• by Mark Walsh  @markfwal, February 17, 2009

Following the opening of its Android Market last fall, Google will begin offering paid applications through the online store this week in the U.S. and UK for devices powered by the Android mobile operating system.

Charging for apps will give increased incentive to developers to create Android programs and generate revenue for Google, which will take a 30% cut of each purchase. The search giant announced plans to sell mobile apps in connection with the launch of the Android-powered G1 phone with T-Mobile in October.

But up to now, the more than 1,000 apps available so far in the Android Market have been free. Google still has a long way to go to catch up with Apple's App Store, which offers more than 20,000 iPhone apps and boasts more than 500 million downloads to date. Google and smartphone manufacturers including Palm, BlackBerry and Nokia are now ramping up or starting their own app stores to compete.

It's not hard to see why. Jeremy Horwitz--editor in chief of iLounge, a site tracking all things iPhone--estimates that Apple has pulled in revenue of $200 million to $300 million to date via the App Store. That would put Apple's 30% take in the range of $60 million to $90 million. Horwitz figures charges for about three-quarters of iPhone apps, at an average price of $2 to $3.

Perhaps more important for Apple is that the proliferation of iPhone apps helps to drive sales of the device itself--a strategy other handset makers surely want to emulate with their own app stores. So far, the G1 is the only Android-powered phone, and handset maker HTC has not disclosed sales of the phone. But it's likely only a fraction of the 17 million iPhones sold to date.

More Google phones are on the way. A T-Mobile executive said last month that the carrier plans to introduce additional G phones this year and Sprint may launch its own Android-powered handset next year. Other announcements are expected to follow.

When it comes to apps, Google plans to start selling them in Germany, Austria, the Netherlands, France and Spain by the end of the first quarter in addition to the U.S. and the U.K. Other countries will also be added by the end of March. Google Checkout will power Android Market's billing and payment system.