But it doesn't matter. It's a bit like opening a make-your-own-pizza Pizza Parlor and thinking that point of differentiation matters against the power of say, Papa John's. Yeah, maybe Papa John's doesn't cater to a niche of pizza enthusiasts who really want direct control of the mundane elements of configuring and baking the pizza. Maybe they're leaving a bit of money on the table there.
Doesn't matter. They know the majority of the market wants pizza twenty minutes ago, they want it delivered to wherever they are, and they don't want to give it anymore thought than that. No problem -- Papa John's builds an infrastructure that can address this problem well, and screw the artisans. So they'll battle it out with Domino's and Pizza Hut and make a good chunk of money.
Apple has a funnel that is greased like a pig. They don't care that a few nerds can't sideload their dingus through an alternative whatsit. Most people are being served through their absurdly convenient ecosystem.
Consumer: Solid core of a few thousand truly excellent apps, plus decent games > Reasonable discovery experience > Convenient payment with existing account.
Developer: Write for (mostly) one device configuration > Get into a crowded store filled with a bunch of people who can buy in seconds without touching their credit card.
It's easy. Android does. not. have. this. And until it does, very few incentives will exist to create outstanding Android applications. As usual, Google has gone off half-cocked without making sure their product does what it should. They need to fix this, or we're all stuck with only one decent mass market for mobile apps, controlled by Apple.
Someone needs to step up and actually compete with Apple on the things that matter, otherwise the standard never moves forward for devs or users, and that sucks.
Just wanted to point out that while "Android" does in fact let you install apps from any source, many Android phones (for example virtually all of the ones offered by ATT) do not actually allow installing non-market apps. And as this is something that any carrier or vendor can implement, I wouldn't be surprised to see more of it in the future. (Much like how even though 2.2 supports tethering, so far handset manufacturers/carriers have been disabling that support on their 2.2 rollouts)
Offering economic incentives by making it easy to generate revenue from direct sales seems unlikely to stem the flood.
If you don't like the competition then you should be happy they're limited to ad revenue in the App store, which will only be the right solution for a subset of apps.
If you've got a moral issue with American companies being slow to enable other options for developers in certain nations then you need to think of a better way of expressing that than worrying about them "flooding the market" with their products and implying that they're substandard.
