Thomas Kurian, general manager of cloud services at Google LLC, right, speaks as Alpna Doshi, chief information officer of Philips group, listens during the Google Cloud Next ’19 event in San Francisco, California, United States, Tuesday, April 9. 2019. The conference brings together industry experts to discuss the future of cloud computing.
Michael Court | Bloomberg | Getty Images
Google is reducing the amount of revenue it keeps when customers buy software from other vendors in its cloud marketplace, as major tech companies face increasing pressure to reduce their so-called usage rates.
The Google Cloud platform is reducing its percentage revenue share from 20% to 3%, according to a person familiar with the matter who asked not to be named in order to talk about internal policies.
This is the cloud group’s latest effort to become more competitive since Thomas Kurian joined as CEO in 2019 after a career at Oracle. Google, which follows Amazon Web Services and Microsoft Azure in cloud infrastructure, is trying to attract independent software companies to sell their products on Google’s cloud.
“Our goal is to provide partners with the best platform and the most competitive incentives in the industry,” a Google spokesperson told CNBC in an email. “We can confirm that a change to our Marketplace pricing structure is underway, and we’ll have more to share on this soon.”
In recent months, big tech companies have reduced the amount of money they keep on their platforms, whether for consumer applications or professional products. Some of the pressure is related to competition, while regulatory and legal concerns are also increasing.
In July, Google reduced the percentage of purchases through its Play Store, where consumers buy apps, to 15%, from 30% for the first million dollars in revenue a developer earns each year.
Also this year, Apple offered the same discount to app developers with less than $ 1 million in annual sales. In a lawsuit filed by Epic Games, a California judge ruled this month that Apple will no longer be allowed to ban developers from providing links or other communications that distract users from in-app purchases. from Apple.
Meanwhile, in August, Microsoft lowered the percentage of sales it keeps of game purchases on its Windows app store to 12 percent from 30 percent.
In Google’s cloud marketplace, customers can find products from leading software vendors including Confluent, Elastic, MongoDB, and Twilio. But it lacks products from companies like Accenture, Equifax, FactSet, Freshworks, Hewlett Packard Enterprise, and Xilinx, all of which are listed on the AWS Marketplace.
AWS, the market leader, charges a registration fee of around 5%, according to an estimate made earlier this year by UBS analysts. The AWS marketplace generates around $ 1 billion to $ 2 billion in annual revenue, they said. Amazon declined to comment.
Microsoft said in July it had cut its rate from 20% to 3%.
“Our fees are only intended to offset our operational costs of invoicing and invoicing customers, and operating the market,” said Charlotte Yarkoni, COO for Cloud and Artificial Intelligence at Microsoft, in a communicated. “We are not trying to take a share of the revenue from our partners. Our ecosystem is a channel for us to help partners sell their solutions, and not the other way around, unlike other cloud providers.”
Google has yet to turn its cloud platform into a profit engine for parent company Alphabet. 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 around 82% of its revenue and almost all of its profits.
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