As I understand
ad revenue works once you have a large number of games that relink to other games. Often the truly free games are only commercials to games with other revenue models and to raise awareness of your company.
IAP is my favourite. It get's people into the game(especially if you have comercial games). Though the model of what IAP items are can very from rip off to well designed.
I plan to target to IAP with ads. Ads are removed for a cost :P and then depends on my game. As an example
0.99 - remove ads
0.99 - 4 player access
0.99 - Puzzle mode
or something like that
then my next project is a Fighting game(that's the current plan). Where the IAP covers
4.99 - 1 extra character
0.99 - 1 Piece of appearance(hair style, chest piece, leg piece)
no pay to win items