Android’s app revenue gap and how developers cope

Android (s goog), as we wrote recently, still trails iOS (s aapl) as a money-maker for app developers, with Flurry saying developers make 24 cents on an Android app compared to $1 for the same software on iOS. Now, app analytics firm Distimo is saying the revenue advantage for iOS is even bigger, with the iPhone App Store generating about four times as much revenue for the top 200 apps compared to the top 200 apps in Android Market.

Even with the rise of freemium business models — which rely on getting people to download a free app and monetizing through in-app purchase and upgrades — Apple still holds a big advantage. Distimo said in its year-end report that 65 percent of the top 200 apps in Android Market are freemium, while the same applies to only half of the top apps in the iPhone App Store. The revenue gap is less pronounced in tablet apps, with the iPad App Store generating twice as much as the Android Market.

The persistence of this app revenue gap is an issue for developers, and one that prevents many from making Android their primary development platform. At this rate, it’s hard to see how Google chairman Eric Schmidt’s prediction of Android becoming the primary platform for developers in six months coming true.

But there are monetization options available that are helping close the gap for some Android developers. One of the new alternatives is a startup called StartApp, which launched on Android in September and said it’s on a roll, paying out $200,000 to developers who install its SDK. StartApp bundles in its own search portal with apps from developer customers, so users get a search icon on their home page, which StartUp uses to generate revenues. StartApp pays out $10-$50 to developers for every 1,000 downloads or shares in the ongoing search revenue. The company said it’s now installed on 450 apps, which have generated 10 million downloads, and it’s helping some developers get a 10x bump in revenues.

“We are thrilled by the results we have seen thus far, with developers rapidly adopting our solution driving incredible growth in the download and distribution of our search solution,” said Gil Dudkiewicz, StartApp’s CEO. “We have received overwhelmingly positive feedback from our partners, many of whom have seen dramatic increases in the revenue they are receiving from their apps. This has led to a zero churn rate in the number of developers using our solution.”

StartApp's payout to developers

This is both a questionable and clever tactic, making consumers download another app that does an end run around Google. It’s reminiscent of old PC toolbar add-ons some software companies used. And it plays on the fact that people do a lot of searches from their smartphone. It’s unclear how users are enjoying this option, though StartApp requires clear disclosure for its app partners, so users see a disclaimer and know another search option has been added to their home screen.

But it’s a sign that as long as Android continues to struggle as a money-making machine relative to iOS, it’s going to get targeted by monetization companies looking to help developers earn more cash. Tapjoy’s incentivized download model was banned by Apple for apparently gaming the App Store rankings, but it’s doing well on Android, and that has been a help for developers. Developers will eventually look at starting on Android as the platform ultimately outpaces iOS in app downloads, which should be the case if current trends hold up. But until Google closes the app revenue gap, it’s going to force developers to look at whatever monetization options they can, including solutions that may not be completely enjoyable for users or can cut into Google’s own mobile search revenue.