Trade wars on smartphones, applications as part of geopolitics


More recently, the geopolitical struggle was unfolding exclusively in physical space. For example, Spain colonized the New World, and the queen of the seas, England was forced to legalize piracy in order to bite off the wealth supplied from the ends of the world. But in the light of existing laws, piracy was a crime that was condemned throughout the enlightened world, so the name had to be changed – this is how corsairs, privateers, and privateers appeared. The same word in different countries denoted legalized piracy. It seems that in Spain, as the object of attacks, its own term for corsairs did not appear, they borrowed other people’s words.

In those days, in order to take away something alien or damage the other side, it was necessary to bear certain costs: equip ships, go to sea, train the crew. In our world, everything has become much simpler and more effective, since it is asymmetrical. America owns most of the IT resources, and this was a deliberate policy in the 60s of the last century. These are computers, operating systems, including for mobile devices, programming languages, literally everything related to computer technology. For the first time in recent history, China has challenged US dominance in this area, Huawei has become a telecommunications leader, while betting on 5G. The task of the United States was to prevent this at any cost, so a trade war with China began, affecting not only telecom, but literally all aspects of trade – from threads and screws to food.

China initially turned out to be smarter than most countries in the world, as it closed the domestic market for American IT giants. There are no Google services in China, there are dozens of local app stores on smartphones, but not the Play Store. The perception of Android without key Google services has always been amazing (was it possible?), As if it were a different quality of the system. But most importantly, by closing the market from the strongest player that would dominate this segment, China has achieved the emergence of alternative options – this is a huge market where competition is extremely high. Outside of China, nothing of the kind is observed, because despite the fact that alternative app stores are not prohibited in Android, they, in fact, are not needed by anyone, people are used to the offer from Google. Countless attempts to create an alternative to the proposal from Google have always turned out to be a failure, the same Yandex was unable to create a more or less digestible app store and abandoned this business. Because it is expensive, time consuming and huge marketing investments are needed, the platform owner is in an advantageous position here. I do not see anything wrong with this, since Google has created a system and therefore has advantages on it.

Exactly the same story with Apple, their system and their rules of the game, unlike Android, you cannot install any applications bypassing the App Store, you simply have no alternatives (the option with Cydia cannot be seriously considered). This means that Apple carefully controls what exactly appears in the app store and how much money the company makes from it. This causes serious indignation of developers in the last year, since the competition has increased, and no one wants to pay 30% to someone else’s uncle for a great life. In Europe, the regulator is investigating Apple’s actions, a crusade has begun with several companies, such as Spotify.

Pavel Durov wrote a good text about how the monopoly of Apple and Google deprives developers of money, and users are tied to specific stores. The text is interesting, although each side has its own truth. You can read it here.

I like this text because it shows the mood in the industry, the current status quo does not suit everyone. Europe attacks the US by imposing taxes on IT companies (a de facto tax on Google), America responds with sanctions on wine and cheeses. The knot of contradictions that have accumulated becomes very tight, and it is possible that no one will untangle it. Applications have become a continuation of the geopolitical claims of countries, it is also a vulnerability for those who stake on them. And not necessarily here we are talking about America, the same China and Chinese companies are vulnerable.

Let us recall the recent border conflict between India and China, in which two dozen Indian servicemen were killed, China’s losses were not reported, but they are clearly not less. Five hundred people participated in the mass brawl, officers banned the use of firearms to avoid more casualties. The previous conflict of this kind happened in 1967, it consisted of two military clashes.

Do you know what is the difference between today’s world? India has dealt an economic blow to Chinese companies, closing its home market to app makers. The list of banned applications includes 59 applications, the most famous is the social network TikTok.

Trade wars on smartphones, applications as part of geopolitics

The official reason was massive complaints to the Ministry of Information Technology of India (just in time!), In particular, officials learned that applications are used to steal and transfer data outside India, and companies “are engaged in activities that damage the sovereignty and integrity of the country, defense, security state and public order “.

Do you think this is a lightweight response to the deaths of military personnel? Let’s take a look at the losses of just TikTok from ByteDance. India for the application is the second market in the world, this social network is installed on every third smartphone in this country. TikTok’s India office has 2000 employees. The planned revenue of the company in 2020 is about $ 2 billion. The total loss of ByteDance due to the application ban in India could reach three billion dollars. Direct losses to Chinese companies in 2020 due to the ban are estimated at at least $ 6 billion. Do you still feel like apps are bullshit that costs little money?

Please note that when buying applications from Chinese companies, Indian users pay them indirectly, this is money that is sent to California first (Google or Apple, it does not matter that much). That is, America gets its 30% by default wherever possible. The actions of Indian officials are hitting not only China, but also the United States, and the trickle of money begins to shrink.

In the next few years, we will see many stories similar to India’s actions: application bans, an attempt to bring payments to America to a local level and impose taxes on them. States are trying to work out a scheme whereby American companies cannot receive money from their citizens the way they do today. And it is impossible to predict where the development of this market will go, there are too many different variables.

The US trade war against China and attempts to stop Huawei’s development have already led the company to develop its own App Gallery app store for its devices. Due to smartphones that are in use, Huawei has serious chances to create an alternative to the Play Store, the monthly audience already exceeds 400 million people. It is clear that these are mainly Chinese users, but the dimensions are still amazing.

In order to attract developers, Huawei decided to give them 100% of all internal payments, waived the commission for the first year (with the exception of games). In the second year, developers will receive 90% of payments. For those who specialize in games, this is 85% in the first and second years, which is still noticeably better than the conditions in other app stores.

Trade wars on smartphones, applications as part of geopoliticsTrade wars on smartphones, applications as part of geopolitics

Life has forced Huawei to create its own alternative to the Play Store, and this is an interesting experience, as it can encourage the same Samsung to actively develop its own store, which the company has and brings in revenues. We can end up in a situation where every prominent manufacturer will create their own offer, which from the user’s point of view is not too bad if key applications are in stock.

Our world has become a very turbulent place, the number of disagreements between countries is growing, even the closest allies cannot agree on the little things, since their shirt is closer to the body. As a result, we see fundamental changes in approaches, and they will increase every day. Including in the field of applications, this is a point of vulnerability for large countries, and a terrible headache for platform holders. Do you think India has banned Chinese apps? She issued a warning to Apple and Google that they must stop distributing these applications in their stores. There are rumors that in the initial version they even wanted to oblige to remove applications from users’ smartphones (Google and Apple have such opportunities), but then they decided to achieve their goal in stages. For platform owners, removing the same TikTok means losing a noticeable share of their income, and this is a shot in the foot. But this is already politics, the economy fades into the background.

Please note that the crusade against TikTok began in the United States, the reasons are exactly the same – the security of the application, which allegedly steals user data and transfers it to China. When Facebook does this and collects a huge amount of data on the user’s device, no one in America cares. After all, this is “our” application and it is possible for him. But as soon as someone tries to do something like that, a sharp reaction ensues.

The bad is quickly adopted by officials of different countries, so that the developed mechanism of prohibitions will quickly spread across the planet. And for Apple / Google, this means an increase in the overhead of managing their stores, it will be necessary to carefully monitor what can and cannot be distributed in a particular country.

I would be interested to hear what you think about applications and how they are embedded in geopolitics, how much they affect the mindset or income of companies.

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