Microsoft and Nintendo’s announcements at E3 last week show that 2009 is the year that game consoles are going social.

Prior to the show, Microsoft had been talking about making its Xbox Live platform more social with the “New Xbox Experience.” But the addition of Mii-like avatars did little to create the community the company wanted. The company conducted various surveys to gain information that would help it make its avatars better.

Microsoft revealed more information about its progress during E3, with the Avatar Marketplace on Xbox Live. Using the Microsoft Points virtual currency, users will be able to download goods based on both first-party games, like Halo or Fable, as well as third-party titles such as Splinter Cell.

Virtual goods will vary, from branded clothing to usable props (toys, pets, etc). Microsoft also announced the addition of fashion lines of clothing for the avatars.

All of this, of course, was in addition to Microsoft’s announcement to bring Facebook Connect to Xbox Live as soon as this fall with Tiger Woods PGA Tour 2010.

One of Microsoft’s chief competitors, Nintendo, also made a rather significant announcement. Nintendo announced the integration of Facebook Connect with the Nintendo DSi, and stated a release date earlier than Xbox’s similar announcement a day earlier. This will mark the first Connect integration to go live on any gaming console.

The announcement was made by Nintendo’s EVP of Sales and Marketing, Cammie Dunway. Through Facebook Connect, Dunway says players will be able to upload and share photos using the DSi‘s built-in camera and interactive lenses.

“Nintendo continues to challenge how both new and longtime players perceive and play video games,” Dunway says. “We are continuing to add entirely new dimensions to the video game experience.”

The new features will be available this summer, and with them comes a new milestone in the evolution of social gaming.

[images via Gamespot]

It was only a few days ago that the game Spymaster came to Twitter. With its arrival came the issue of tweet spam and a backlash towards Twitter itself and its lack of filtering options. It was the opinion of many that this would be needed when, not if, similar games were made available, and sure enough, there is already another.

The game is 140 Mafia from a team called Lolplaying, and it is a text based RPG like Mafia Wars, but in this case, is tied into Twitter. Players sign in using their Twitter account, and are presented with a relatively familiar interface that holds all of the essentials (jobs, fight, equipment, property, etc).

As you may have guessed, players select the type of mobster they want to be and level up through experience primarily garnered through Jobs. Of course, each job done requires a bit of energy and players have to wait for it to recharge before they can continue doing more. That isn’t to say you can’t keep playing, as this is where the usage of Twitter begins to come into play.

Like most social network RPGs, 140 Mafia allows you to grow your mob by recruiting friends (or in this case followers) and fight one another. Here is where things can get ugly. You see, this game, like Spymaster can be both very viral and obnoxious at the same time. When someone fights you get sent a message, then when you fight another player, you automatically send out a tweet. Doesn’t seem like a lot, but there is still much, much more.

This particular title encourages the automatic tweet settings, enticing players with 1% extra income for each tweet type they leave on. That said, players can choose to tweet everyone when they level up, purchase an item, purchase property, earn a badge, complete a job, or fight another player (as well as receive direct messages based on another group of settings). As any avid veteran of such RPGs could tell you, some of these are done very frequently, and if there is a tweet going out every ten seconds because you decided you wanted to buy a knife, then this tweeting idea is going to quickly devolve into spam.

We have already seen a backlash from Spymaster (more so for Twitter’s lack of filters than for Spymaster itself), and it is very likely to have a similar one with 140 Mafia. More of these types of games are coming, so if Twitter wants to be become as large and robust as it claims, it’s going to need to handle the issues these two titles have brought to the forefront, and soon.

A little less than a month ago, we took a look at SGN’s preview for its unnamed jet dogfighting game for the iPhone. Though it was merely a short demo, it was truly astounding graphically, and could easily compete with any of the mainstream handheld consoles such as the Nintendo DS or Sony PSP.

Well, SGN has announced the game is live and it actually has a name this time. The title is F.A.S.T. – Fleet Air Superiority Training, and it is every bit as cool as it looked in the preview.

Unlike the simpler motion found in past titles, this aerial simulator not only has impressive, full 3D graphics, but also takes full advantage of the iPhone’s accelerometer, with the ability to fly using the actual motion of the phone itself. Sure, it takes some getting used to, and is a bit challenging at first, but once you get it down, it is significantly more fun. Furthermore, and perhaps one of the best features, the game has live WiFi dogfights that consist of 1v1 and 2v2 battles.

