Should I always release at the highest level (8 at the current moment) or should I backtrack as far back as possible? Or does it matter?
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Here is the current distribution: http://developer.android.com/resources/dashboard/platform-versions.html. Obviously, you want the lowest possible API to make sure that you can reach as many users as possible. Targeting 1.6 will lose almost 8% of your potential audience. Targeting 2.0+ will lose more than 20%.