So far in Zynga’s offer re-rollout, it has launched with two companies that we know of: SocialVibe and Offerpal. We covered SocialVibe’s brand offer ads earlier today, now here’s a look at what Offerpal is doing.

Its offer wall is now up on virtual restaurant game Café World — the second-largest game on Facebook, with more than 30 million monthly active users — as well as on one of Zynga’s smaller titles, role-playing game Vampire Wars. The walls on both sites include the advertisers that Mark Pincus mentioned last night on his blog: Blockbuster, GameFly, Netflix, Book of the Month, The New York Times, Discover, Snapfish and HSBC.

These advertisers are the high quality ones that have been running through Offerpal and other offer providers. As with the lower-quality offers that many offer companies also used to run, they’re derived from online advertising networks far removed from Facebook. Zynga removed all offers two months ago.

Offerpal’s existing features are present. There’s a button that pops out a window showing you what offers you’ve taken and are waiting to redeem points from. Each offer includes text explaining the terms required to earn the points. The Discover offer, for example, says that “Cafe Cash awarded ONLY on approved applications. Allow a minimum of 10-14 business days for your application to process and to receive your Cafe Cash if your application is approved.”

All of the offers appear to be hand-picked, at this point. Offerpal has talked in detail about its efforts to filter out bad offers, so has Zynga — the latter company has set up its own team and technology to independently monitor the offers.

Offerpal has previously said it has many more offers it considers high-quality, so we expect those to gradually appear in this interface. While the company has faced heavy criticism for the quality of some of its offers in the past, what we’re seeing today shows it has made a lot of progress. Convincing the largest social gaming company to add it back is a big win.

It has been months since the first release on the iPhone of SGN’s air combat game Flight Air Superiority Training, or F.A.S.T. But the company decided to make it free just before Christmas, along with another new flight simulator called Skies of Glory, so we decided take a closer look at their game-play and monetization.

Like most flight simulators, these two boil down to a few core details. In FAST, you’ve got a jet, and you’ve gotta blow some stuff up — other jets, ships, villages, and so forth. Swap out your missiles for machine guns and a constantly droning prop, and you’ve got the World War II planes of SOG.

Turning is mainly accomplished by tilting your iPhone, while a handful of buttons on the periphery control speed, attacks and so forth. The plot in each is also standard fare, although each game comes with missions and something of a skeletal plot for people interested mainly in playing alone; FAST has also gone through two major upgrades since its summer release, adding some variation to the play.

It’s in the gameplay and graphics that FAST and SOG really succeed. Once you know the few controls in the games, either through the tutorial or guesswork, the learning curve is only a few minutes. Visually, these simulators look good; the ground mostly resembles a fuzzy blur, but that’s true if you’re looking out of a plane in real life, too. When you get a close-up of the enemy or a glimpse of your own plane, both are always crisp and clear.

Two drawbacks should be noted. One is that making sharp turns can have you twisting and turning the iPhone to the point that the screen is difficult to make out. The other is that, especially in multi-player missions, the constant turning of your enemy to evade being targeted can make dogfights drag on frustratingly. These are a problem for the whole flight sim category on the iPhone, though, not just SGN’s games.

Small irritations aside, these games are pretty fun — though SOG has a leg up over FAST, in my judgment. That’s partially because SOG is the company’s second try at the flight sim category, giving SGN a chance to improve on the gameplay, while still giving players the chance to pick which they prefer.

SGN’s new chief operating officer, Randy Breen, also thinks SOG offers a better experience. “Prop planes that move slower and get closer are much more engaging in terms of the gameplay,” he says. “When it’s jets fighting, things happen fast and from a long way away. I think it was just obvious to us that there was an opportunity for a dog-fighting game, and it offers a better multi-player experience.”

The catch is that FAST is a more developed game, with in-game currency that lets you “buy” more alternate planes and missions for the price of playing a few times. For now, it appears that all the extra content in SOG has to be bought with real money.

