You nailed it.
The most viable business models seems to be when a product is free to obtain and the revenue comes from advertising, in-product additions and/or selling services which are connected to a server.
I agree, but you cannot just take a product and apply a business model to it. If you want to milk IAPs, you need to design your whole game around it. Cramming ads onto a 3.5" phone screen isn't always easy either. Subscriptions (the fair model to pay for a server) might scare people away.
Looking at the top grossing games on the Oz App Store, I wonder if the trick is not simply "don't be a small player": http://i.imgur.com/9S1yx.png?1
Could a small team handle the traffic and meintenance needed for a freemium game?
Whether that's true or not, I hate most freemium games. Sell me the game or find a way to have me endure ads, but I won't be buying in-game points soI can make my brown cow purple or whatever. I also don't like spamming friends to earn the points needed to purplefy my cow. In general I've never met a freemium game that compelled me to pay after install.
Or rather you're so difficult to sell too that it's not worth the effort. Perhaps there are a load of people out there who will pay for the things you won't, even if they're relatively small in number they're potentially much more lucrative?
There's other models besides Zynga and facebook spam.
Giving the client software away for free and charging for access to official servers has been done for years successfully by Eve online and other games.
