Are Zune Ad-Supported Apps a Wrong Move?

(MoneyWatch)  Microsoft is reportedly relying on ads to support an apps infrastructure for Zune. But while I'm sure the company figures it will jump start adoption because, hey, it's all "free," which means that the app developers get a cut of revenue and are happy, I suspect it's one of those moves that will prove to be foolish. Here's why:

1. Free is relative. I know that sounds nuts -- free means free. But it doesn't necessarily. Something is only free if people perceive it as such. When it comes to ads, the payment is the annoyance factor, and that can be enormous to users. Too high and free bears a big price tag. Given the size of mobile screens, how much of them does the ad have to take up to make the advertisers happy that their promotions are readable?
2. Developers don't want to trust Microsoft. This is a very old story, and you can see the reverberations in the patent infringement suits that the company has lost this year. It's one thing to ask for a reckoning of how many of your apps were downloaded. That's a clear number. But ad delivery? Although in theory it might be the same, emotionally I think it requires more trust, and the reporting I'm sure can become more complex. From my own experience in the publishing business as an author, I can say with some authority that complex reporting of things like royalties quickly starts the eyebrow arch.
3. The reason you'd offer ad-supported apps is because you think there would be a higher uptake of them. But look at the iPod touch/iPhone. You'd have to ask how there could be sticker shock at a few bucks for an app given how much people are willing to shell out for the initial device. Given the large number of apps that people seem to download, why not just collect the money when they're willing to pay?
4. Related to that last point, you know that Microsoft is going to deliver ads with every app. Why not? But now there's no such thing as a "free" app in the sense that many of the iPod apps are free. That is unless app vendors can ask Microsoft not to deliver ads.
5. What happens when users aren't connected to a Wi-Fi network for the Internet connection that allows ad delivery? Do the apps stop working? And back to point 2, are the developers going to believe Microsoft's count?

All in all, it sounds like a questionable approach. Why not invest the money in underwriting apps for the short-term, or giving each new Zune purchaser five or ten free apps? That strengthens the perception of free, gives the app vendors an incentive to get things up, and helps Microsoft in what should be its longer-term goal of creating an application ecosystem, a need that it surely understands.

Image via stock.xchng user GlennPeb, site standard license.