Bloomberg reports that app developers are beginning to embrace Android despite the limited potential for short-term revenue growth, in order to be well positioned as the platform gains traction in the coming months. With Android now powering most smartphones sold in the US, and also strong in international markets including China, observers are seeing the potential for sales for the platform to match those from Apple’s App Store, possibly by the end of 2011.

As our recent analysis article notes, Android Market is currently dominated by free applications, with customers in only 14 of the 46 countries where it is available able to buy paid-for products. This is making it more challenging for developers to generate revenue from applications when compared to Apple’s more established channels.

A number of issues have been noted for Android Market, including higher costs for initial app development and a weaker store navigation interface than some of its rivals. The use of Google Checkout for purchases and the lack of support for in-app purchases is also limiting developers’ potential to make money, Bloomberg says, although Google is working with PayPal and is set to embrace carrier billing in order to improve the payment options for Android Market. The policy of allowing customers to return products without question for 24 hours after purchase was also criticised.

PocketGamer notes that the relative lack of control within the Android Market when compared to Apple’s tight grip on the App Store also leads to problems. For example, an app is available on the Android Market called Angry Birds, which is unrelated to the Angry Birds which has proved a massive success on the App Store – it is the biggest selling paid application for iPhone, with the “HD” version being the fourth biggest title for the iPad.

Possibly the biggest problem for developers is fragmentation among Android devices. While Google is refreshing the platform at an impressive pace, this means that handsets in the market are supporting a number of different versions of the operating system. In addition, many device makers and operators are supporting custom extensions to the core operating systems, while form factors are also diverging with the introduction of Android-powered tablets to the market. This means that a degree of porting and testing is needed to ensure apps work seamlessly across the range of handsets, which is not the case for the relatively homogenous iPhone range.