SGN has also stated that further features will be added once iPhone’s OS 3.0 becomes available this summer. So far, there are two major features coming in the near future, one of which is the ability to purchase items and supplies for your various aircraft. However, this is miniscule compared to the event SGN says it has planned.

Apparently, along with the OS 3.0 launch, the game will launch a global dogfight war that makes use of 3.0’s capabilities. Players can pick sides in the battle and it will be supported with live voice chat, and tactile feedback (such as vibrations) that responds to actions occurring around the player‘s vicinity.

Check out the game play video here.

Zynga, one of the largest developers of social games across all major platforms, today announced that it has recently added five new members to the executive team. The new hires include Reggie Davis, Robert Goldberg, Vish Makhijani, Colleen McCreary, and Mike Verdu.

With nine years experience at Yahoo!, Reggie Davis will be joining the team both as general counsel and overseer of Zynga’s legal department. Previously, Davis was an associate general counsel for Yahoo! as well as vice president of network and exchange operations.

Also joining is Robert Goldberg, taking the title of senior vice president of business operations with responsibilities over revenue management, marketing, and studio services. Goldberg has 25+ years of senior management experience in media, e-commerce, enterprise software, and venture capital firms.

Vish Makhijani is to be senior vice president of Zynga’s casual and mobility group. Formerly the CEO of Russian search company Yandex as well as senior vice president Yahoo! Search, he will be focused primarily on web and social network opportunities.

Finally, Zynga will also be adding to its roster of former Electronic Arts employees with Colleen McCreary and Mike Verdu. McCreary will be coming in as the new chief people officer, while Verdu will become vice president of game development.

Last week played host to the release of a new Twitter-based game from iList called Spymaster that has spread very quickly in the last several days. If you haven’t already heard of it and you’re on Twitter, you will soon.

Spymaster brings to Twitter many of the text based RPG elements we have seen in past games like Mafia Wars and a bit beyond. Like the Facebook/MySpace game, players get in-game currency, perform tasks, buy gear, and most importantly, assassinate other spies. As players perform actions such as tasks or assassinations they use up energy, and if you fail in the latter, lose money as well.

Players can also join various global spy networks such as the CIA, British SIS, or Russian FSB. While this seems arbitrary, the developers actual have currency that is unique to each faction; currency that can be “wired” to other players regardless of network using the current international exchange rate.

In addition to currency exchange, Spymaster further differentiates itself through its use of Twitter’s core function, tweeting. Whenever you perform important actions within the game, it automatically tweets your followers. Some tweetable actions are black market purchases, securing a safe house, leveling up, and assassinations. Each of these can be turned on or off by the player, but every action tweeted can earn you extras such as more money.

Though this isn’t required, it is encouraged, and that leads to a serious problem that has developed for Twitter since this game was made public. Even if players limit what they automatically tweet, the amount of status updates begins to pile up quickly, turning an interesting idea into obnoxious spam.

If Twitter truly is trying to make itself a more robust system, then it absolutely needs filtering systems that will block specific hashtags or keywords. Sure, there are third party apps that can help, but that is in no way going to be enough in the long run.

Former Digg lead architect Joe Stump shared some thoughts on the steps he has been forced to take to alleviate this spam issue. According to Stump, he has had both unfollow and report a number of users to @spam as he has had “no other recourse to stop this application’s abusive behavior.” He goes on to compare it to the same issue caused by the game Zombies during early Facebook years that caused almost identical problems for users’ streams.

According to Spymaster co-founder Eston Bond, however, “[the] Backlash has been pretty minimal. Some people find Spymaster noisy but I’m amazed at how many people defend their tweeted spymaster actions to others.”

Spymaster will not be the only game of this type, and once more of its kind surface, the backlash here is going to compound exponentially. Twitter will be forced to take action if it has not begun to do so already.

Internationally, little has been done to establish laws around virtual currency. Just a week ago, however, a Chinese man in the Liaoning province was charged and sentenced for the extortion of virtual goods and currency within a local Internet café.

