Why Was PhoneFusion Pulled from the Android Market?

Late last week, news broke that PhoneFusion’s Visual Voicemail app had been pulled from the Android Market by Google. Speculation has swirled since then about the reason why, but no explanation seemed to quite ring true. The extent of Google’s official statement is that “we remove applications from Android Market that violate our terms of service.”

However, after speaking with people with knowledge of the matter, we can rule a couple of speculative explanations out and take a stab at what’s likely the case. We’ll also see how Google could have avoided a lot of distress and bad press by handling the situation differently.

First, it’s important to note that PhoneFusion’s app is no newcomer; launching in November, 2008, it’s among the first apps Android users were able to install on their G1s. In their time in the Android Market, they amassed around 1,000,000 users. They even had been featured by Google on the old Android Market website, when it just highlighted a few featured apps in each category. In fact, Jonathan Hollander, PhoneFusion’s EVP and co-founder, noted that letting PhoneFusion know they were being featured was the only time Google had contacted them before this incident.

So what changed? Not the app, or how it works. The app is free, ad-supported, and ties in with a web-based visual voicemail system. Through the web interface, users can add premium features onto their account: they can remove ads for a one-time fee of $1.99, they can add speech-to-text transcriptions to their account for a recurring fee, and they can add on a virtual phone number to receive faxes for a recurring fee.

Importantly, none of these features can be activated through the app. GigaOm’s Ryan Kim speculated that the move was tied to Google’s recently announced in-app payment system, that will require developers to use Google’s solution for in-app purchases. But PhoneFusion’s paid services cannot be purchased within the app, and regardless, Google’s solution has been announced but has not launched. We can rule out that theory: this is not related to in-app purchases.

Another theory is that this was a punitive move against an app that competes with Google Voice. But that strains plausibility: Google has allowed direct competitors like Bing, Yahoo! Mail, and MapQuest on the Android Market, as well as other apps with features similar to Google Voice, such as YouMail and HulloMail. Why would they have singled out PhoneFusion’s app? And certainly any small advantage they’d gain by pulling it from the Market would be more than undone by the backlash at such a baldly anticompetitive move, especially at a time when they are actively working to enhance the Market experience for developers and users. It’s simply not a theory worth considering further without evidence that leads us down that road.

The simplest explanation is that Google only recently became aware of a violation–or a perceived violation–of their terms, and removed the app in response. Since Google is not in the business of vetting every app as it’s published, it’s not surprising that a minor, peripheral violation could have gone unnoticed for quite a while.

So what would the violation be? Part of the problem here is that Google has been tight-lipped–not only with us but with the developers themselves–about that.  But let’s look at what they did tell PhoneFusion. In their first email, sent late Tuesday afternoon, February 22, Google explained that the app had “been removed from Android Market due to a violation of the Developer Content Policy.” In response to PhoneFusion’s request Wednesday for a more detailed explanation, Google directed them to section 3.3 of  the Android Market Developer Distribution Agreement:

“You may also choose to distribute Products for free. If the Product is free, you will not be charged a Transaction Fee. You may not collect future charges from users for copies of the Products that those users were initially allowed to download for free. This is not intended to prevent distribution of free trial versions of the Product with an “upsell” option to obtain the full version of the Product: Such free trials for Products are encouraged. However, if you want to collect fees after the free trial expires, you must collect all fees for the full version of the Product through the Payment Processor on the Market. In this Agreement, “free” means there are no charges or fees of any kind for use of the Product. All fees received by Developers for Products distributed via the Market must be processed by the Market’s Payment Processor.”

The gist of this section is fairly straightforward: you can’t get the benefit of distributing a free app in the Android Market, but then sell the paid version elsewhere to get around paying Google their cut. And with an ad-free version for sale on their site but not in the Market, it’s not hard to see how PhoneFusion is in violation of this policy.

But wait–if PhoneFusion is in violation, what about other apps with similar models: the additional storage you can buy from DropBox; the  products you can buy through Amazon’s various apps; the premium version of Yahoo! Mail that works over wifi; premium accounts for music streaming apps like Pandora; free apps like Rdio that don’t work at all after a short free trial, unless you sign up for a premium account on the web. Should this serve as a warning to all those apps’ developers?

Thankfully, no. Remember, Google’s first email to PhoneFusion referenced the Developer Content Policy, a different document. There, we find a similar clause, but with a couple of exceptions: for purchases of physical items, and “where payment is for digital content or goods that may be consumed outside of the application itself.” In other words, when I buy additional storage for my DropBox account, it’s tied to the service as a whole, and not to the Android app itself. But when I pay to remove ads from an app, I’m just paying to remove ads from an app.

Except when I’m not: Jonathan Hollander points out that when a user pays to remove ads from PhoneFusion, ads are removed not only from the Android app, but also from the Blackberry and iOS versions of the app, should you switch phones down the line, as well as from PhoneFusion’s web interface. It’s possible Google didn’t realize this when they pulled the app, or that they don’t accept it as fitting into the exception.

Of course, it’s also possible I’m wrong about why Google pulled the app. And there is the crux of why this issue is still festering: Google’s first step was to pull the app, and they still have not told PhoneFusion exactly what they need to change to avoid running into trouble in the future. It makes sense when a clearly violating app is pulled without warning, but when an app that Google themselves has featured, whose developer has been an “upstanding citizen” for so long, is found to have an issue, a different approach is called for.

Especially since, now that the app has been pulled, it’s unclear if PhoneFusion will be able to get back its accumulated download numbers, user reviews and its four star rating. As Hollander said, “I don’t understand how, a company that’s been in there for two years, with a 1,000,000+ downloads, doesn’t get afforded a courtesy of, ‘we see that you’re violating, we want you to stop the violation by doing this.’ I just don’t understand why that couldn’t have happened.”

While I don’t buy that there’s a conspiracy against them, it’s hard not to feel for PhoneFusion. “We don’t know how to comply. We’ll comply if somebody tells us how to. … We’re going to stand up for ourselves because it’s just not fair to be bullied like this. But if we get an answer, we’ll back down completely. We’re not looking for a fight.”

Perhaps too optimistically, I expect that in the coming week, we’ll see Google provide PhoneFusion with some direction in updating their app and returning it to the Market. And hopefully, the incident will also serve to help Google tweak the way they handle issues like this in the future, especially when they concern established developers.