"Google’s changes likely will not have much of a financial impact to Apple if they adopted this." -- Evercore analyst Amit Daryanani
From a note to Evercore clients that landed on my desktop Tuesday:
ALL YOU NEED TO KNOW: The EU passed the Digital Markets Act two weeks ago, and while it will not go into effect until early next year, the focus has been will companies proactively act to offset some of the risks. Today, Google announced they have taken actions to be in compliance with the new rules around third party payment systems.
Google announced that non-gaming apps will now be able to include third party payment systems. The use of a third party system would result in a 3% discount on the 15% fee usually collected by Google.
Apple may choose to follow Google’s lead here, which would be a positive as Gaming accounts for ~65% of App Store revenue, so excluding them from third party payments would protect the majority of the revenue base. Even if gaming is eventually included, the 3% discount would not be material to Apple’s App Store sales, especially since it is limited just to the EU (no EU country in the top 5 App Store markets). It is unclear if this action will be enough to be in compliance with the new DMA rules, so it’s likely we will see substantial DMA related litigation over the next couple of years as both Apple and Google fight to protect their respective stores.
Net/net: We view these changes as a positive and far from a worst case scenario, but it remains to be seen if the EU courts will consider these actions to be sufficient for compliance with the DMA.
Maintains Outperform rating and $180 target.
My take: Google felt the heat more than Apple on this one.