Which content you’ll want will depend heavily on how social you are, as a player. While buying all the available add-ons for either game would cost well over $20 each, more than double the price of an expensive paid app, Breen says that most players will tend to gravitate to either a single- or multi-player experience.

Those who opt for single-player will spend a few bucks to expand the length of the game with new mission packs and variations of the core plane-fighting experience, like naval battles. People playing against other real players, on the other hand, won’t care much about missions, but are likely to spend money on new planes, weapons, armor — small purchases ranging from 99 cents to three dollars that will add up to a significant advantage over other human players.

Given the close timing of SGN making its games free and other flight sims coming onto the market, it might appear that the company was responding to new entrants like Tom Clancy’s HAWX and Laminar Research’s X-Plane simulator series, which are respectively $6.99 and $9.99 up front. Breen says that’s not the case.

“HAWX hadn’t come out when we submitted our latest version of FAST,” he told me. “The short answer is that’s not why. We could have continued down the path of introducing singular product and fixing a price and sequeling the product over time, but frankly I think that’s an old model of product development.”

The virtual goods model, in which players get the basic game free but pay for upgrades, is fairly new to the iPhone; Apple only made the necessary changes in mid-October. But companies like SGN and Ngmoco have been quick to jump on board.

Even though FAST reportedly made about $2 million as a paid download, being free offers it access to a much larger audience of potential buyers, and more earning potential over time. Ngmoco, for example, quickly hit the list of top grossing apps in November with its shooter Eliminate Pro.

Down the road, SGN might eventually offer another flight sim, but for now it only plans on rolling out periodic updates to FAST and SOG while it concentrates on other game genres. “I see lots of areas in the marketplace where there’s opportunity to take the free to play experience and apply it to more than just the social experiences. More of these approaches taken by social games can be applied to action games,” Breen said.

Zynga announced that it was bringing back social advertising offers earlier today, after suspending them for two months while the company worked on new quality controls. Now, per a blog post by chief executive Mark Pincus last night, the offers are back. And they look more like normal coupons than the remnant-style advertising you see elsewhere on the web.

We covered the announcement in a little more detail over on last night. But here’s a closer look at the first Zynga offer wall now in action (that we know of), currently viewable in PetVille. It’s provided by a company called SocialVibe, from what we can tell; it’s not one of the established offer companies, and instead it has spent the last couple of years creating social engagement advertising that caters to major brands.

> Continue reading on Inside Facebook.

While neither the full release of the Facebook Credits system nor the release of the full API to developers has yet to be announced, there have been a handful of games that have been testing the Facebook Credits integration.

As we reported back in mid-December, Happy Island, developed by CrowdStar, was the first game that exclusively used Facebook Credits for all in-game purchases. Recently, we’ve noticed that a “Payments Issues” link has been added to the footer of Happy Island, which provides a sneak peek at what options users will have to dispute payments for Credits going forward.

Selecting the Payments Issues link opens up a new dialogue box, where a user can choose to either get help in making a purchase using Facebook Credits or to dispute a past transaction:

If a user selects the first option, they see a very straight-forward dialogue box that opens with, at this point, just one pre-populated comment field (not a drop down) that the user can change, plus an additional text box where comments can be added:

If you wish to dispute a Facebook Credits purchase, then you are instead presented a screen with a pull-down box that allows you to select the purchase you want to dispute:

And then must describe why you are disputing the transaction:

This is a pretty simple billing resolution process, but since details about the credits program and a developer API has not been released yet, it provides a small insight into why they are building a payment operations team — in part, to deal with all these inquiries.

It also brings up the question of how this process will be balanced (if at all) with payment systems other than Facebook Credits. For example, (Lil) Green Patch by Playdom has purchases available by Facebook Credits and PayPal, yet the Payment Issues link (which is also integrated there) only deals with Facebook Credits – there is no direct link to deal with any disputes of payments done with PayPal. If Facebook continues to allow developers to use their own payment methods (including credit card, PayPal and offer systems), it would be doubtful that they’d want to lead customers who have issues with those payment methods to get mixed up with Facebook Credit-specific disputes.

