I'm actually the owner of the blog @Mona mentions, and thought I'd chip in with some feedback about the current state of things.
To answer the question - Yes, ads can be profitable for your average Android app. It all depends on how much capital you're investing in the app.
If all you're putting into it is your time, and you're getting a few thousand people with 15-20 minutes per day total usage, you should be able to make a decent profit. Here's a few quick calculations for you:
- 15 minutes per day = 900 seconds
- 90 second refresh rate for ads = 10 ads per person, per day
- 2,000 daily users = 20,000 daily impressions (assuming 100% fill rate)
- eCPM of $0.70 = $14 per day
- $14 per day = $420 per month, or about $5000 per year
Some caveats with these calculations though:
- 15-20 minutes is a long time for somebody to spend with your app. Most casual apps only get about 1-2 minutes average visit length.
- You'll never get 100% fill rate on your ads, so figures will be slightly less than this. However, with AdMob I've achieved >94% fill rate, which is close to 100%.
- Your eCPM will always vary, depending on ad network, time of year, and CTR. In my experience, $0.70 is a safe bet if you're doing things right. Some developers are actually getting over $1.00 eCPM, which would bring these figures up to $7000/year.
If you're chasing more info from actual developers regarding eCPM and level of profitability, you could checkout the Income Reports forum on my website. A number of people are sharing details here about their own earnings with moderately successful Android apps.
Velti also have an interesting "State of Mobile Advertising" report which covers many of these details on a global scale.