Free apps get downloaded zillions of times: a lot more then commercial apps. There are plenty of different estiamtes on the ratio between free and paid apps. In our experience, free apps can get even more then 10 times the downloads then a similar paid app priced over the 0.99 USD tier. We’re speaking of pure stability in the range of 50-150 downloads per day after you loose the initial visibility on the app store for a very niche targeted free app.

Those are good numbers… Too bad a free iPhone application never gives you any ROI. To monetize the downloads quantity ad networks such as AdMob allow you to include ads inside your application.

How much do you really earn out of AdMob and AdWhirl?
I have a very limited data set to look at, but it looks like the average eCPM for an app that gets 100-200 downloads/day is about 0.35-0.45 USD. eCPM is the “effective cost-per-thousand impressions” and represnets the average publisher earnings per thousand ads. That means very little to me.

So in more real-world terms, an app with those numbers is earning 3-6 USD per week, or 12-24 USD per month, or 144-288 USD per year.

You need to consider AdMob ads change every 30 seconds, so the number of ads a user will see are highly dependent on the time he spends using your app. A nice example is the free iPhone App Analytics Agent Lite. Reviewing Google Analytics stats takes time, especially if you have a set of website to supervise. Therefore, they manage to deliver lots of ads.

According to a report posted by AdWhirl in May, 2009, developers who break into the top 100 Free iPhone Apps can make as much as $400-$5000 a day. These seem to represent “peak” revenues at the height of an app’s success but revenue for this application depicted does appear to reach a consistent level over time.

The findings are somewhat contradictory to previously published reports from Pinch Media who believes that the majority of apps would do better as paid applications because usage drops precipitously over time. AdWhirl’s examples, however, appear to represent some of the highest earners rather than necessarily a broad cross sample.

Therefore, you should look into going this path as your primary source of revenue only if your app is likely to be used for more then a few minutes every time it is launched, and you should aim to get at least 500-1000 downloads per day in order to get any decent ROI out of this. Or, in other words, do not look at this as your primary source of revenue: you’ll likely be disappointed.

A smarter way to use ad support in your business model, is including it in the “lite” version of your application. Releasing a free, limited edition of your app (watch out, that’s not a “demo“!) will allow people to notice your app more easily, potentially driving sales to the commercial version of your app.

Building ad support into the app, you’ll be able to get back something out of it.