How to Make Money off Free iPhone Games

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In the future, there will be more opportunities for developers who want to work with a wide range of phones, from Apple's devices to Research In Motion's (RIMM) BlackBerry to the mobile phones of HTC.

Riffing on the Accelerometer

Loodberg, 28, and Alptun, 30, started working on Labyrinth even before they found out they would be able to market it through iTunes. They first developed the program last year for iPhones that were "unlocked," or hacked so that they could be used on unauthorized wireless networks.

One reason they decided to work on Labyrinth was because the iPhone has an unusual technology called an accelerometer, a motion sensor that tracks when the device is tilted one way or the other. The technology is what allows you to hold the phone screen up, drop one side slightly, and send a digital ball rolling to the lower end of the phone. "I showed it to my 92-year-old grandmother, who never used a mobile phone or the Internet, and she immediately understood the game," says Loodberg.

The bootleg version of the game proved popular in certain circles. But it couldn't be loaded onto an iPhone last year without violating the company's terms of service. Indeed, BMB contacted Illusion Labs in November 2007 about designing a game for a marketing campaign. But the client opted to hold off until there was a sanctioned way to market applications to iPhone users. Widespread popularity came only after Apple set up the iTunes Store so applications like Labyrinth could be installed with Apple's blessing.

App as Marketing Tool

While this is one of the first iPhone applications used as a marketing tool, it is certainly not the last. "We have a lot of interest to do free, branded iPhone applications," says Joe Grigsby of VML, an interactive marketing company that has worked with Burger King (BKC), Colgate (CL), and Intuit's (INTU) TurboTax in the past.

"Marketers were hesitant initially. They did not understand what applications would be popular or what the market would be," says Grigsby. "[But now] there are a lot of opportunities. [Advertisers] and agencies see this as a chance to develop original branded content." VML is now working on four different free, branded applications.

As for Illusion's partners, the two Swedes have turned a few heads, even beyond BMB. Loodberg says two companies have expressed interest in buying Illusion Labs, one ad agency and one game publisher. "They realize there is a great opportunity in branded applications. They're not just boring banner ads," he says. Still, Loodberg and Alptun aren't ready to sell, at least not yet. "We would like to stay independent," says Loodberg. "We like to create things that we really like."

Business Exchange related topics:
iPhone
Mobile Industry
Video Game Industry
Apple

Yarow is a reporter for BusinessWeek.

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