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Alphabet Halves Initial Subscription Commission at Its App Store

Alphabet's Google currently charges third-party subscription services a 30% fee for the first year, then 15% afterward.

Alphabet’s  (GOOGL) - Get Alphabet Inc. Class A Report Google is slicing the commission it takes from subscription services on its app store beginning Jan. 1

Google Play Store will move to a 15% fee for third-party subscription apps, the company said in a blog post Thursday. Currently the charge totals 30% for the first year, then 15% afterward.

“We’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate. So, we’re simplifying things to ensure they can,” Sameer Samat, Google vice president of product management, wrote in the blog.

Already, “99% of developers qualify for a service fee of 15% or less,” he said.

“And after learning from and listening to developers across many industries and regions, including developers like Anghami, AWA, Bumble, Calm, Duolingo, Kadokawa, Kkbox, Picsart, and Smule, we're announcing [the] additional changes.”

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Further, “Digital subscriptions have become one of the fastest growing models for developers but we know that subscription businesses face specific challenges in customer acquisition and retention,” Samat said.

Alphabet rose 0.08% to end the regular session at $2837.72.

Morningstar analyst Ali Mogharabi raised his fair value estimate for the stock to $3,200 from $2,925 after Alphabet’s second-quarter earnings report in July.

The results “not only beat expectations but were also indicative of faster and more sustainable digital advertising growth than we previously expected,” he wrote.

“An impressive increase in search ad revenue was accompanied by continuing growth in YouTube advertising and subscription revenue, combined with Google gaining further traction in the cloud market. We continue to believe the stock is attractive.”