According to the Xinhua news agency, the man, along with three others, assaulted another man in the cafe, forcing him to give up various virtual goods and 100,000 yuan ($14,700) worth of the virtual currency known as QQ coins. The coins are the currency utilized by the major Chinese web portal, Tencent. It is used for the purchase of online goods and premium services for supported titles.

The sale of virtual currency within online games is a commonplace business within China. The QQ coins, like most other virtual currencies, cannot be converted back into real legal tender. Thus, the only way to turn a profit is through second-hand sale.

Based on reports from +8* | Plus Eight Star, more than 300 million people currently are playing online games in China today. The virtual goods market, as a whole, hovers around $2.8 billion, and Tencent alone accounts for approximately $1 billion of that total, with 90 percent of its revenue coming from virtual goods.

Despite the clear financial value, no law exists in China to protect virtual goods or currency. This case set a new precedent: The court ruled that the victim should be protected because he spent money on the extorted items. Under the ruling, the three men who assisted in the crime were fined. The primary defendant was sentenced to three years in prison.

This marks not only a significant precedent for Chinese law, but for the legal treatment of virtual goods worldwide.

Today, IMVU, the avatar-based social network and virtual world with over 35 million users, announced a  new partnership with Offerpal Media, a provider of monetization and advertising for social networks and virtual worlds, Now. IMVU will offer a new way for players to earn free virtual currency through the use of Offerpal’s targeted offers, trials, and surveys.

In five and a half months or so since receiving $10 million in funding in a round led by Best Buy Capital, IMVU has grown by nearly 20% from the 30 million registered users reported at the end of January. At the time, the company said that it was generating around $1 million in revenue each month, a number it hopes to increase.

“We implemented Offerpal to further monetize our user base,” says Kevin Dasch, IMVU’s Vice Preseident of Finance and Business Development. “This platform provides yet another way for our loyal members to obtain IMVU credits, our virtual currency.”

IMVU users can use the world’s virtual currency to purchase over 2 million items (developed by over 100,000 developers) from IMVU’s digital goods catalog including clothing for avatars, props and furniture for rooms, and other premium services within the 3D world.

As social games and virtual worlds mature, developers are increasingly turning to “managed offer networks” like those from Offerpal, Super Rewards, Sometrics, Gambit, and Peanut Labs Media to assist with virtual currency monetization. Many developers are doing quite well as the space continues to expand rapidly in 2009.

Last month we profiled new start-up building games for the iPhone called Portable Zoo. Started by EA veteran Don Traeger and four associates from his days at THQ, the company has been making headway with two games already under its belt: Letter Bug and Quick Turn. We recently spoke with Traeger to hear more of his thoughts about where the company has been, where they are, and where they’re going next.

[Inside Social Games] Thank you very much for taking the time to chat with us. So we have to know: Coming from a company like Electronic Arts – how would you describe the experience since then? Just how different is iPhone app development?

[Don Traeger] Well….so far the games we are doing for the iPhone are a lot less complex than the high-end console games depth of games like EA Sports titles! Instead of years and 20-40 million dollar budgets we are doing games in a matter of weeks or months. And, I think they are a lot more fun for your average player!!

I kind of think of the iPhone as about equivalent to the Sega Dreamcast. However, for the casual mass market, games are less sophisticated than those titles were. At Portable Zoo, we would eventually like to “up the ante” on the sophisticated side and are working on some pretty mind blowing proprietary technology.

Another neat differentiator for me is that with iPhone games you are always in touch with your audience. You can put games out and get feedback, update and tweak. Really cool. As an ex marketing research guy…..I love the contact and feedback from users.

[ISG] Very true, we’ve seen a number of good games become great through iteration and feedback. That said, what can you tell us about the design process for a game such as Letter Bug? Obviously with EA Sports titles, you did a lot of iterative development year after year, but I’m sure it felt a bit stifled.

[DT] What I love most about what we’re doing at Portable Zoo right now is that we are a totally independent entity making the kind of games we want to make with no interference. Letter Bug was really a game of passion for the guys and our Chief Creative Officer Matt Winalski. In a bigger Publishing-type environment ….who knows, that game might never get made? (And we reached #2 in Word Games just behind the mighty EA with Scrabble!!)

[ISG] When we last checked in on Portable Zoo, you had said that the business has changed “drastically” toward platforms like the iPhone. How do you feel that shift is taking place so far?

