Android Market: Pros and Cons of Carrier Billing

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Google is changing the Android Market Developer Distribution Agreement (DDA), ostensibly to pave the way for direct carrier billing for Android apps. The move should spur an increase in Android apps and Android Market sales, but may be a double-edged sword for IT admins and users.

A post Friday on the Android Developers blog, announced the upcoming change, explaining, "This is in preparation for some work we're doing on introducing new payment options, which we think developers will like."

The two key changes highlighted in the blog post are that "authorized carriers" have been added as an indemnified party, and that a new section was added clarifying that payment processors are responsible for any claims related to tax accrual.

The obvious implication of "new payment options" and the addition of "authorized carriers" is that Google intends to allow Android Market purchases to be billed directly by wireless providers. After killing off the Nexus One, and shuttering its online mobile store, it seems that Google might also like to offload Android Market billing.

Developers will welcome the change. Although the current Android Market payment system--requiring a Google Checkout account--is similar to the Apple App Store system which requires an Apple ID and some method of payment, Google Checkout is not embraced by Android users the way iTunes has been embraced by iPhone users, leading to anemic app sales for the Android Market.

The wireless carriers will also benefit by getting to play middleman and possibly getting a piece of the app revenue pie. As successful as the iPhone App Store is, that revenue flows directly to Apple. If wireless carriers can share the revenue from app sales, it can help recoup losses from other areas such as declining voice sales.

The strategy is a good one for Google. Developers are the lifeblood of the smartphone culture. Although most users only have a handful of apps on their iPhone, and the vast majority of the 200,000 plus apps available are irrelevant, the fact is that the success of the iPhone platform is often measured based on the sheer volume of apps available. For Android to continue to gain smartphone market share and compete with the iPhone, it needs to have a vibrant developer community cranking out useful utilities.

It is also a solid strategy from the standpoint that sharing revenue with the wireless carriers gives them an incentive to promote Android smartphones more heavily and to help drive sales of Android Market apps. Essentially, what Google gives up in revenue should be made back--and then some--from increased app sales, and Google doesn't have to invest its own money in marketing the Android Market to get there.

There is a potential downside, though. Company accountants and users could be in for sticker shock when they receive the monthly wireless bill and find a bunch of apps charged to the account. Without the added step of logging in or confirming payment options, users might purchase apps inadvertently, or without being consciously aware of the costs.

It is also possible that unscrupulous developers, phishing, or malware attacks could result in undesired apps being charged to the account without the user's authorization.

Still, Android users stand to benefit from a strong developer community and growing inventory of apps as well. Users just need to be careful what they click, and pay extra attention to errant charges when the bill arrives.

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