There’s great post at GeekYouUp regarding the viability of selling on the Android Market. Two conclusions are that people won’t pay for an app when there’s a free one available, even when the paid one has a better UI and that there’s a strong demand for free apps.
I’d echo the second conclusion. As of writing this, I have had over 30,000 installs of my freeware.
I think it’s far too early to assess the viability of selling applications. The G1 wasn’t very inspiring hardware and even that hasn’t rolled out to many countries yet. With new devices coming and rolling out across many countries, I anticipate it will take at least a year from now before we can assess the viability of selling applications.

