Google’s recent launch of in-app billing in the Android Market gives app developers a way to make more money by letting them sell digital content within their applications. It’s a great improvement for game and app developers looking to do business on the Android platform. But before you commit, you should be aware of a number of challenges you’ll face in selling apps on the Android Market.

1. Cumbersome Check-Out Process: Most of the applications and games in Google’s Android Market are free, and the majority of games that are downloaded in large quantities (more than 250,000 times) are free.

One of the main reasons games are free is Google’s inefficient check-out process. Contrary to iPhone users, who have a credit card correlated with their iTunes account that allows one-click purchasing, Android users use their Google account, which does not require that they sign up for Google checkout or provide their credit card information. iPhone’s success can be attributed to two main factors. The first is that iPhone users are requested to enter their credit card information when first activating their phone, and majority of users do so. The second has to do with the iTunes store, which had millions of registered users prior to the iPhone launch. It was a small leap for Apple to get their existing users to download games for their iPhone.

But Android users are only prompted to provide their credit card information after choosing to buy a game. The fact that users need to haul out their credit cards at this stage, combined with a cumbersome purchase flow, lowers the conversion of paid games and applications. Consequently developers have to “sell” their games for free in Google’s Android market.

2. Device Fragmentation: With so many device manufacturers adapting the Android OS to their specific devices, fragmentation of the OS has become a problem. The issue of fragmentation reared its ugly head with Angry Birds’ Android first release and, according to the latest reports, it’s here to stay.

Do not be mistaken, fragmentation is not only the developer’s problem. It can also be confusing (and frustrating) for users who need to figure out which flavor will work on their device and can be flustered at the multitude of choices.

Angry Birds users reported performance problems with several Android devices. As a result, just one month after the game’s successful launch, Angry Birds maker Rovio developed a separate, lighter version of the game in an attempt to resolve fragmentation issues. Even then, though, users need to figure out which version to install on their device.

As for developers, the plot thickens as Google separates smartphone and tablet OSes. A report from Pocket-lint suggests that Google will release a mid-way version of Android for smartphones that can run some Android 3.0 (“Honeycomb”) games on phones, which could ultimately result in a split of the Android OS.

3. Search Limitations: Despite the fact that users can search for content using various “categories”, searching for content in the Google Android Market can get somewhat confusing. When users search for a specific game or developer in the general search, the results aren’t displayed in the clearest way. For instance, a simple search for “Angry Birds” is likely to flood your screen with wallpaper collections, unofficial rip-offs, and plain old spam applications. Needless to say, this does not create the best user experience and presents another hurdle for users within the Google Android Market.

4. Lack of Marketing Tools: The Android Market lacks in marketing and promotional tools for developers, such as affiliate programs, coupons and more. Whereas third-party app marketplace GetJar lets developers promote free games in various ways such as paid promotions and affiliate programs, the Android Market presents developers with close to no options for marketing and promotion.

5. Limited Distribution: In the past, developers who wished to sell their games to users were limited geographically to a certain amount of countries that the Android Market supports. Google only added prominent regions such as Hong Kong, Brazil and 16 others towards the end of 2010. To date, developers can only sell their games in 29 countries.

6. Google’s Return Policy: To makes things even more complicated, Google’s has a problematic game return policy. Google initially allowed users to buy games and return them within 24 hours. Users, therefore, downloaded games, played them for one day and then were refunded for these games. Google recently updated this to 15 minutes, but the old policy might have created a misleading perception of the Google Android Market and the way users consume games and applications.

A Few Solutions
So how do you overcome these Android Market challenges? The trick is to combine a few solutions and adjust them to your specific goals. Developers are advised to be creative from a marketing perspective and make use of alternative business models in their monetizing efforts.

1. Lite Version of Games. Developers can allow users to play a “lite version” of their game apps (either based on the amount of levels or a time limited game) and buy the full version with a click of a button, easing the way users are required to purchase games today. Besides the fact that this is the most successful and popular model in the PC games market (“Try before you buy”), it also makes sense. If developers succeed in creating a cool, beautiful and addictive lite version of their games, users will hopefully become addicted, which will encourage them to purchase the full version of the game.

2. Virtual Goods. By the same token, developers can choose to include virtual goods in their games to support or enhance the user experience. Examples include unique weapons, extraordinary powers, and additional chapters in game apps. In general, users who enjoy a game are more likely to spend money on features that improve their achievements, increase their success and level of satisfaction. This is accomplished by designing a game that is complete on its own but can be enhanced with small additions.

3. Mobile Games Ads. Developers can also make use of mobile games ads. There are two main kinds of ads related to games.

* Ads: These are ads that are displayed to users while playing games. Despite the criticism of this business model, it has shown great success and is expected to continue to do so in the future. Rovio’s Angry Birds generated net revenues of $1 million per month from ads alone in December 2010.

* Branded/Product Placement Games: These games are designed to promote a specific product or brand. A most noted example is the Fishlabs game, which was designed to promote Volkswagen Touareg. This game was downloaded by millions of iPhone users. While this model is considered to be more lucrative, it is also more challenging to carry out for the simple reason that you need to put the cart before the horse — ie, you need to be “commissioned” to develop such a game before you start the development process. So this model isn’t always scalable and will only work for a minority of developers.

Don’t Forget Third-Party App Stores
Developers who have already developed Android games should also consider other app-stores in the market, which are steadily growing, including Amazon, GetJar, MobiHand, SlideMe, and more that allow developers to distribute their games, promote them and create brand awareness. These stores allow various pricing models and billing methods (like PayPal). You’ll want to study the requirements and limitations of these stores and weigh the pros and cons of each before launching your apps there. While the Google Android Market is slowly adding assets for profitability, developers should definitely tap into the many distribution channels in order to reap rewards from their hard work.

Ora Weissenstern is marketing manager of MoMinis — a provider of development and distribution solutions for 2D mobile casual games. In MoMinis Ora manages the market research and business development with leading app-stores in the mobile market. Prior to joining MoMinis, Ora practiced law in various law firms and The State Attorney’s office.