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I developed an Android application and I am amazed at how effective Android Market has been at spreading the word about it. It basically advertised my application for free.

Now I have an idea for a pretty simple mobile application. I could do the whole thing as a mobile website to support more phones. But I'm worried about losing the free distribution channel Android market provided. So I was thinking I could build a very simple webview wrapper that I could distribute on the market to gain free exposure without sacrificing support for other phones. I could also give users a nice desktop shortcut.

Is it a common practice to wrap a mobile website in an Android (or IPhone) application just for distribution?

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Yes, it is common practise. As a matter of fact, there are frameworks out there that gives you the possibility to deploy mobile-friendly websites to multiple mobile platforms, such as:

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