Google Forces Developers to Use Wallet Following Apple’s Approach

Google’s (NASDAQ:GOOG) pressure tactics on app developers to adopt Google Wallet as the payment mode is evidence that the search giant’s much-hyped payment platform is struggling. ^[1] The worrying part for Google is that this move may directly hamper the growth of its Android app store, now called Google Play. Having said that, Apple (NASDAQ:AAPL) has always made payments on its own iOS platform mandatory since the inception of the App Store.

See our full analysis for Google’s stock

Emulating Apple May Backfire for Google

While Apple mandates payments on the App Store through its own platform, it must be noted that this is effectively the “Apple” way for most of its services i.e. maintaining exclusivity is generic to the company. Google, on the other hand, has always pushed Android as a flexible alternative, even allowing for modification of its OS source code to suit different hardware platforms. Consequently, its warning to developers to use Google Wallet (or be suspended from Google Play within 30 days) is sure to leave a bitter taste among the community members.

And its worse that Google is demanding a 30% share in all transactions, which is more than the share taken by other third-party platforms like PayPal. However, considering that Android is managing 1 billion app downloads a month, ^[2] it may provide some short-term respite to Google Wallet as it keeps battling newer payment options like Isis. ^[3]

We currently have a price estimate of near $627 for Google’s stock, which is roughly 3% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Google leans on developers to use payment service, Reuters, 9th March 2012 [↩]
2. Apple Ahead of Google with 25B App Downloads, Information Week, 5th March 2012 [↩]
3. Isis set to beat Google Wallet ahead of its release, Android and Me, 5th March 2012 [↩]