Microsoft are “investing a lot to attract developers”, will guarantee revenue

Microsoft is ready to pay to ensure a good application selection on Windows Phone 7 If you have to choose between developing for 100 million devices or 5 million, the rational developer will, all things being equal, always choose the larger number.

Fortunately all things are not equal, and the iPhone and Android marketplaces is choked with crApps, but it still means the odds are against developers choosing Microsoft’s new mobile platform.

Microsoft is however not taking the situation lying down.

“We are investing a lot to attract developers big and small to Windows Phone 7 to let them understand what the opportunity is and provide as many resources as we can to help them be successful on our platform,” said Todd Brix, a senior director at Microsoft. “We’re open for business and we want to work with them.”

In Microsoft’s case that means making sure developers do not have to worry about losing out by choosing the smaller platform.

Todd Brix confirmed Microsoft is providing financial incentives ranging from free tools and test handsets to funds for software development and marketing. In some cases, Microsoft is providing revenue guarantees, and will make up the difference if apps don’t sell as well as expected, he said.

At least four app makers have been approached by Microsoft and offered financial incentives in cash, assistance with development costs or revenue guarantees in exchange for having apps ready at or near the release of Windows Phone 7, said five people with knowledge of the matter. The people declined to be named because the incentive terms are confidential.

Developers expect Windows Phone 7 to be successful, three of the people said.

Microsoft’s strategy makes sense, according to Kevin Burden, an analyst at ABI Research.

“In no way do they want to say, ‘Trust us, there will be apps at some point,’” said Burden. “If that means paying developers, so be it. It’s a good strategy for them.”

“There’s absolutely less enthusiasm today for Windows Phone 7 — developers develop for the platform with largest number of users because that’s where they can make the most money,” said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington. “Windows Phone 7 is an unproven prospect. It definitely makes sense for Microsoft to prime the pump a little bit.”

It seems shareholders agree. Microsoft rose 30 cents to $25.13 yesterday on the Nasdaq Stock Market.

Read more at BusinessWeek here.