[Android Software Development] Chainfire:
I understand your reasoning, and I certainly don't disagree from an ideal standpoint.

However, I think you are putting yourself in the corner of the average user, but from your comment you are clearly not [an average user]. You appear to be an educated user. Somebody who knows what is going on, somebody who knows about security, etc. Apparently somebody who understand that nothing is truly for free, and somebody who doesn't mind paying for an ad-free version if it's useful, too.

If all users (and sites) were like you, there wouldn't be a problem, and there probably even wouldn't be much ad-ware.

This is in my experience however probably as far removed from an average user as you can get. You call me cynical, but it's only experience talking here. I've been in IT for 15 years, I've done the sales, I've done the support, I've done the engineering, I've done the management. I've done most of those things in situations dealing with consumers as well as dealing with businesses. I'm not trying to bury you in credentials or "I know better because blah", but the point is, in my experience what the average end-user always comes down to is that they want the best possible product for the least possible price (free!), and the average user will take an inferior product at a lower price over a better product at a higher price at that.

While it is certainly true that a feature crippled or time limited version could achieve the same effect, it will not have the same initial "draw" as ad-supported has to the general public. Trials and demos have a "nasty taste" psychologically and are quickly put aside by people looking for something. The average user sees an ad-supported version as truly free with a minor inconvenience, they never have to pay up in their understanding. Of course, yes, there are security/privacy risks, but do you honestly see the average user care about this ? They don't even know. You can read about Facebook's security/privacy flaws on Slashdot almost daily, and it's still the most popular website in the world. People don't know, don't care, and they won't do either until it bites them in the ass hard. Extra bandwidth costs and such ? They don't even realize.

What also helps is that many sites, forums, blogs, mobile news sites, etc, also see ad-supported as free while they frown upon the trial / demo / nag wares (XDA is certainly also guilty of this - see the rules, adware allowed, trial / demo / nag isn't, except for the paid software forums). From a marketing and reach perspective there are huge benefits to having an ad-supported version vs. a trial / demo / nag ware.

Not to mention the success stories about ad-supported wares like Angry Birds. Everybody starting out thinks they can score big this way. It takes a few apps for them to realize this isn't the case. In the end, those apps just get written off as a major loss. The ads don't pay enough, projects are abandoned. The number of savvy users like yourself who actually buy software is way too low percentually to warrant further work and development on such projects.

In the end it's a numbers game, and I'm quite certain that if you take the average Android developer who isn't paid by some company to write the programs, the indie developers and whatnot, average payback for the time spent is far below minimum wage. This in turn fills the market with inferior, unpolished, unfinished and low-cost products (this in turn reduces revenue for quality stuff).

Is this all due to adblockers? No. Probably an even larger part is the ecosystem itself and the "air" of Android. People expect things to be free on Android (and ad-supported satisfies this), and for a great many people it is either not possible or really difficult to actually pay for an application. Ad-supported is in those cases the only way to get any payback at all. Let's also not forget that Android app prices are also very very low. And yet still the average user complains about prices for apps that cost less than a single beer at the bar. That beer however, will entertain you for minutes at most (seconds for some ;)), while those apps you might use daily and people spent 100s of hours to make for you. I find it hilarious that right now, it's actually still easier to make money on the WM6.5 platform with ad-free trials than it is on Android any other way :) And while adblockers aren't the bulk of the problem, they are part of it, and so are the attitudes of those who use them.

I think you erroneously put yourself in the normal users camp. It's a common fallacy in the "tweaker" world to take things you know and understand to apply to the average user. Also, security is not an excuse to personally run an adblocker, if ad-free versions are available for $$$.

Went off on a tangent again there, haha :) There's just so much (more) to say about this. That being said, the underlying problem neither starts nor ends with adblockers.