Last week, Google and Match reached a settlement in the app store antitrust case where Match had sought the right to offer its users an alternative to Google Billing in an effort to avoid Google’s Play Store commissions on in-app purchases. As a part of the agreement, Match said it would implement Google’s new User Choice billing option, which allows app developers to use their own payment systems for a 4% discount (i.e., instead of 15% or 30%, as is standard, developers pay 11% or 26%, respectively.) But following Match’s Q3 earnings, it’s becoming clear that a billing change isn’t the only reason the dating app maker agreed to settle. It appears the terms of the deal, while confidential, may have been of great benefit to Match from a financial perspective — totaling more than $300 million, in fact.
The adoption of User Choice Billing on its own is not really a win for an app developer because a 4% reduction in fees is often not enough to offset the cost of the fees associated with running your own payment processing, where fees could range between 3% to 6%. In other words, User Choice billing is not always a cheaper option than Google Play Billing and it sometimes costs even more. (In fact, it’s suspected that Google may have negotiated a special deal with Spotify, an early adopter of User Choice Billing, as it’s been asking to seal portions of an exhibit that would detail its Spotify deal in the ongoing Epic-Google antitrust lawsuit.)
So what would have prompted Match to settle? Money, it seems. And the answers as to how much may lie in Match CFO Gary Swidler’s statements to investors on Match’s Q3 earnings call with investors, where the deal was discussed.
He highlighted that Google had been seeking damages going back to October 2021, following a change Google implemented in its billing policies. It wanted Match to escrow $40 million to account for the unpaid commissions (or Play Store service fees) that the dating app maker owed for the payments it processed outside Google Play while the lawsuit was underway.
But more recently, Google had pushed Match to put more money in escrow, saying that the original figure of $40 million was no longer enough. It had realized that Match disclosed in its Q1 2022 earnings that the incremental cost to adopt Google Play Billing was $6 million per month. If Google wanted to collect the “correct” amount of lost service fees from October 2021 through the end of this year, December 2023, at a rate of $6 million per month, then that would total $162 million.
As Swidler noted on the recent Q3 earnings call, “…as part of the settlement,…we basically agreed that we won’t owe any amounts prior to the end of this year, and so what that means is everything that we’ve been processing on credit cards for the last two-plus years there’s no incremental fees owed.”
That means that not only does Match get to keep the $40 million it had put in escrow, it also doesn’t have to pay the “real” total of missed service fees to Google, which would have been $162 million (this would include the existing $40 million in escrow). That’s a significant win for Match.
But that’s not the only financial component of the settlement. As Swidler also told investors, there was a “second piece of value” to the deal with Google, where he referred to the company’s broader partnership with the tech giant which includes distribution, marketing, and cloud services.
Said Swidler, “…and as a result of the new broad partnership, we’re going to get benefits such that we essentially offset the impact of the implementation of User Choice Billing, and so we view that as largely neutral in the ’24, ’25, and ’26 period.”
Breaking this down further, that means over a 36-month period, the cost of implementing User Choice Billing — meaning paying Google the required service fees and paying its own payment processing fees — is going to be “offset” by whatever Google is giving Match.
We don’t know what Match’s payment processing fees would be for the payments it handles itself. Perhaps it’s saving a little money over Google Play Billing, or perhaps it’s paying a little more — because, as noted, the discount Google offers in User Choice Billing often doesn’t fully cover payment processing fees. However, we can still use the previously disclosed $6 million per month figure as an estimate to determine how large this “offset” figure could be. Over 36 months — 3 years — at $6 million per month, that would get you to $216 million.
So, even by conservative estimates, Match’s settlement with Google seems to be a deal that netted the dating app maker well more than 300 million dollars. Well, no wonder it settled!
The question this raises, then, is why would Google settle if this was the cost of doing so? Perhaps it felt it made more sense to just focus on the antitrust battle with Epic Games, which is being argued now, rather than allowing Match to tell its story to the court, too.
We’re also curious to see what Google may have offered in its settlement with the group of U.S. states that had previously been involved with this antitrust lawsuit, as well. The state attorneys general agreed to settle their case with Google in September, ahead of the Match settlement. The terms of that deal weren’t immediately disclosed, because a judge still has to approve the finalized settlement, but those details should become public in the future.
Match and Google cannot comment publicly on the settlement, which is confidential.
