There's a common misconception that you can't make money from giving away free apps. This really isn't true. Here's a brief summary of business model's I've seen that leverage the free distribution of content to make money for developers:
1. Freemium content - place a demo / freeware version of mobile software which then upsells to a fully paid version. This has the advantage of encouraging consumers to download the app without fear of bill shock
2. In application advertising - tried and tested by people like Greystripe, HOvr and others. Features ads running either in a wrapped manner (loading and exit screens of the app) or integrated within the app. Money is split between the technology provider, the content owner and the carrier (if they are distributing)
3. 3rd party. Classic example here is Opera Mini. The browser is free for download but any search that a consumer does using this browser is paid for by Google. Google pays Opera for the searches as a way to encourage use of its search engine.
so in a nutshell, just because its free doesn't mean smart developers cant make money from it. As most consumers only keep apps on average 3-4 weeks on their phones and aren't willing to shell out money for apps we believe free apps is the way to go. Then again premium will have a role to play if the content is branded and of exceptional quality.