Motorola announced about 400,000 Xooms sold in their quarterly earnings announcement – Android is struggling with tablet sales.

I’m reminded of the launch of the G1 in 2008. A year later, 25 Android handsets sprung into the market. In late 2009, Apple had sold about 12M iPhone and iPhone 3Gs. In time, Android has won huge swaths of market share.

Free wins share and grows the market, goes the thesis that underpins freemium and open source products. Android has proven free works for the mobile OS. Android grew the smart phone market faster than Apple could and won share as a result.

Flash forward two years after the G1. The first Android tablets hit the market in late 2010. Android tablets are now flooding the market at many different price points ($99 on Amazon) and form factors. Apple has sold 15M iPads through March. Quite a few similarities in the two situations.

Two years later, Google and Apple achieved the market segmentation they had planned. iOS is the premium product. Android is the mass-market default. But the tablet battle will be fought very differently for three reasons.

First, Apple is actively targeting Android core. Apple is entering the market with a lower cost iPhone, so the rumor mill goes. AT&T’s success with a $99 iPhone 3G validates the notion that Apple can win share against Android in this segment.

Second, cloud back-up platforms encourage platform loyalty. Apple will compete for budget conscious users with a lower cost iPhone to win their content budgets. After spending $100 on iTunes, users won’t switch to Android. Content libraries lock users in and Apple’s ecosystem is far more developed than Google’s.

Third, users will be far more demanding of tablets than phones. Carriers subsidize phones and in the US at least, most have price points less than $100 in exchange for 2 year contracts. Phones have certain, finite lifetimes.

Conversely, tablets are replacements for laptops – they steal share from netbooks and laptops, says Forrester. Tablets command a much higher price point and become considered purchases.

As a result, consumers will buy certainty. Certainty of cross-compatibility with other hardware. Certainty that most software exists on the platform. Certainty of a high quality product that’s the same experience as an iPhone. The first two are lessons Apple learned from battles with Microsoft.

The industrial market is a different animal. Android will win share with café and hotel owners looking to replace paper menus and cardboard placards with cheap tablets. But, there is no revenue aside from hardware sales in this market. Consumers drive the multibillion dollar mobile content market – the pot of gold.

Market share for tablets will be much harder to win for Android than for mobile phones. The tablet market won’t grow as quickly as the mobile phone market and instead of repeating the market growth story, Android will compete head-on with Apple on product design, hardware quality and software.