Google won't share Checkout user numbers but penetration isn't huge and much, much smaller than PayPal's "more than 100 million" users. Apple also claims more than 100 million credit cards on file with iTunes.
When Checkout launched in 2006 it had enormous potential -- it was uniformly called a "PayPal killer" -- but that potential has failed to materialize because Google didn't "sell" it to consumers. Now, four years later, Checkout's weak consumer adoption is one of the challenges behind the lackluster paid app sales on Android.
Distimo shows that Android's proportion of free to paid apps lags other platforms. Part of that is the weak and challenging payments experience on Android. However T-Mobile did launch carrier billing for Android. Reportedly Google is also considering one-time rival PayPal as a payments option. My prediction is that it will be compelled to allow people to use PayPal if it wants to sell more apps and appease developers.
Proportion of free (blue) to paid apps (green) in US smartphone platforms (August, 2010).
Source: Distimo, 8/10
Why does any of this matter?
It matters because dissatisfied developers may not continue building for Android (although its sales numbers mitigate this potential outcome). In addition and perhaps more significantly Google gets 30% of any app sales through the Android market. If those numbers are small it's 30% of "less than it could have been."
Gartner estimates that in 2010 there $6.8 billion (topline) in apps sold, with the majority of those being on iOS. Gartner argues that Apple was responsible for over 99% of app store sales in 2009. There's real revenue in apps sales, even if the Garnter numbers are way off.
Now Verizon and more recently Amazon (reportedly) are launching Android app stores, separate and apart from Google. My belief and understanding is that the 30% that would go to Google would go alternatively to Amazon in such a scenario. I could be wrong about that cut. But certainly Google, if it gets anything, would get much less than the 30% if it sold directly to the consumer vs. Amazon.
A more user-friendly Amazon Android app store might draw developers and users who've got credit cards on file with Amazon -- to facilitate a one-click purchases -- away from the direct Android market. That would contribute to further fragmentation of the platform/user experience, which would be potential bad news for both developers and consumers.
All this is partly a function of the Android "openness" strategy, and the opening it creates for third parties, and partly a function of weak Checkout adoption.