Google Court Ruling Spurs Analyst Opinions — Will The $500B App-Store Industry Hit 'A Wall Of Large Numbers' Or A Regulatory Barrier?

The $500 billion app-store industry is being disrupted by legal and regulatory challenges, with a recent court decision declaring Google’s GOOGLapp-store monopoly as unlawful. This ruling is the latest in a series of international actions that have gradually eroded the control exerted by Google and Apple Inc. AAPL over digital marketplaces.

What Happened: As the Wall Street Journal reported on Tuesday, after Google’s monopoly over the app store was deemed illegal, there is increasing pressure on Google and Apple whose control over third-party software on billions of smartphones globally is gradually diminishing by escalating regulatory interventions.

"Apple will hit a wall—either a wall of large numbers or a regulatory wall—and that will curb the growth of services," said Peter Tuz, president at Chase Investment Counsel and an Apple shareholder. Tuz added that he predicts services could face annual declines in a few years. 

Starting in March, a new EU law will force Apple to allow software downloads outside the App Store for the first time. Moreover, in South Korea, both companies were mandated to open their stores to alternative payment systems in 2021. The U.S. Justice Department and state attorneys general are also examining a deal where Google pays Apple around $20 billion annually to be the default search engine on more than one billion devices.

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Despite these hurdles, the potential financial impact on Apple and Google's operations remains unclear. Changes are expected to unfold over several years and both tech behemoths may still comply with legal requirements in ways that do not significantly impact revenue. In 2021, app store spending was $167 billion, and mobile ad spending was $336 billion, according to data.ai.

Why It Matters: Google’s Android app store, a significant profit center beyond search, is now endangered. The Fortnite creator advocates for Google’s Android ecosystem to be more open and competitive. A federal jury ruled against Google’s Android app store after Epic Games claimed that Google had been leveraging its power to maintain a monopoly over the Play Store.

Epic Games CEO, Tim Sweeny, said that he was aware of most of Google’s undisclosed activities. The U.S. District Judge James Donato is expected to rule on remedies next year, and the Supreme Court may ultimately determine the future of the app-store economy.

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Image via Shutterstock/ Mr.Mikla