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Is Android for Cheapskates?

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Are Android users cheapskates by nature? That's one possible conclusion you could draw from a hot-off-the-presses comparative app store report conducted by app store research firm Distimo in the month of May.

Just the facts, ma'am
The Android Marketplace by Google (Nasdaq: GOOG  ) sported the largest proportion of free applications with 57% of all programs not costing users a penny. Palm, aka the mobile division of Hewlett-Packard (NYSE: HPQ  ) , followed with a 37% free-to-paid ratio with the rest of the field bunched closely between 22% (the Microsoft (Nasdaq: MSFT  ) Windows Marketplace) and 28% (the Apple (Nasdaq: AAPL  ) App Store for iPhone).

But you could jump to many other conclusions, too. For example, the average price of the top 100 non-free applications in the Android store works out to $4.27 while the same figure for the iPhone market lands at a mere $2.62. So, once Android users decide to pay up for an application, their wallets open wider than the iPhone owners'.

You'll see plenty of stories today bending the Distimo data to fit various pet theories and biases. It's easily done because Distimo left out a few important data points: We don't know how many applications showed up in each store during the study period; we only have availability and average prices but no sales reports, and the samples could be skewed six ways from Sunday.

OK, so the top 10 apps for the Research In Motion (Nasdaq: RIMM  ) BlackBerry comprise fewer games and more personal-finance tools than the same list for iPhone users, but that's hardly an earth-shattering revelation. In the end, we know very little about the users who wield revenue-generating cash in the app store equation, but we do learn something about the developers who supply all of that mobile content.

What's special about Android, then?
The Android platform appears to attract programmers of an open-source mind-set. The idea is to give away the app and make money in other ways. In the traditional software world, that means Red Hat (NYSE: RHT  ) selling premium support for their freely available software packages. Here, you post ads in the application or encourage users to buy a higher-priced app from the same developer if you liked the free stuff.

The verisimilitude to Google's own business model is glaring. Inspire people to surf the web more and Google collects ad clicks as an incidental side effect of higher traffic. As long as Google can place AdMob ads in programs found at the Apple store, the iPhone is actually Google's friend. Even if that sales opportunity goes away, as Apple has threatened but not followed up on, the simple Web browser that is so central to any smartphone's user experience is another conduit for Google's marketing might.

So, are Android users cheapskates? The answer is an unqualified "yes, no, and maybe," based on what the Distimo report shows us. But Google makes money from Android -- and all other smartphones -- either way.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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  • Report this Comment On July 12, 2010, at 9:44 AM, MrWiking wrote:

    I'm surprised the article doesn't mention anything about the fact that you can only sell apps on the Android Market if you live in one of 9 countries, or that you can only purchase apps in 13 countries. Couldn't this be a major factor in the dominance of free apps on the market? The fact that a large part of Android's user base don't even have access to paid apps?

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