There may be more than 20,000 iPhone apps out there that have been downloaded more than 500 million times, but what is the average shelf life of each app? Greg Yardley, CEO of Pinch Media, offers some stats based on the 30 million+ downloads his iPhone app analytics startup has kept tabs on. One of the most telling slides in a recent presentation he gave shows the drop-off rate in iPhone app usage (see above; entire slide presentation embedded below). For free applications, only about 20 percent of users return to use the app the first day after they download it, and then it quickly drops off from there. By 30 days out, less than 5 percent are using the app. The chart for paid apps shows a slightly steeper fall-off rate. So there is a very brief window of time to capture people’s attention and potential revenues.

The key insight of the presentation is derived from this data. Because it answers the eternal question that all iPhone developers have: Should my app be free or should I charge for it? For all but the most successful apps, the free route does not make much sense because ther eis not enough time to recoup the costs of developing the app from advertising.

Free apps tend to be run 6.6 times more often than paid apps, but even with that increased usage, it is not enough to make more money. Yardley offers some quick math. The average paid app returns $0.70/user. The average free app is run 80 sessions. In order to earn the same as a paid app on a per user basis, the free app would have to command an $8.75 CPM (cost per thousand ad impressions). But most iPhone app ad rates are in the $0.50 to $2.00 range. That is assuming on ad per session. The other option is to bombard users with more ads, which might scare them away.

Yardley estimates that less than 5 percent of all apps woul dmake more money right now with advertising than charging for paid downloads. His advice: “Unless there is something inherent about the app that screams free, sell it.”

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Mobile game ad network Greystripe has hit 140 million ad-supported game downloads thanks to iPhone users. In the fourth quarter of 2008 alone, it supported 30 million downloads. All of these ad-supported and Greystripe says that over 50 percent of ad impressions are from iPhone games. The ads themselves have game-like characteristics designed to increase the chances of consumers clicking on them and playing with them, hence “advergames.”

Last summer, TechCrunch reported that Greystripe turned its attention to the iPhone, and is subsequently seeing an increase in downloads and ad impressions. In fact, Greystripe’s Top 10 Total Games (by ad impression) are all iPhone games. In December, the company created its own version of Adobe Flash for the iPhone, which Apple currently prohibits on the iPhone, that would allow advertisers to use rich media flash ads. The company is making the iPhone market a “priority for the foreseeable future,” finding that the device is a much more successful ad platform for gaming than Java devices.

Greystripe is not the first ad network to see potential in the iPhone-other mobile ad networks have followed suite. TechCrunch reported last November that ad network Videoegg extended its ads to the iPhone. Other iPhone ad networks include : AdMob, Medialets, and PinchMedia.

Some of Greystripes top games on the iPhone include 21 Pro, Blackjack, Cookie Bonus Solitaire, Origami Rose, and Powerboat Racing. None of these are top game apps in the iTunes Store, however.

Greystripe also distributes ad-supported free games and applications through its consumer site GameJump, as well as through the iPhone App Store in iTunes. The company inserts ads into more than 900 game titles from 100 publishers that can be downloaded onto mobile phones. Advertisers on Greystripe’s iPhone and Java games including New Line Cinema, Burger King, Jeep, Speedy Oil Change, Dunlop, Xbox, Leap Frog and Axe.

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The new offer, which is basically an extension of its existing SiteCatalyst solution, is called App Measurement for iPhone and will be generally available as from January 2009. To our knowledge this is the first analytics program specifically designed for native iPhone applications, but it’s safe to say other providers will soon follow suit with similar offerings.

Update: that’s why we love commenters. Venture-backed Pinch Media also offers an analytics suite for iPhone developers.

Update 2: similar service providers include Medialets, Mobilytics, AppLoop and Mobclix.

In related news, Tel Aviv-based Kenshoo is taking its Search Engine Marketing campaign management solution mobile, enabling users to consult campaign statistics and reports from their iPhone browser. More information about their solution is available here, and a video demo can be viewed here.

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The market is already doing that sorting. According to Greg Yardley at Pinch Media, as of this morning there were 798 iPhone apps available through the App Store on iTunes, and only 20 percent (161 apps) are free. The most popular price point is now 99 cents, with 24 percent (188 apps). The second most popular is $9.99 with 12 percent (96 apps, including Enigmo, an addictive puzzle game, and the handy GuitarToolkit). See the price distribution chart above.

All the other price points are shifting to either 99 cents or $9.99, implying that the sweet spot is 99 cents for most apps just as it is for songs. But with the caveat that if your app is good enough people will be price insensitive. Below is the price distribution of iPhone apps the day of launch, for comparison purposes.

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A small and very new startup out of New York called Pinch Media is building tools for iPhone and iPod touch developers.

The first of these tools is an analytics offering called Pinch Analytics, released just today for free, that will track an application’s number of unique visitors and active users, as well as how much time those users spend on the app and where they are located geographically. Fred Wilson is calling it the “FeedBurner for iPhone apps”.

Pinch Media is debuting with some formidable backing. Both First Round Capital and Union Square Ventures have provided an undisclosed amount of seed money in conjunction with several angels. Chris Fralic, a partner at First Round, says the firm is a big believer in “the power of the iPhone platform and how it’s driving usage beyond its market share and functionality beyond the desktop.”

Expect Pinch Media to roll out additional tools for promoting and monetizing apps built on the iPhone SDK. The startup’s already signing up advertisers for its platform.

Founders include Jesse Rohland and Greg Yardley, who left Yahoo in March.

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