Yes you can sell your app on the android market with ads. I have several free soundboards, and then I have PRO versions of them, with a ton more sounds and features.
Nobody has complained about there being ads in the PRO versions, they however have not been up for a long time. Only time will tell if people really can't stand ads in a PRO version.
The feedback I have received however has been extremely good.
My suggestion: make a free version of your app, with limited features. Then make a PRO version that costs however much you wish to charge.
Then, once the pro version is out on the market, go into your Admob account and create a "House Ad" that will link to your PRO version. And deliver that ad to the Free version.
When I implemented this House Ad feature in Admob, I saw a sharp increase in my downloads per day of the PRO version!
Good advice Joshua. Of course the common wisdom on this is that if you're going to charge for your app, people don't want to see ads as well. If you're making money with your apps, treat Andromo right - and your customers- by paying the $99 to remove the ads! It makes good sense - and you'll surely have happier customers by spreading the love a bit.
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