“We have significantly cut our investment in Android platform, just like … many others,” Gameloft finance director Alexandre de Rochefort said at an investor conference…We are selling 400 times more games on iPhone than on Android” via Reuters

Let’s estimate the number of Android devices sold at about 2.5M (250k Droids, 1.5M G1s, 500k Dreams and a handful of others). All things equal, one might expect sales of Android apps to be 20 times less than iPhone since there are more than 40M iPhone/iPod touches in the wild. 

But game developers aren’t seeing a linear relationship between devices volumes and app sales according to this anecdote. Instead, sales are an order of magnitude less than expected. Why?

Payments is the major driver: it’s much more difficult to buy an app on Android than Apple. Distribution is the second: Apple has a desktop experience in iTunes for browsing applications which is integrated into the stack and into people’s lives, which can’t help but drive distribution. And third, the integrated hardware and software provide a identical and consistent development environment for app developers.

App store application policies be damned, you can’t argue with users and their dollars. 

Two potentially large issues for Android: device and market fragmentation, and payments

One of my fears for Android is in five years, it’s very similar to J2ME – a “universal language” distributed over 500 different models of phones, each of which has a slightly different implementation of the standard, different hardware specifications (particularly screen size) and a horde of different market places each with a different subset of applications. 

Carriers are seeking to create their own stores. Handset makers also have this option and Google will operate one as well. Needless to say with certain applications available on particular app stores, user confusion is inevitable.

I hope the developer tools associated with the platform make cross device testing and porting simple and provide seamless user experience. This is a Herculean task given the pace at which new devices are released and the breadth of Android deployments and customizations. But it will be essential to ensuring a vibrant app ecosystem – and of course a simple way to pay for things.