Marco Arment, creator of one of my favorite services, Instapaper, decided to remove the free version of his Instapaper iOS app. The full version costs $4.99. His results are very surprising and worth a read for anyone interested in app store pricing.
I’ve made a lot of assumptions in the app market over the last three years that turned out to be wrong. Most frequently, I underestimate demand, both for my product and for others.
What it comes down to is charge money for your product, and ads probably wouldn’t make up the difference. That has tremendous implications for startups assuming they can just “flip the switch” on monetization, but like Marco says, “Every app is a special case.”
Tap Tap Tap, makers of Camera+ had a similar result with in-app purchases:
There are companies with free photography apps that are trying to have their business models revolve around selling effects via in-app purchases, but it’s very unlikely that this can be an effective business model.
It’s just a matter of evaluating how special your case is. Your app is just a hobby until it makes money.