Google to start charging phone makers for access to European app store
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Google to start charging phone makers for access to European app store

Silicon Valley giant Alphabet, the parent company of Google, will start charging phone makers for access to its app store in the European Union. The move comes in response to an antitrust order in the bloc that was accompanied by a record-breaking 4.3 billion euro fine. From the end of this month, all phones in the region that come with pre-installed apps including the Play app store, Gmail, YouTube, and Google Maps, will come with a licensing fee. The manufacturers can then choose to add Google search and the Chrome browser for free, if they wish – but they’re not obliged to do so.

Alphabet’s share price is up by 7% so far this year

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Source: Yahoo Finance

The Google Play store is a fundamental piece of the Android operating system’s architecture: it’s a gateway to the huge ecosystem that Google has built for users of its (until now) free service. In order to get access to it previously, phone makers had to pre-install Google’s Search and Chrome apps – effectively putting their online ad business in front of hundreds of millions of people. The EU ruled this huge distribution anti-competitive, and set a deadline (next week) by which Google had to fix it.

Despite this concession, analysts aren’t fretting over Google’s continued dominance in the EU. Licensing fees are likely to be low, and Google may offer manufacturers some kind of revenue-share agreement to make the pill even easier to swallow. Pivotal Research analyst Brian Wieser summed up many observers’ thoughts when he commented earlier this week:

“Changing the nature of the arrangement with handset makers might make some difference, but at the end of the day, Google is still the best provider out there. Maybe one day some upstart in search will find it had a way into the market because of this, but Google will also continue to refine its products.’’

Disclosure
Dominion holds Alphabet, the parent company of Google, in its Global Trends Managed Fund.


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