[DT] Yeah, the paradigm shift I really see happening (and have observed over the past couple years) is that the old high-end console model is broken. Too many high priced games coming out and not enough interest. Especially in this economy, how many $70.00 retail games can kids afford to buy and how many $60 million budget games with 5 million unit breakevens can publishers really afford to do? It has really gotten pretty insane. And, this was happening even before the economy went south.

Of course, you also have the coming shift to digital distribution and the advent of the iTunes App Store. All this is kind of happening at the same time and when this happens, you usually get these sudden turns or paradigm shifts in industries. Like the music business in the 90s, I think this is happening to our industry right now. And free, $0.99 or $1.99 games on the iPhone is a great response to that!

[ISG] Any predictions on the path it might take further down the road?

[DT] I don’t have a lot of insights or predictions on where all this is heading. But, there are a few things I’m excited about. I’m eager to see the new iPhone products in early June. We have been working with OS 3.0 now for a while and I’m really stoked about the ability to handle micro-transactions from within your game. This will be awesome. Apple has continued to do things that help game developers and from within the App Store, I’m really enthused about how that is evolving. We are also keying in to the social networks and are interested in expanding our community of players through the network and web. Last month we introduced Global High Scores to our games and also post IPhone High Scores to our web page. PLUG!! http://www.portablezoo.com/

[ISG] You’ve said previouslt that Portable Zoo was self-funded but was looking for some new outside financing. Have there been any developments along those lines?

[DT] Yes. Things are moving along. We are in active engagements with the investment community. I’m working closely with a firm right now out of San Francisco and we should have some news on this front very soon.

[ISG] So with this new funding, what sort of growth are you expecting over the course of 2009?

[DT] Through 2009 we are looking at growing from our current 5 person start-up to around 15-20, and ultimately, probably 50 people or so. Mostly development and marketing folks.

[ISG] For having only five people at the moment, you guys are certainly on the right track considering the popularity of your iPhone titles. What lessons have you learned since releasing them? Would you have done anything differently?

[DT] We are really happy with the initial launches of both Letter Bug and Quick Turn into the iPhone app store. They are fun games and we are learning a ton about this new market. I’m still blown away that with zero marketing budget Letter Bug blew through the word game charts and made it to #2 for several weeks behind only EA’s Scrabble. For 5 guys in start-up mode to be chasing EA in the game charts? As Don King would say: “Only in America!!”

The key thing we have learned is that when you release a game into the iPhone marketplace, you are always in contact with your players. You can listen to them and make improvements and tweaks as you go and end up with an even better game. We have recently added direct feedback buttons to our games. This has really improved our ability to work directly with our customers. I love the connection to players.

The other lesson we have “learned” that we knew going into this: Marketing is hugely important in this marketplace. You can’t very well drop games into the App Store without a sound marketing strategy. This is crucial.

[ISG] The irony with Letter Bug chasing down EA Scrabble is that you only had a one month turn around. Obviously, that’s not something that you always want to do, but there have been a number of new third party tools appearing lately (like OpenFeint, Greystripe, Raptr, SGN cross promotion network, Scoreloop). Have you had any thoughts about using these tools?

[DT] Yeah, Letter Bug was about a month or so in development. Quick Turn was more like 2 weeks!! Our engineers, Chief Technical Officer Rob Marr and Principal Programmer Mark Blattel have been doing sophisticated gaming tech on mainstream consoles for years. They have built a complete proprietary 3d engine and toolset for Portable Zoo, so we have no need to use other engines or tools or anything, in fact, we are looking at possibly licensing out our dev stuff for other developers to use. It is really great tech.

As far as some of the other distribution and advertising type support, I have talked to a few people there and I think we will be working this into our release strategies in future games.

[ISG] Word on the street is that you are currently working on some new 3D titles may be on the way. Is there anything you would be willing to share?

[DT] We have some killer 3D tech and some great looking demos. But nothing we can really show yet….you’ll have to trust me on this…..we have some incredible technology and games in the pipeline!

On the more casual side, we also have some fun new faster game apps coming out all the time, so keep checking PortableZoo.com for what’s new!!

