Should I promote (with ads) the paid or free/lite version of my iPhone app?

There are sources to let your user upgrade through a sponsorship.

If you are truly committed to a paid model, promote the paid version in a way that will help it's discovery in App Store Search and increase the chance a user will download it when they see it. The best way to do this is to first pick the right keywords and then make sure your app receives reviews and ratings early on.  Reviews and ratings directly impact how your app ranks in search. Work with a service like Gnome Escape to market your app (they focus on reviews, ratings and downloads) and are compatible with paid apps. Free apps (in my experience) get a lot of freeloaders who don't want to pay and don't convert.  Focus on driving the good traffic who will open up their wallets to you :-)

Why do you have 2 versions? Keep one and focus your marketing efforts there. Freemium Model: Pros- Attracts a lot more users You can have a FB or G+ login on launch to build your Customer DB Generates Ad Revenue Generates IAP revenue Cons - If your content/feature is not compelling enough, it will be difficult to funnel users to a IAP Paid Model: Pros- Get quality paid users Build a paid user Customer DB Cons- Low user volume Ads: It works for both free and paid apps but it depends on a lot of things 1) Quality of the app 2) Quality of your marketing copy and graphic 3) Ability to target the right market with the right message 4) Impression/Offer you make in the marketing copy 5) Impression/Offer you make in the App Store metadata(Icon, Description, Screenshots, Ratings and Review, Price point) I prefer to use FB and Twitter mobile app install ads. Reason: It has targeting options and Admob is blind(Run of the Network) Irrespective of which ad network you use, you need to be able to accurately measure the effectiveness of your campaigns (Clicks, Installs, Post Install Purchases) For Campaign tracking, you can use FB SDK or  http://www.mobileapptracking.com/ SDK if, using multiple Ad Networks. Final Note: When you are targeting users via ads measure its effectiveness by 1) Installs 2) Purchases 3) Ranking elevation due to paid ads resulting in more organic downloads. 4) User email acquisition 5) Spike in ad revenue Afterthought: https://itunes.phgconsole.performancehorizon.com/login/itunes/en_us/ does more than earn commission for you. For organic marketing activities like Forum Posting, Blog Posting, Social Media activity, Email campaigns, Cross-Promotion within your apps etc, there is no straightforward way to measure the traffic you bring to your App Store landing page, unless you have a third-party SDK within your app. With iTunes PHG affiliate program, you can create multiple affiliate links for the same app and use those on different channels to see which one brings the most traffic to your App Store landing page.

Advertising paid wont help for paid version. Do it for free version you will see 8-11% or more downloads. For paid if you want better ranking go through offerwall. Why you keeping two versions. Should be only one free with IAP. Two versions not good for many reasons