Piper Jaffray produced one of the first cracks from a research firm at overall revenue for developers from the iOS and Android platforms today, saying that Google’s platform has generated 7 percent of the gross revenue that Apple’s has for developers.

Specifically, Gene Munster says that Android has paid $240 million out to developers while Apple has paid out a cumulative $3.46 billion.

While it’s true that Android does trail iOS in overall revenue for developers, Piper Jaffray is omitting some key points.

1) Munster’s estimates seem to be based primarily on paid downloads. If you look at Munster’s estimates, the total gross revenue Piper Jaffray calculated for both platforms is close to the average sale price of the app multiplied by the percentage of apps that are paid and then multiplied again by the estimated number of total downloads to date.

This ignores a big trend this year. Most of the highest-grossing applications are now free-to-play and monetize primarily through the sale of in-app purchases. You can see this in the iOS charts where 14 of the top 25 grossing apps are currently free and on Android where 19 of the top 25 grossing are free as well.

Many of the best performing Android-based developers realized early on that paid apps weren’t going to work on the platform. (We reported on problems with paid apps on Android 10 months ago in January.) Hence, a much smaller percentage of developers have elected to go the paid route understanding this reality.

The big reason for the difference in performance of paid applications on Android versus iOS is that Google doesn’t have the same database of credit card information that Apple has accumulated over the years through iTunes, which now numbers more than 225 million accounts. Android, with more than 200 million device activations, only now has the momentum to build up a credit card database and is doing so by prompting users to enter in their data with the latest version of the OS, called Ice Cream Sandwich. This also comes on top of issues with user experience and fragmentation.

Piper Jaffray’s estimates also exclude advertising revenue.

2) Secondly, the report also underestimates Android’s cumulative installs to date by more than 1 billion downloads. A source with first-hand knowledge of downloads on the Android platform said a week and a half ago it had passed 8 billion cumulative installs. The company last publicly shared data on this in its second quarterly earnings call in July when it said the platform had seen 6 billion installs to date.

To be fair, the spirit of the report is true. The top-tier and mid-size developers generally concede that Android trails iOS revenue. Glu Mobile, for example, which has a respectable footprint on both platforms with one top #25 grossing app on iOS and three top #25 grossing apps on Android, said in its last quarterly earnings call that Google’s platform contributed 30 percent of the company’s smartphone revenues compared to Apple’s 70 percent. 

However, there are a few outliers that we know of. Storm8 said in a panel our editor Kim-Mai Cutler moderated in October that it was seeing higher average revenue per user on Android than on iOS. Similarly, Austin’s Spacetime Studios said it’s also seeing higher revenue per user on Android’s platform. Hong Kong’s Animoca, which just raised $5 million, is a third developer that said in September that it was seeing 30 percent higher ARPU or average revenue per user on Android.

The general rule of thumb we would suggest is go to iOS if you’re doing a paid app or an experimental concept. If you’re building a game or app idea that’s already been proven, it will succeed on iOS only if you’re willing to outdo the existing competition on production value and willing to spend on marketing.

Otherwise, if you’re creating something in an area or genre that’s already saturated on iOS, go to Android where it’s the Wild West and user acquisition is still cheap. Get cheap distribution early before the big guys come in. But be prepared to QA test the game or app against lots of different devices and versions of the OS to succeed.