The shift to the free-to-play model has tripled the total revenue generated by the 100 highest grossing apps in the Apple App Store, but intense competition has pushed the average number of daily downloads an app will receive to their lowest level since 2010, says Distimo.

Unsurprisingly, Distmo’s latest report found the the shift to in-app purchases has been spearheaded by games, 21 percent of all free games now feature in-app purchases. When looking solely at highly popular games the number rises even higher — 77 percent of the top 300 most popular free games feature in-app purchases.  Distimo also found that over the past two years, the proportion of total iTunes App Store revenues generated by free apps featuring in-app purchases has increased from seven to 68 percent.

While the last two years have been very good for free apps and apps that monetize through in-app purchases, things have not gone nearly so well for paid apps. Although the volume of downloads for the top 200 most popular paid applications has increased by 13 percent over the last two years, the average selling price of a paid app declined by 16 percent. Distimo found the daily revenue generated by the top 200 most popular paid applications has actually decreased by five percent over the past two years.

Although the daily volume of free app downloads has also increased over the past two years, climbing from 7.7 million to 16.8 million among the top 200 most popular free apps, increased competition has meant each app sees fewer downloads than it did two years ago. In June 2010, the number of downloads among the top 200 most popular applications per available app was 15.4 downloads. That number has since fallen to 8.4 downloads, a decline of 45.4 percent.

Another key finding in the report is that while the Unites States has been the largest market for the iPhone since launch, it has become less a significant market over the past two years. The top 10 largest countries for downloads of the top 200 most popular free applications are the United States, China, Japan, United Kingdom, Germany, France, Canada, Italy, Australia and South Korea.

Overall, Distimo’s report confirms what developers should already know from reading our previous coverage: In-app purchases are almost without exception the most profitable business model for a mobile app, but increasing competition means developers should strategize for other countries like China, which is already the second largest market in terms of free downloads.