Zhongyou Securities has released a research report indicating that Alphabet (GOOGL.US) has announced significant changes to its Google Play Store. These changes include opening up to third-party payment systems and app stores, while reducing the service fee commission from 30% to 20% or lower. This adjustment is seen as highly favorable for game developers targeting international markets. Mid-core and hardcore mobile games that rely on in-app purchase revenue will benefit from reduced commission pressure, potentially leading to improved profit margins. Furthermore, the introduction of third-party payment systems enhances operational autonomy for developers, while the compliant integration of third-party stores is expected to lower installation barriers for users, potentially driving a revaluation of platforms like TapTap. The main points from Zhongyou Securities are as follows:
On March 4th local time, Alphabet announced major reforms for the Google Play Store. Firstly, it will open up to third-party payments and third-party app stores. The commission structure will be split from a fixed rate into a "settlement fee + service fee." Using third-party payment avenues exempts developers from a 5% fixed settlement fee. Secondly, the service fee commission will be reduced from 30% to 20% or lower. Specifically, the service fee for new user installations involving IAP drops to 20%, decreases to 15% for those joining an upgrade program, and falls to 10% for recurring subscriptions. An additional 5% settlement fee applies if Google's official payment system is used.
High-quality game developers expanding overseas are poised to gain significant advantages, with potential for both enhanced profit margins and greater operational autonomy. Thanks to stable performance of mature products and successful new game launches, revenue from Chinese self-developed games in overseas markets has maintained steady growth. According to the Game Publishing Committee, overseas revenue for Chinese self-developed games reached $20.455 billion in 2025, exceeding one hundred billion yuan for the sixth consecutive year. The reduction in Google's commission rates is expected to bring the following changes for overseas game developers:
1. Reduced IAP commission pressure is expected to boost developer profit margins, potentially invigorating the game supply market. Under the traditional Google Play model, a significant portion of IAP revenue was subject to approximately 30% channel fees. After the new policy takes effect, the standard IAP service fee drops to 20% or lower. Consequently, overseas developers of mid-core and hardcore mobile games (such as SLG, RPG, card games) that depend on IAP income will benefit substantially. For example, Shengqu Games, with its title "Whiteout Survival" surpassing 100 million global downloads and topping the Chinese mobile game overseas revenue chart for over ten consecutive months, stands to see significant profit conversion from this high-grossing hardcore game, potentially fueling further game upgrades and new product development.
2. The upgraded payment system allows developers to utilize official website top-ups or third-party payment channels. This not only increases operational autonomy but also enables further cost reduction by bypassing Google's payment ecosystem.
The introduction of Google's "Registered App Store" program, permitting compliant third-party stores on the Android system, means these platforms no longer require complex "sideloading" for installation. This significantly lowers the barrier for user installation, potentially leading to a period of user growth. For third-party game platforms, this could enhance their bargaining power and competitiveness, allowing them to leverage differentiated advantages. For instance, XD Inc's TapTap, which operates without shared operation fees, may attract more developers, enriching community content and strengthening user appeal.
Investment recommendation: It is advised to monitor companies with a high proportion of overseas game revenue, such as Shengqu Games, Giant Network, Kingnet Network, Sinosoft, 37 Interactive Entertainment, Glacier Network, and Perfect World. Also noteworthy are companies with third-party game platforms, like XD Inc, Tencent Holdings, and NetEase.
Risk warnings include potential delays in the implementation of Google's policy, increased industry competition if competitors like Apple follow suit, and risks associated with the overseas expansion of games not meeting expectations.
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