Tap’s Revenge: Profiting From Pirates; Shazam Booming, Too

iPhone app piracy may have cost Apple (NSDQ: AAPL) an estimated $450 million (really?) – but mobile pirates may also provide app developers with a rich new income stream, according to a fascinating insight from the stage at the Midem music conference in Cannes…

Rhythm game Tap Tap Revenge saw 2.5 million downloads in its first two months – but a million of those were pirate downloads, Tapulous business development head Tim O’Brien told delegates.

But that’s okay. “We know who they are,” O’Brien said, adding that many of the pirates are now buying virtual goods and legal music downloads within the app.

We’ve started running ads to the pirate users more aggressively. Some of those users, because we sell virtual goods, have become high-volume users.” Now Tapulous has 25 million unique users and has been profitable since June.

Panelists – from music labels and the mobile app world – were united in their affection for in-app purchasing, which they said gives publishers more pricing flexibility than app stores’ billing engines allow.

For one music app, it’s proving remarkably successful. Shazam is now identifying two million songs every day and is converting 13 percent of them in to actual song purchases, CEO Andrew Fisher said. In other words, Shazam is sending a whopping 260,000 paying customers every day to affiliate partners like iTunes.

“And it’s growing,” Fischer said. Already beyond 50 million users, it’s picking up another 750,000 new users every week. “When we launched Encore (the new premium version), we haven’t seen one single instance of piracy, which has surprised us given how much we’ve shipped in to the marketplace.”