[ISG] Hmm, more teasers I see…. Well, will any of the new titles play more directly into some of the hot topics of today? (Especially social connectivity using Facebook Connect and Twitter?)

[DT] We love the social connectivity of the iPhone. We’d like all our games to take part in the social computing revolution. Even our first games, with global high scoring and website score posting work this a little bit. You will see our games integrated more and more with the current social gaming trends….scoring and other messaging between game and Facebook, Twitter, etc. Yeah, that is really cool and fun stuff.

From a technical end, our main drivers on the social gaming side have been Ken Proudfoot, our Technical Art Director and our Assistant Producer, Lindsay Haven. We have made some headway here, but as we grow and take off, this area will be key for us.

[ISG] You also mention that new titles will be available on more than just the iPhone. What are some of the other mobile platforms you have in mind?

[DT] Right now we are solely focused on iPhone. And it will stay that way at least for the foreseeable future. We always keep abreast of what is happening out there in the real world….so, you never know. Or course, we watch what is going on with Blackberry and gPhone and potential new Palm devices. Online, web- based stuff is also interesting to us. Heck, I’m still a big fan of the PSP and the new DSI.

[ISG] All very cool stuff. But before we wrap things up, one last question: What is the future for Portable Zoo? Any thoughts on what is beyond the iPhone?

[DT] Our company is 100% focused on mobile gaming for high-end platforms. And, right now for us that means iPhone. I want Portable Zoo to become super-successful on the platform and really deliver top-notch games that look fantastic and give our players hours of fun. When we achieve this we can look at expansion and other potential areas for growth….but for now, iPhone, baby!

There’s an old saying that goes something like this: Hidden inside of every blessing is a curse.

And the greatest blessing of Social Game to developers is this: You can deploy any revisions to your game to 100% of your audience at any time.

It’s an incredible amount of freedom compared to how things used to work, and it’s a switch that separates social games from almost every form of game development that’s come before it.

When you compare it to way things used to be, the repercussions are fairly staggering. It wasn’t that long ago that you were shipping into the retail void, crossing your fingers that your audience would find you, and praying that you’d get some good reviews and word of mouth.

And then, if your game sold, you were stuck trying to find a way to deploy new versions to deal with bugs or play issues, with every minor change demanding a major new release before you moved all your resources into creating a sequel that would both fix all the issues with the previous produce, while creating a whole host of new ones.

But with social games that all goes away. You’re releasing constantly, and with every new version you can be absolutely sure that 100% your users are working on the same version of the software. You can even release a games “sequel” simply as another update.

For developers who are coming from the web side this may seem like business as usual, but for those of us coming from “traditional” game development this is a fundamental shift. And at first it seems like a dream come true, but there also isn’t a developer I’m speaking with who doesn’t have a list of fixes, updates, and features that’s far, far out ahead of the actual production time that they have to do the work in.

That means what we used to call “planning” now becomes “prioritizing”. Not only are internal pressures like infrastructure, monetization, and virality fighting for resources, but your audience is well aware that if they’re squeaky enough they’ll get the grease they’re looking for. In the constant deployment environment there is no “gold master”, and the only time your game is complete is when there’s no one playing it anymore.

It also means that everyone is working at a breakneck pace. Rather than shipping a game and taking a deep breath, your work has only just begun.

But one thing does remain similar to the old school development philosophy—building and relying on your underlying practices and structures is the best way to optimize your development strategy. Is your asset pipeline strong? Do you have a good set of processes for determining both the priority of work to be done and a way to quickly and effectively analyze the results?

And just like the old days, it’s easy to ignore the long-term value of building best-practices for the short term value of getting stuff out there as soon as possible.

Andrew Mayer is a Social Gaming and User Experience Consultant with over seventeen years of experience in the games industry.

Inside Social Games extends a big thank you to our fantastic sponsors for supporting the continued growth of Inside Social Games. Check them out below!

Offerpal Media is a leading managed offer network for social applications and online merchants.

Social Gaming Network (SGN) is a leading global development platform for social game distribution.

Zong is a leading provider of mobile payments serving the digital content, social media, and gaming industries.

Super Rewards is a leading monetization solution for applications and games running on social networks like Facebook.

AdParlor is a leading advertising network designed specifically for social networking sites.

Kramaley Games is a leading developer of social games on Facebook.