As much as people like to find one point of failure to blame there's more than just one variable at play here. "Fragmentation" is a concern but it's not the only concern. Perception of the two markets and the difficulty in using the Android SDK are just a couple of other concerns (among others) that I've seen developers voice.
There are a couple of things at play here.
Developing for the Android platform has its ups and downs. The user base expects more free apps, there is rampant plagiarism, copyright/trademark infringement (see all the 50 cent ringtones, unlicensed Disney character apps). Then there is the disorganization of the app store itself. Moreover, Google is not really pushing the paid model around the world.
Android developers are not making any money compared to their iOS cohorts.
There are numerous Admob, stats showing that:
1) On average Android users spend less money. Android users expect more free apps. 43% Android vs 75% iOS users inclined to pay for apps.
2) Android developers get less volume/traffic.
3) Less inclined to further develop their apps.
4) Google is not pushing the paid model around the globe.
5) 82% of developer say the marketplace is poorly designed (a gazillion wallpaper apps).
Survey Says Nearly 60 Percent Of Android Developers Unhappy With Profits | mocoNews
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Android Development: The App Makers Still Cannot Make Money - iSmashPhone iPhone Blog
NextParadigms 5 Big Reasons Why Android Developers Don?t Make Money
About the games. The games are casual diversions. $2 are impulse purchases but they add up.
Tonight, I was looking for some counting apps for my baby on my Incredible. I counted a total of "7" "toddler counting" apps on Android vs over a hundred on iOS. The iOS ones had authentic licensed theme characters and came from publishing companies such as Disney, the Cartoon Network, and PBS. If you are a parent with kids, there are lots more "cheap" diversions on iOS. The attraction to games cross genders as well. Facebook diversions like Farmville and Mafia War is nowhere to be found on the Google marketplace.
Right now, iOS, despite the large number of apps,seems to be the sure bet for most developers.
The iPad had a breath-taking 3,500 iPad optimized apps at launch. That just shows you how strong the eco-system is.