According to an interview by Dean Takahashi of Venture Beat with Google executives Bradley Horowitz and Punit Soni, Google will charge game developers 5% for micro-transactions, not 20% as reported by this expert. And, much lower than Facebook’s 30% cut.
This is great news for game developers launching on Google Games in the short term. And such a stupid move by Google after making all the right moves so far.
Why? Because once you start out at a low price, it’s very hard to get the number back up without making your partners angry. Just ask Facebook.
Facebook just forced all its developers onto its Facebook Credits platforms, asking for 30% of all revenues, whereas before it received zero dollars. The problem is that game developers had built their businesses on no revenue share, so that when Facebook started to charge 30%, it ate too much into many developers margins. So much so, many developers are grumbling that unless they are as big as Zynga (who is going public to get ever greater scale), they can’t make a profit on Facebook. Some say the end result of the 30% Facebook Credits cut is a 50% drop in total revenues.
Now Google is about to make the same mistake. According to the interview, this is a promotional rate and Google has the right to increase it later at any time. The thing is, Google could have gotten any game developer to migrate to Google at any rate up to 30% because game developers are dying to find a distribution partner aside from Facebook. Not that Facebook is a bad company to work with, but people don’t want to be dependent on one distribution channel.
Google could have launched at 20% and still be smelling like roses. They then could have offered 5% for exclusive games and had flexibility to drive down the price later if they needed traction to keep growing the service.
Now, they are launching at 5%, just a few points from zero. They hope to raise it in the future, but as anyone who has taken a business course or watched a hour of The Apprenticeknows, you can always drop the price, you can never raise it.
After making all the right moves with the Google Games product — with the separate game stream, diversified game titles, circles, and hangouts — they just made their first mistake. And one that could have been avoided if Google actually hired one MBA in their company instead of thousands of engineers.
Anyway, not to be sounding overly critical, but this is such a painful mistake to watch when they got all the hard stuff right.
The one other interesting piece of the interview is that Google is definitely thinking about cross-platform gaming in the future. As I mentioned just a few hours before, if Google can connect Google Games in its social network, Google+ with its Android mobile platform, this could really be an unbelievable business for them. Hopefully, by then, they will hire a MBA to run a spreadsheet for them instead of running everything through algorithms.