Jan
1
2010
The Quest for the Killer App
Author: Alberta VentureTake the world’s most popular smart phone, a month of coding and a viral marketplace, and you’ve got a (slim) shot at a ballooning, US$2.4-billion prize. Welcome to the frenetic world of iPhone app development
by Duncan Kinney
It’s the middle of October and 30 people have gathered on a weekend in an old classroom at the University of Calgary. They are here to discuss esoteric concepts like how to program a game in cocos2D and how to plug memory leaks. Called the yyc iPhone DevCamp, the two-day-long workshop brings together an emerging community of software developers who specialize in making games and other applications for Apple’s iPhone. The crowd ranges from experienced developers with successful apps under their belts to neophytes to representatives from WestJet Airlines and the Telus World of Science. The iPhone dev culture is putting down roots in Calgary and those roots are about to get deeper.
Jon Lam is at the camp wearing multiple hats: participant, sponsor, talent scout and pitchman. Lam is the CEO of Ph03nix New Media Inc., a small but successful casual gaming company based in Calgary that takes its name from Lam’s gaming handle. His most recent venture is more ambitious: the iPhoenix Fund, a micro-cap fund that is targeting the entertainment and casual gaming space on the iPhone, aiming to get in on an exploding niche for applications for the popular smart phone. The goal is to produce 133 apps over the next three to five years.
Since September, Lam has been pounding the pavement raising $700,000 in $5,000 units. His eventual target is $2 million. In his sales pitch, Lam has a quotation that he brings up time and again: “There are two kinds of people: people who love to gamble and people who love money.” The line is from legendary poker player and gambler Amarillo Slim. Lam loves Slim.
“The iPhone market seems like gambling to a lot of people. It’s very, very hit-driven and people can’t make sense of it. But what Amarillo’s lesson is is that if you apply the right strategy and the right math to it, you can make sense of the chaos,” says Lam.
The idea for the fund sprang from a beer meeting in late July at Earl’s Tin Palace with business partner and iPhone developer Michael Sikorsky. Both wanted an iPhone division but Sikorsky wanted one that would scale. The problem was risk. iPhone apps have a notoriously short shelf life and, like any entertainment audience, the customers can be fickle. By investing in different developers and different games, a technology development fund can spread out the uncertainty inherent in betting on just one team or one game to hit it out of the park.
The iPhone platform has created a staggeringly large, self-contained economy in just the two and a half years it has been around. According to mobile advertising company AdMob, the iPhone app economy is worth around US$2.4 billion a year. Developers have created more than 100,000 apps and users have downloaded more than two billion copies. Flight Control, one of the most successful iPhone games, has enjoyed more than 1.5 million downloads at 99 cents a pop. Not bad for a program made in an Australian developer’s spare time – on nights and weekends – over a two-month period. In that game, you juggle the flight paths of giant airliners, single-engine aircraft and helicopters and land them on a skinny airstrip. Alberta companies such as MoboVivo Inc. and Multiplied Media Corp. are likewise generating revenues off iPhone apps.
Under its licensing agreement, Apple Inc. takes 30% from every transaction, then the iPhoenix Fund will split revenues 50-50 between investors and the marketing and development teams. By Lam’s calculation, if the fund raises the full $2 million, there will be $6,917 for the development of each app with another $6,917 for marketing. Third-party developers only get to start to negotiate on 35% of the potential revenue from their games. Developers can negotiate for more payment up front and less revenue sharing or less payment up front and more of the back end.
iPhoenix plans to attract talent with help from the people behind BlueUnit Studios Inc. Acquired over the summer, the company started by Craig Rushforth and Dan Kratt developed Sally’s Spa, an iPhone hit game where the eponymous Sally performs facials, hot stone treatments and massages. Rushforth and Kratt will provide feedback and shepherd developers through the game-making process.
