Google's announcement marked an important step in the search giant's quest to catch up with Apple in the fast-growing market for smart phones.

It signals Google's commitment to expand into a relatively hot mobile market, even as it pulls back on certain other initiatives such as broadcast radio.

Google said in a blog post on Friday its Android Market will initially carry paid applications from developers in the US and Britain, with plans to allow developers in Germany, Austria, the Netherlands, France and Spain to participate later this quarter.

That could present an outlet for developers such as Electronic Arts who have been anxious to expand sales of their mobile phone games to the Android Market, which has been limited to free applications until now.

Smart phones, which allow consumers to browse the web, send email, play games and listen to music, in addition to making calls, are one of the few bright spots in a slowing technology and consumer electronics market.

While overall unit sales of mobile phones declined 12.6 per cent year-over-year in the fourth quarter, smart phone shipments increased 22.5 per cent, according to research firm Gartner.

The T-Mobile G1 phone uses the Android operating system.

The availability of applications that run on a particular smart phone are important to define and distinguish the product, said analyst Rob Enderle of the Enderle Group.

"It's what's providing that extra value and getting people into the stores," he said.

Apple, for instance, enticed a large community of developers to create both paid and free applications for its iPhone.

According to a Google spokeswoman, there are currently 1000 applications that run on Android smart phones. Consumers will buy the forthcoming paid Android applications via the Google Checkout payment product. -- Reuters