I notice that a lot of free games/apps with ads get bad reviews because the ads get in the way of gameplay or obstruct view in an already limited screen space. I know there are ways to elegantly place ads that don’t interfere, but that may lead to fewer click-throughs, hence defeating the purpose of ads in the first place.
IAP, on the other hand, still puts your game in users hands free-of-charge with no obstructions, no annoyances, and an OPTION to purchase upgrades, subscriptions, whatever. With ads, the ONLY option for a hassle-free experience is to buy the ad-less version. People really appreciate having more options - having none angers people.
If ads were the only option for us, I would choose NOT to use it because I’d rather have a lot of people keeping a free version of my game on their iPhone rather than having them DELETE an annoying ad-based version. Remember, 6 months from now you may release a new feature that a lot of people may be willing to purchase. If they’ve deleted your ad-based game, the chances of them hearing about this new feature and re-downloading is pretty slim.
The bottom line - do whatever you can to keep your game or app on users iPhones!
Just my $.02 
Dave [import]uid: 8194 topic_id: 475 reply_id: 10865[/import]