Reminds me of the the success of Tap Defense on the iPhone, which was (is?) a really successful, free, ad supported game. Its success funded tapjoy.com, which went on to even greater success and an exit.
Ben & Lee invested heavily in enabling virtual goods before iOS had any infrastructure for it - I think the Tap Defense revenue primarily came from people installing other applications in order to get an in-game feature, not from traditional ad networks like AdMob. And I'm pretty sure Tapjoy still did a seed round of ~$500K or so to get started, although I forget with who.
No arguing that they did have a nice exit, and it's somewhat telling that their acquirer, Offerpal Media, has now renamed themselves 'Tapjoy'. That doesn't happen very often.
