Does Google market Android to cheapskates?

COMMENTARY Time ran out for Eric Chu, the head of Google's (GOOG) Android software market. He's moving elsewhere in the company as Jamie Rosenberg, who ran Google Music, takes over. The problem? Too few apps selling through Android Marketplace.

It's an embarrassment to Google, an irritation to app developers (just ask developer of popular mobile games Mika Mobile, who just announced that he'd drop support for Android), and a potential major weakness in the Android ecosystem. There are potential explanations for what Google is doing wrong in running its market. But instead of just looking internally, perhaps it would make sense to turn the eyes elsewhere -- on the customers of the smartphones using the mobile operating system, who might happen to be a cheap lot.

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There are different explanations for what went wrong in Google's market, according to Kim-Mai Cutler at TechCrunch. One is a conflicted management structure, in which Chu was responsible for business development and developer relations while another was in charge of product management.

Another is a lack of resources because Google has judged Android's success by activations, not by the number of apps sold. Companies put their money on what they measure as being important to their success. Ignore something as relatively unimportant and you spend your cash and attention elsewhere.

Many major app developers also bring their products to Apple's iOS platform first because, as one recently told me, coding is much easier than trying to write for Google. The fractured nature of Android makes writing an app that works across all the variations inherently more difficult. Here's what Mobile wrote:

There's a big difference between generating revenue, and "making money" - It's not that they haven't generated income, but that income is offset by the additional support costs the platform has demanded. Where did your dollar go? We spent about 20% of our total man-hours last year dealing with Android in one way or another - porting, platform specific bug fixes, customer service, etc. I would have preferred spending that time on more content for you, but instead I was thanklessly modifying shaders and texture formats to work on different GPUs, or pushing out patches to support new devices without crashing, or walking someone through how to fix an installation that wouldn't go through. We spent thousands on various test hardware. These are the unsung necessities of offering our apps on Android. Meanwhile, Android sales amounted to around 5% of our revenue for the year, and continues to shrink. Needless to say, this ratio is unsustainable.

And the results are inevitable.

Android users see pay, read painful

All of those issues are certainly valid, but the big one -- the white elephant sale in the room, as it were -- is the very last point Mobile mentions. Developers can justify a lot of work if there's a proportionate return. Only, there isn't for many on Android

The problem isn't difficulty in getting around the Android Market. (In my experience, Google's site remains far easier to navigate than Apple's.) It's that Android users are choosing first and by far foremost to download free apps.

Is that really so surprising? Consider that the big reason for the market success of Android hardware is that it often reaches lower price points that open vast amounts of additional buyers than wouldn't spring for an iPhone or iPad. That's why the market sees a $20 Android smartphone after a $50 rebate (and even $70 is relatively cheap). Look at AT&T's Android phone page to see all the free and $0.01 phones. And there are many more below $100.

It seems that Android hardware manufacturers, in an attempt to compete with Apple (AAPL), have used lower price as a tool. The problem, though, is that the platform attracts a larger percentage of cost-sensitive consumers as a result. These are exactly the people who are more likely to favor free apps over paid.

Google pays in the long run

It's not that such customers are wrong in doing so. They're expressing their preferences based on their own interests and requirements. But they're different from the large number of people who have purchased Apple products that tend to sell at premium prices and higher margins than usual. Such people are less price sensitive and, as a result, more likely to pay for apps.

But that's a potentially big problem for Google. If the hardware and operating ecosystem attracts many price sensitive people, developers increasingly won't be able to afford to support Android. That could even further cement Apple's position at the high end of smartphones and tablets, absorbing more and more of the available margin, which, in turn, would act like positive feedback, driving Android into even more of a price-centric existence.

Image: Flickr user ecastro