'Taxing' online payments may put U.S. technology giant in tough spot
Apple Inc may have made millions of fans around the world with its flashy, innovative devices, at least in the early years, but one recent move from the U.S. technology giant has drawn strong criticism in China, a crucial market where the company has been struggling to uphold its once-thriving business.
Apple recently added a new policy on its App Store Review Guidelines that classifies online tips, which are peer-to-peer payments transferred on social platforms like WeChat, as "in-store purchases." Under the firm's policy, those transactions would be subject to a 30 percent commission.
The move ended ambiguity surrounding Apple's policy on the popular function that many Chinese consumers use to "tip" original content they like, including articles, videos and live broadcasts, but it also irked many users and content providers.
Some widely circulated articles online Monday called the commission an "Apple tax" or a "road toll." Many Chinese netizens did not hold back on expressing their anger over the policy, which many said is unreasonable, and some even threatened to boycott Apple's iPhones.
"Apple has gone crazy trying to earn Chinese people's money. For Chinese people today, we can easily switch an iPhone for another brand, but to not use WeChat? Sorry, that's impossible," one netizen commented on an article on guancha.com on Monday.
"I'm filled with disgust" by Apple, another netizen who claimed to be an Android user wrote on ifeng.com.
Many argued that an online "tip" is just like a tip in a restaurant - a payment for goods and services they enjoyed - and for Apple to take a cut is wrong.
"Tips are gifts that users give to content providers; they are not something app developers sell for profits," Luo Yonghao, CEO of Chinese smartphone maker Smartisan Technology, was quoted by Beijing Business Today as saying on Monday. He called Apple "thuggish" and said that it "can't distinguish black from white" and such moves could lead to boycotts.
Apple's media relations representatives in China could not be reached for comment as of press time on Monday.
Some online content providers also expressed frustration with Apple's move. A Beijing-based content provider who would only give her surname as Tu said that her blog hasn't received any tips since WeChat stopped allowing iPhone users to use the tipping function in mid-April.
"Without tips, we don't have any motivation because we feel our work hasn't been recognized and appreciated," Tu told the Global Times on Monday. She said that such a move could hurt the quality of original content online.
WeChat, which has more than 800 million users mostly in China, closed the tipping function for iPhone users on April 19, after prolonged discussions with Apple.
A survey released in April by the China Academy of Information and Communications Technology (CAICT) found that 10.7 percent of WeChat users had used the tipping function. Among those, 11.2 percent spent 50 yuan (.4) on average each month on tips.
The social media behemoth had not responded to Apple's new policy as of press time.
In a report in April, the CAICT also found that tips are very helpful to content providers when it comes to quality and intellectual property protection. According to the survey, 47.3 percent of content providers said that the function protected intellectual property and improved quality.
Apple's move could mean losses not only for Chinese online content providers but also for the company's business in the country, where it is dealing with declines in sales and revenues, said Liu Dingding, a Beijing-based industry expert.
"As evidenced by angry comments online these days, the move certainly irritated many people in China, and that's certainly not in Apple's interests," Liu told the Global Times on Monday.
Apple sales in China fell 14 percent year-on-year to .7 billion in the company's fiscal second quarter ended on April 1. Compared with the previous quarter, Apple's revenue in China dropped 34 percent.
Liu said that the move has put Apple in a tough position with Chinese social media sites such as WeChat and Weibo, Chinese answer to Twitter.
Given the popularity of these social media sites in Chinese citizens' daily lives, "Apple will definitely lose if Chinese consumers are forced to choose," Liu said.