This is something I have been wondering about for a while. Is there a good way to transition from a payed app to a free app without hurting your old users? For example you may have an app that cost 0.99 and later want to make it free with just some ads. But of course you don't want to display them for the people who already bought the app before. Is it possible to detect if someone have bought the game before? It should be I would think? :S

The other option is to do a "GAME TITLE FREE" version but it would be much simpler and better to just have the old game become free instead?

The other option is to do a "GAME TITLE FREE" version but it would be much simpler and better to just have the old game become free instead?

A lot of devs do that. 2 different versions.

Sadly, it takes away from your traffic. But on the one hand, it gives you a funnel of free users to potential buy the paid version. The difference is removing ads.

It is possible to check old receipts for when the purchase was made, and enable functionality if the user previously payed for it before it "went free".

We do it for one of our games.

Unfortunatly I don't know exactly how, and the guy who did left for the day, I might be able to ask him tomorrow.

would be much simpler and better to just have the old game become free instead?

Depends on how you implemented your system already.

While some games do split out free and paid versions, that isn't what I normally see.

The iOS ecosystem has Apple-provided 'receipts' that you can download for your app.

The example from Apple's developer library is straightforward:

NSURL *receiptURL = [[NSBundle mainBundle] appStoreReceiptURL];
NSData *receiptData = [NSData dataWithContentsOfURL:receiptURL];
BOOL rocketCarEnabled = [self receipt:receiptData includesProductID:@"com.example.rocketCar"];

New customers who don't have the matching receipt flags get the free version, those with the flags get the benefits.

The multiple apps route is most common although personally I think it's messy especially when the free version lets you pay in-app to turn it into the paid version.

Having your app able to check if the user has paid and use that to control ads would be neater if it's easy to do... what @Shippou says basically. Then you can still add a "pay to remove ads" in-app purchase for anyone who wants it.