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How to Make Money off Free iPhone Games

Can developing free software for mobile phones be a business? It can if you’re Illusion Labs, a fledgling company in the Swedish port city of Malmö.
Illusion Labs was started a year ago by Carl Loodberg and Andreas Alptun, who had worked together at another Swedish company called TAT, designing software for companies including
Samsung and Nvidia (NVDA). They set up their own company so they could concentrate on developing applications specifically for Apple’s iPhone. “When the iPhone came out, we were excited about the big screen, the graphics chip, and the good components,” says Loodberg. “We thought it was an opportunity too big to pass up.”
It looks like they were right. The first game they developed has become one of the most popular pieces of software for the iPhone. The game is called Labyrinth, a digital update to the old wooden box on which you maneuver a small silver ball through a maze while avoiding cut-out holes the ball could plunge into. The game, which is available for free from Apple’s (
AAPL) iTunes, is being downloaded 80,000 times a day, according to Loodberg, and is getting rave reviews from users. “Controls extremely precise,” wrote one person on iTunes. “Smooth, very fluid, and is realistic,” wrote another.
While the game is free, its success could mean rich rewards for Illusion Labs. The company is selling a souped-up version of the game, which is also quite popular, for $6.99 on iTunes. More promising, advertising agencies have contacted the company to develop variations on the game with the logos of advertisers embedded in them.
Marketing and Mobile Phones
Already, Illusion Labs has designed a game called iPint for Carling beer, with the London-based ad agency Beattie McGuiness Bungay (BMB). In iPint, an iPhone user tilts her phone to guide a beer down a bar through a variety of obstacles and into a waiting hand. Once the beer arrives at its destination, the screen changes into a pint glass with Carling’s logo on it. It then fills up with a virtual beer, which disappears when the phone is tilted to simulate drinking from a glass. Loodberg and Alptun won’t comment specifically on how much they were paid for the work.
This is a new era for marketing and mobile phones. In the past, phonemakers including Nokia (
NOK) and Motorola (MOT) and wireless operators such as AT&T (T) and Verizon Wireless (VZ/VOD) kept tight control over what people could do with their mobile phones. That’s changing now, as wireless players let customers install new applications on their phones and go where they want on the mobile Web.
Apple, whose phones are sold exclusively through AT&T in the U.S., has been at the leading edge of the trend. When Apple announced its iPhone 3G last month, it also unveiled the iTunes App Store, which lets any independent software developer market its products to the phone’s users. Already, there are more than 1,000 applications being offered by developers, from Illusion Labs to Major League Baseball to eBay (
EBAY). Other wireless carriers are following the approach of Apple and AT&T. Verizon Wireless has said it will open its network to outsiders. 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.
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