In terms of market share, yes Android has gained market share, but look at where that share is being siphoned from. Apple's market share stayed flat at 25%, Rim gained 1.3%, meanwhile MSFT and Palm lost market share.
http://techcrunch.com/2010/04/05/comscore-android-market-share-continues-to-gain-on-the-iphone/
And the # of apps really doesn't matter. Sure one can say there is a huge selection, but at the same time if half that selection is just crap to gain a quick buck of some dolt who doesn't know better, then what's the point.
What it really comes down to is customer satisfaction. The happier a customer is in using a product will lead to them being a returning customer. Android is a good OS, and a nice platform, but at the same point if it becomes saturated with bad apps, and poor support due to fragmentation, which is a real risk with Android, it could leave a bad taste in consumers mouths.
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