Google Restricts South Korea’s Leading Messaging App Over Payments Dispute

July 7, 2022
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Google has introduced a ban on new updates to the KakaoTalk messaging app in South Korea, following an alleged violation of its in-app payments rules.

Google has introduced a ban on new updates to the KakaoTalk messaging app in South Korea, following an alleged violation of its in-app payments rules.

KakaoTalk, the most popular messaging app in South Korea, has instructed its users to download the latest version of the app directly from a Kakao Corp website to skirt the ban.

According to local media reports, the dispute stems from KakaoTalk’s use of an external link in its Android app that takes users to a direct payment option for Emoticon Plus, a subscription-based service for animated emojis.

At present, users who pay for Emoticon Plus via the external link will receive a discount of more than 30 percent compared with paying within the app.

While the external link charges 3,900 won ($2.98) per month, those who pay via the Android app will be charged 5,700 won ($4.36).

Previously, the subscription price if paying through the Android app was 4,900 won ($3.75) per month, but according to a screenshot shared by local media, KakaoTalk said it had to raise the price to offset Google’s commission fees on in-app purchases.

However, since December last year, Google has offered a commission rate reduction of 4 percentage points in South Korea for in-app purchases using an alternative billing system.

Based on Google’s current service fees, this would amount to an 11 percent commission on each subscription payment for Emoticon Plus.

In January this year, Google introduced a two-tier system of commission rates: one for single in-app purchases and one for automatically renewing subscription payments.

Single in-app purchases are charged 15 percent for the first $1m of earnings each year and 30 percent for earnings in excess of $1m each year, while all automatically renewing subscription payments are charged 15 percent.

In a statement provided to local media, KakaoTalk said it will continue to offer Emoticon Plus at the two different rates — one within the Android app and one via the external link — despite Google’s block on updates.

VIXIO contacted Google for comment, but had not received a reply at the time of publication.

South Korea takes on bigtech

Google’s response to KakaoTalk will be watched closely by observers both foreign and domestic, as South Korea offers itself as a test case in standing up to Google’s in-app payments rules, which some app developers have described as monopolistic.

The country’s dispute with Google dates back to August last year, when it passed an amendment to the Telecommunications Business Act mandating that all apps must be allowed to offer an alternative in-app payment processing option.

This law — the first of its kind in the world — removed the likes of Google and Apple’s ability to exclude rival payment processors and privilege their own.

In November last year, Google issued a statement saying that it would comply with the new law, and would open up Android apps to alternative billing systems offered alongside Google Play.

However, Google still maintains its own policy on how such billing alternatives can be displayed, and KakaoTalk’s use of an external link appears a violation of this policy.

As reported by VIXIO on Wednesday (June 6), Apple is facing similar teething pains in its efforts to comply with South Korea’s new payments regulation, which local media has dubbed the “Google power abuse prevention law”.

Apple is likewise offering a reduced commission rate of 4 percentage points to iOS apps that process purchases via third-party payment services.

Apples looks on

So far, the latest version of KakaoTalk (v9.8.5) is still available via the Apple App Store and the SK Telecom-operated One Store.

This could suggest that KakaoTalk’s payment practices on its iOS app have not offered cause for complaint. Nevertheless, Apple is likely to closely monitor the situation as Google pursues the test case against the messaging app while it observes from a distance.

According to data compiled by Statcounter GlobalStats, Android currently accounts for a 72 percent share of the mobile operating system market in South Korea, while iOS accounts for a 27 percent share.

With an estimated 47m monthly active users from a population of 51m, it is also fair to say that KakaoTalk is a formidable opponent of any company in South Korea, including bigtech.

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