Following Apple’s lead, Google is letting developers test in-application billing, the first step in creating a sustainable business model for Android games and apps.

In preparation for the launch, Google is opening up Android Market for upload and end-to-end testing of developers’ apps that use in-app billing for digital and virtual goods. That is a monetization mechanism that has helped developers of iOS apps make money, which up until now had been more difficult to do with Android apps.

“This is a great opportunity for a wide range of organizations looking to get involved in the digital realm, particularly for producers of games and traditional publishers such as newspapers,” said Michael Becker, San Francisco-based managing director of North America at the Mobile Marketing Association. “It gives them an opportunity to monetize their content in new ways.

“By doing in-app billing it allows the marketer and brand to provide customers with a consistent user experience, because the customers won’t have to leave the app to purchase the digital content during the interaction,” he said.

“This gives developers the opportunity to enable a unique and compelling user experience for both the marketer and the consumer.”

Google caters to Android developers
Back in January, Google announced its plan to introduce Android Market in-app billing this quarter.

Developers can now upload their Android applications to Google’s Developer Console, create a catalog of in-app products and set prices for them. They can then set up accounts to test in-app purchases.

During these test transactions, the in-app billing service interacts with the applications exactly as it will for actual users and live transactions.

“Generally speaking we’ve seen a trend over the past year toward more free apps that consumers have downloaded, that is especially the case in Android Market,” said Noah Elkin, senior analyst at eMarketer, New York.

“At the same time we’ve seen the rise of in-app purchasing as a revenue-generator in addition to paid downloads,” he said. “This should help continue that trend and help shift the focus from paid apps to in-app purchasing.”

Google noted that although developers can upload applications during this test development phase, they will not be able to actually publish the apps to users until the full launch of the service later this week.

The company has updated the developer documentation with information about how to set up product lists and test in-app products.

“In-app billing is key for attracting popular apps and games to the Android Market,” said Sean Rosenberg, New York-based managing director of U.S.A. at Grapple Mobile. “Until Google mimics the iTunes requirement to have credit card registration for free apps, there will continue to be a lag in premium Android Market sales.”

Google cautioned that it is absolutely essential that developers review the security guidelines to make sure the app’s billing implementation is secure.

The search and software giant encouraged developers to start uploading and testing in-app billing in their Android apps right away.

While initially the in-app billing does not extend to physical goods, in-app billing for digital and virtual goods can be lucrative in and of itself.

GetJar has reported that certain mobile game producers boosted their revenues three to four times over when they started selling virtual goods.

“I think it is obviously a good sign for developers if they can make more money on billing within their applications,” said Neil Strother, Kirkland, WA-based practice director at ABI Research. “The Android developer community should be happy.

“They’ve seen it on the iOS side, and now they will see it on the Android side,” he said. “My hunch is that it will be a good thing provided they get everything right behind the scenes and there aren’t any screw-ups.”

Final Take
Dan Butcher is associate editor on Mobile Commerce Daily

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