Pinch Media (iPhone business specialists) conducted an analysis and found that after downloading, iPhone apps are hardly used. According to the analysis of 30 million downloads, just 20% of free apps are revisited one day later. That number drops to 5% after four weeks and near zero after three months. Granted, it's likely that many of these apps are one-trick ponies (Koi Pond, for example), so they don't offer much after an initial run-through. Still, these numbers are discouraging for developers.
The analysis also found that if an app makes the "Top 100" list in the App Store, downloads near double. Because of the surge in available apps (more than 15,000 are available), it's increasingly difficult to crack the Top 100. A free app needs more than 20,000 downloads in 24 hours to reach the top 25, double what was needed six months ago.
The results suggest that not only do free apps fade from the forefront for users, but any free apps hoping to make money from embedded advertising are going to be disappointed. In short, developers might be better suited creating paid apps, and capitalizing on early revenue. Not only can they earn right away, but Pinch Media's study also suggests that paid apps get more use, presumably because once users have paid for something, they feel the need to use it.