Technology

Google cuts its income share within the cloud market from 20% to three%

google-cuts-its-income-share-within-the-cloud-market-from-20-to-three

Thomas Kurian, Chief Executive Officer of Cloud Services at Google LLC, right, speaks while Alpna Doshi, Group Chief Information Officer of Philips, during the Google Cloud Next ’19 event in San Francisco, Calif., On Tuesday, Jan. April, listen. 2019. The conference brings together industry experts to discuss the future of cloud computing.

Michael Kurz | Bloomberg | Getty Images

Google is reducing the revenue it retains when customers buy third-party software on its cloud marketplace as technology leaders are under increasing pressure to lower their so-called take rates.

Google Cloud Platform is reducing its revenue percentage from 20% to 3%, according to one person familiar with the matter who refused to be named to discuss internal policies.

This is the cloud group’s most recent attempt to become more competitive since Thomas Kurian joined Oracle as CEO in 2019 after a career at Oracle. Google, which is lagging Amazon Web Services and Microsoft Azure in the cloud infrastructure, is trying to attract independent software vendors to sell their products in Google’s cloud.

“Our goal is to provide partners with the best platform and the most competitive incentives in the industry,” a Google spokesman told CNBC in an email. “We can confirm that a change to our Marketplace fee structure is in the works and we will be reporting more on this soon.”

Big tech companies have been reducing the amount of money they keep on their platforms in the past few months, be it for consumer apps or business products. Some of the pressure has to do with competition, but regulatory and legal concerns are also growing.

In July, Google reduced the percentage it withheld from purchases through its Play Store where consumers buy apps from 30% to 15% for the first $ 1 million in revenue a developer makes each year.

Again this year, Apple gave app developers with annual sales less than $ 1 million the same reduction. In a lawsuit filed by Epic Games, a California judge ruled this month that Apple can no longer prohibit developers from posting links or other communications that dissuade users from Apple in-app purchases.

Meanwhile, Microsoft cut the percentage of sales it keeps from game purchases from its Windows app store from 30% to 12% in August.

On Google’s cloud marketplace, customers can find products from well-known software companies, including Confluent, Elastic, MongoDB and Twilio. However, it lacks products from companies like Accenture, Equifax, FactSet, Freshworks, Hewlett Packard Enterprise, and Xilinx, all of which are listed on the AWS Marketplace.

According to an estimate by analysts at UBS, AWS, the market leader, charges a listing fee of around 5% at the beginning of the year. The AWS marketplace has approximately $ 1 billion to $ 2 billion in annual revenue, they said. Amazon declined to comment.

Microsoft announced in July that it had lowered the interest rate from 20% to 3%.

“Our fees are only intended to offset our operating costs for invoicing and billing customers and operating the marketplace,” said Charlotte Yarkoni, Microsoft’s chief operating officer for cloud and artificial intelligence, in a statement. “We’re not trying to take over part of our partners’ sales. Our ecosystem is a channel for us to help partners sell their solutions, not the other way around, unlike other cloud providers. “

Google doesn’t have to turn its cloud platform into a profit engine for parent company Alphabet just yet. In the second quarter, Google reported an operating loss of $ 591 million from its cloud segment on revenue of $ 4.6 billion. Alphabet still relies on advertising for about 82% of sales and essentially all of its profits.

SEE: What the reorganization of Google Cloud means for the company

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