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Google Moves to Minimize the Risks in Its App Business


Jun. 10 2019, Updated 1:06 p.m. ET

App bans

Alphabet’s (GOOGL) Google has banned apps that facilitate the sale of marijuana on its app marketplace, citing changes in its content publishing rules, according to media reports. Although many US states have legalized marijuana use for medical and recreational purposes, the substance is still banned under federal law, meaning that companies under federal regulations run the risk of being punished if they handle marijuana transactions in ways that aren’t currently accepted under those regulations.

Google’s move to ban apps that facilitate the sale of cannabis seems aimed at minimizing the risk in its app business. Google runs an app marketplace known as Google Play, which facilitated $25 billion in app sales last year, according to Sensor Tower estimates.

The selling of apps has become a lucrative business. The global mobile app market is forecast to reach $311.2 billion by 2023, up from $108.4 billion in 2016, according to Allied Market Research.

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Source of non-advertising revenue

The app business generates revenue for Google in a variety of ways, including the 15% commission the company charges on in-app purchases. This commission income contributes to Google’s non-advertising business, which brought in $5.4 billion worth of revenue in the first quarter. Baidu (BIDU), Facebook (FB), and Twitter (TWTR) generated non-advertising revenues of $963 million, $165 million, and $107 million, respectively, in the quarter.

PayPal (PYPL) and other companies in the banking and payment business are lobbying lawmakers in Washington to approve legislation that would allow federally regulated companies to handle marijuana transactions.


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