Greg Yardley, CEO of Pinch Media gave a fascinating presentation at last night’s NYC iPhone Developer Meetup.  Greg’s slides were chock full of numbers and data gathered by Pinch Media’s iPhone analytics platform.  As you might expect, I was in heaven.

Greg demonstrated his evidence that a free ad-supported app rarely earns more than a 99c app. After Apple’s 30% cut, this 99c becomes 70c.  So what does it take to make 70 cents through advertising?

The Pinch Media numbers show that free apps, as a category, tend to be used 6.6 times more often than paid apps (this figure incorporates both the increased download popularity of free apps and also the slightly decreased frequency-of-use of free apps versus paid apps).  On average, free applications are used heavily at first but usage levels off quickly — the average app lifetime is 12 runs.

So compared to a single paid app, making an app free results in 6.6x more app uses and at an average lifetime of 12 runs/app = 80 sessions. Remember that the paid app makes 70c.  So the question becomes “Can the average free application make up 70c in advertising revenue across 80 usage sessions?”

Greg’s answer: “Hell No.” Assuming one ad is shown per each session, this requires a CPM of $8.75.  Unfortunately, typical CPMs are 50c – $2.00, far below the point required to match the paid app’s revenue.  Unless your app can serve 18 ads per session (assuming a worst case 50c CPM), or there’s some especially ’sticky’ property that makes users reliably use your app repeatedly, Greg concludes that charging for your app is generally a good idea.

Slides from the presentation below: