Summary:

Android is on its way to becoming the most ubiquitous smartphone OS in the world, but could the fragmentation in the platform — the many ve…

Lenovo App Store
photo: M.I.C. Gadget

Android is on its way to becoming the most ubiquitous smartphone OS in the world, but could the fragmentation in the platform — the many versions of the OS; the many devices running it — handicap the ability to make money from it? The state of Android in China presents the starkest picture yet of how Google’s operating system is mutating as its growth explodes.

In China today there are already some 40 million Android devices being used, and China is the third-largest market for Android developers.

But those developers are not writing apps for Google’s official Android Market: they are publishing them in the 70 Android-based app stores that are estimated to exist today in China. These storefronts are run by operators, handset makers, Internet portals and many others besides, and many of them come pre-loaded on devices instead of the Market. One from Lenovo is pictured here. (note: We look at eight of the most popular ones here.)

Those figures came to light last week during the Tech Crunch Disrupt conference in Beijing, during a panel on Android in China, and were reported by the Asian gadget site M.I.C. Gadget.

It’s hard to put a finger on what, exactly, is the business model behind Android apps in a market like China, except perhaps that everyone is using apps as a way of enticing people to buy other goods (such as the phones themselves) and other services. And there is probably some hope that someone will capitalize on the volume of growth in the country: the Ministry of Industry notes that there are now some 150 million people registered with app stores, and Flurry says that China is currently the world’s fastest growing market for apps usage, with app sessions growing by 870 percent between January and October this year.

But at the moment it’s still hard to see hard to see where the commercial opportunity is for Google (NSDQ: GOOG), which has yet to launch an official Android Market in the country or launch any APIs for those other app stores to link into its Market.

Some other points that emerged during the panel:

» Google is not the only one not making any money on apps in China. Almost 90 percent of the apps on those stores are free, and as it has in other countries, advertising on these apps is not bringing much in the way of revenues — yet.

» Consolidation is on the way. David Chao, a co-founder of the VC firm DCM, predicts that in two or three years those 70 stores will whittle down to 10. That will partly be forced by the fact that these stores are not making any money but still have bandwidth and other costs to bear.

» Google still has not said how it intends to approach China with its own Android Market. John Lagerling, director of Android partnerships for Google, made it clear that China is a crucial market for Google, but he would not spell out how it might work there directly, possibly because of past issues for Google in the country. “If we screw up the way we build Android, then OEMs and developers will start choosing something else,” he said, adding that “we need to be attentive to the needs of the Chinese market. We are trying to take the pulse of the needs of the Android market.”

» The presence of cheap Android devices will continue to keep the platform dominant. It’s not uncommon to see Android phones costing under $100 in China, and now that cheap trend is extending to Android tablets. Prices today are already ranging from between $78 and $315, and that top price is predicted to drop.

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