a policy it applies globally.

The Stakes

The timing of these demands is critical. Apple faces significant challenges in the Chinese market, including a recent 6.5% decline in Greater China revenue for the June quarter. Moreover, Apple is navigating regulatory scrutiny worldwide, with the European Commission ruling that it must allow developers to direct users to external payment options.

A standoff with Tencent, a dominant player in Chinese internet content, could add another layer of conflict for Apple, which is already grappling with multiple regulatory and market pressures. This tension is evident in Apple's recent request to the Supreme People's Court in China to remove references to its "dominant position" from a favorable ruling, underscoring the company's sensitive status in the Chinese market.

The Broader Impact

Apple's aggressive stance in China is part of its broader strategy to maintain control over its lucrative app ecosystem. However, this could strain its relationships with major Chinese tech firms like Tencent and ByteDance. These companies have vast influence, with millions of users relying on WeChat and Douyin for various services, including in-app purchases and online entertainment.

Looking Forward

Apple's demand for compliance from Tencent and ByteDance highlights the ongoing struggle for control over digital payment systems within apps. As Apple enforces its payment policies, the impact on its relationships with key Chinese players and the broader market implications remain to be seen. The outcome of this standoff will likely shape the future dynamics between global tech giants and their operations in China.