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Monday, January 25, 2010, 11:20 am PT (02:20 pm ET)

iPhone App Store developers find ways to profit from pirates

Faced with a large number of users stealing their applications, iPhone developers have found ways to earn money even from those who pirate App Store software.

Developers of popular iPhone and iPod touch applications Tap Tap Revenge and Shazam were a part of the MIDEM Music Conference in Cannes recently. According to Moconews.net, when Tap Tap Revenge garnered 2.5 million downloads in its first two months, a million were pirated copies.

But Tim O'Brien, head of business development with game maker Tapulous, said many of those pirates now buy legal music downloads from within the game. In the end, the developer is making a profit from many of those who initially stole their software.

"We’ve started running ads to the pirate users more aggressively," O'Brien said. "Some of those users, because we sell virtual goods, have become high-volume users."

Sales from pirates have helped the company to earn nearly $1 million per month. The $0.99 rhythm game Tap Tap Revenge 3 has more than 25 million users and it is one of the most popular titles on the App Store. Tapulous has been profitable since June.

It's also helped Shazam, which sells songs through its music identifying software. Company officials said 13 percent of those who identify a song with their software buy it through an in-app purchase.

The ability to offer in-app purchases through free software was added in October. Prior to that, the iPhone OS 3.0 update gave the capability for paid applications. Developers praised the feature as an important revenue opportunity within the App Store.

This month, one analysis estimated the App Store has lost nearly $450 million in revenue due to software piracy. It said some apps have come with piracy rates as high as 90 percent. Software can be pirated through a process known as jailbreaking, which allows users to run unauthorized code on their handset. Apple and the hacking community have been in a long back-and-forth battle over running unsanctioned software on the iPhone.