Mountain View (CA) – Google’s Android application is officially online. Coninciding with the
launch, there are new bits and pieces of information which indicate
that Apple's App Store has a six month time advantage before Android
Market will enable paid purchases. Developers are required to prove
their ID by purchasing a one-time digital certificate for $25, even if
they submit free applications to the store. Just like Apple, Google
will keep 30% of application sales - and will hand over almost all to
carriers. Google calls it a "fair deal," some think it is simply a
"carrier tax."

The beta version of the Android Market (AM) which opened for business two days ago is now accessible on T-Mobile's G1 smartphone, currently the only Android smartphone on the market. It features a relatively modest selection of 50 applications, including multimedia, location-based tools, barcode scanners, travel guides and games. Users can download applications and post YouTube-style comments and ratings that determine - combination with anonymous usage statistics - how applications are ranked and presented. Developer features like versioning, multiple device profile support and analytics will "arrive soon," Google said.

AM will come preloaded on future Android handsets from other vendors, while it does not force vendors to make the store available – the open-source Android platform gives handset makers and carriers the choice to disable this feature. Google is still wrapping up the final terms of use for developers and will start accepting submissions next Monday. Google said that developers "simply register, upload and publish" their apps. However, a one-time ID certificate priced at $25 is needed to "make sure that each developer is authenticated and responsible for [published] applications." Once developers register, they can post applications "without further validation or approval." So far, so good.

However, Google now says it will collect 30% of the revenue from application purchases and hand most of this money over to carriers, keeping only a fraction to itself in order to cover billing fees. The company calls the policy "fair", but it surprised many, not because Google takes 30% - after all, Apple's App Store keeps the same cut - but because developers are now essentially required to pay what is generally described as a "carrier tax" for no obvious reason: Carriers do not host programs, handle payments or fund the AM marketing. In effect, developers are the ones who pay for the luxury to have their applications run on carriers' cellular network without restrictions – while cellphone users are actually already paying for the bandwidth they use.

The App Store does not share revenue with carriers, but there are downsides with this model: AT&T prohibits free VoIP calls over its cellular network, tethered modem programs and other "bandwidth hog" applications. Android developers who are unhappy with new terms can opt for alternative Android stores such as AndAppStore or SlideME that respectively keep 0% and 3% to 5% of the revenue, but are less exposed than AM and do not come preloaded on the handset.

The kill switch and ID certificate somewhat dwarfs Android's openness. Much more damaging, however, is the delay of paid applications to "early Q1," a move that could cost the platform dearly. In its first 104 the App Store has already turned into another iCash product for Apple. Despite Apple’s controversial screening policy, the store raked in $30 million in its first month of operation and now sports 5500 available applications that were downloaded more than 200 million times. Analysts predict that the App Store will grow into a $1.2 billion business by the end of 2009, with the potential to eclipse the iTunes Store in terms of revenue in the near future.

The paid software delay on AM presents Apple with enough room to solidify the App Store position, even if it is limited to the iPhone. The reason why the App Store extended to 5500 applications so far is also because Apple gave developers the opportunity to make money from day one. With that in mind, many developers could remain focused on profitable iPhone development and will wait until Google enables paid purchases on AM. This, in turn, might easily lead to a short-term shortage of premium programs on AM and open the floodgate for lots of junk applications that might undermine the users' confidence in the platform - a dangerous scenario in a world where software often determines the fate a platform.

Google bets that the platform openness and lack of screening will keep the wheels turning, but analysts have doubts. "It is likely that at least some portion of the applications will be less than robust," says Jack Gold of J. Gold Associates. "How will they get sorted out in the application store? Bad applications could easily take down a phone, which could be deadly in such a personal form factor," the analyst said.