How Android app growth will mean payoff for devs

Android (s goog) app downloads are expected to overtake iPhone (s aapl) apps this year for the first time, according to research firm Ovum, and will nearly double iPhone downloads by 2016. The fast growth comes from Android’s overall sales momentum and consumers’ growing appetite for apps, Ovum said. It would also appear Android is benefiting from third-party app stores like GetJar and Amazon Appstore (s amzn), which can also move apps.

Ovum said the iPhone saw 2.7 billion downloads last year, almost double that of Android at 1.4 billion. But by the end of this year, Android is expected to have 8.1 billion downloads compared to 6.1 billion for Apple’s smartphone. And by 2016, Android is forecast to have 21.8 billion app downloads versus 11.6 billion for the iPhone.

Apple, however, will still generate more revenue for paid apps, said Ovum, who predicted that iPhone paid download revenue will hit $2.86 billion in 2016, compared to $1.5 billion for Android. It’s also important to note that Ovum is just comparing phone app downloads, while Apple has a huge lead in tablet apps and downloads.

But if the Ovum numbers are correct, it raises some interesting implications for developers. Yes, Apple will still generate more money through paid downloads, both iPhone and iPad. But as we’re seeing increasingly, freemium apps with in-app purchase are generating more money now than paid downloads. Users will still be attracted to high-quality paid apps, and they’re likely to find them most reliably on iOS for some time. But the fact that Android is poised to drive more downloads is significant, especially for free apps looking to obtain revenue from in-app purchases and advertising. If Android can deliver the eyeballs, it could begin to shift developer momentum toward the platform. But people have to be making money on free Android apps and we’re seeing more signs of that, not just Angry Birds.

I wrote last month about Tap Fish, a game from Gameview Studios, which said the Android and iOS versions of the free app produce comparable average revenue per user  on most days and on some days, the ARPU on Android is 30 percent higher on Android than iOS. That’s due to the fact that Android doesn’t ban incentivized install app distribution campaigns like Apple does and also provides some development flexibility that helps highlight the app.

Outblaze, a Hong Kong developer told Inside Mobile Apps this week that average revenue per user for its Android apps is 30 percent higher than on iOS. That’s partly due to less competition on Android, ensuring mass compatibility for the apps on Android devices and aggressive updating. Both Gameview and Outblaze said that complaints about not monetizing well on Android are outdated, at least for them.

If you look at the larger picture then, developers on Android have a lot to look forward to. The monetization picture is getting better and I would argue that the apps on Android are also improving. And if downloads of Android apps now soar, it means they can benefit from a lot of scale. The gap in revenue between iOS and Android apps is starting to close and that should accelerate as app downloads on Android go up.

Now there are a lot of warnings to consider too. As I wrote about, Android users appear to download a more narrow selection of the top apps. So more downloads won’t be of benefit for many developers if it’s not more evenly distributed. That’s where better discovery tools and increased quality across the board will help, especially as Android Market gets more crowded.

Also, Android must stay on top of piracy. The Yankee Group published findings from a developer survey of 75 developers conducted by Skyhook Wireless, which found that 27 percent see piracy as a huge problem and about third of developers say piracy has cost them more than $10,000 in revenue. That’s more of a concern for paid apps, but it’s something that raises concerns about the quality of Android apps in general.

But I think over time, we’ll see that developers are going to have more options as Android’s app momentum grows. Apple’s App Store will still be the place for developers who want to sell paid apps, but when it comes to more freemium apps developers now have more reason to build up their Android business. And perhaps over time, that will be where freemium app makers focus to make their money. Not everyone will see results like Gameview or Outblaze right away, but if downloads soar as Ovum predicts, there’s a better shot to finally make some money on Android.