Our latest ranking of Facebook games that gained the most daily active users has plenty of familiar names this time around, as the recovery from the twin holiday slumps of Christmas and New Year’s continued this week. What looked like declines in DAU for many games toward the end of December now appear to be gains; in reality, most large titles have held steady over the course of the past month.

The post-holiday uptick started last week and continued into this one, which is one reason that nine of the top 10 DAU gainers were also on last week’s list. Still, there are a few interesting movements to point out. First, the list:

	Name	DAU	Gain	Gain, %
1.	FarmVille	27,898,912	+1,163,442	+4.17
2.	Happy Island	2,276,246	+484,287	+21.28
3.	Tiki Farm	1,010,569	+378,730	+37.48
4.	Pillow Fight	1,145,347	+373,256	+32.59
5.	Café World	9,880,979	+364,195	+3.69
6.	Country Life	2,315,020	+312,038	+13.48
7.	Texas HoldEm Poker	5,398,574	+227,515	+4.21
8.	MindJolt Games	2,327,650	+217,035	+9.32
9.	Island Paradise	2,058,836	+191,322	+9.29
10.	Zoo World	1,475,773	+185,168	+12.55
11.	FishVille	6,889,169	+129,694	+1.88
12.	PetVille	4,172,691	+103,520	+2.48
13.	Country Story	1,185,586	+99,569	+8.40
14.	My Town	204,169	+93,418	+45.76
15.	Friends For Sale!	746,749	+89,979	+12.05
16.	LivingSocial	199,030	+74,678	+37.52
17.	Garden World	246,793	+71,092	+28.81
18.	Wild Ones	96,194	+57,964	+60.26
19.	Barn Buddy	1,043,347	+45,823	+4.39
20.	what are you born to do?	90,541	+36,683	+40.52

It’s not hard to see that Farmville has claimed the top spot almost by default; the game has enough users that even a smallish rise in its DAU percentage puts it over everything else. Still, even if it’s not actually growing, the game appears to be continuing its penetration ever more deeply into the popular conscious. One genre of pop FarmVille story right now is that even real farmers are addicted — as one quipped “it doesn’t depict real farming because you make money at it all the time.”

Other high positions are similarly held by games that are recovering from the holidays: Cafe World, Texas Hold’em, Mindjolt Games, Fishville and Petville are all in that same category, showing dips in DAU around the two big holidays with a slow recovery through this week.

A different trend is taking place in a small chain of island-themed games, which, as we noted on Monday, appear to suddenly be popular: Happy Island, Tiki Farm and Island Paradise. All three games were released recently, and none are huge yet, so it’s still possible they’re a smaller fad brought about by winter — who wouldn’t rather be on an island right now?

The remainder of the list is taken up by a mix. Two of the games actually appear to be in decline, longer-term. Barn Buddy’s monthly active users have decreased by a third over the past month, while its DAU is down some 18 percent; its presence on the list is probably just a holiday recovery. Country Story has experienced a similar decline in MAU, though its DAU numbers aren’t down much at all.

Finally, there’s another trio of small-but-growing games. Garden World, a modification of the farming genre, continues to grow strongly. My Town is a city building game released by Broken Bulb Studios, which also runs Ninja Warz.

Wild Ones is a new artillery game from Playdom that’s essentially a less-amusing version of Worms featuring dogs (we reviewed it after its release). Given the current fascination of Facebook users with raising animals, it should be interesting to see whether they’re willing to blow away household pets en masse; so far, the game’s userbase has grown somewhat unevenly.

After a two-month hiatus, Zynga is reintroducing advertising offers to its social games. The company, like most other developers, had for a long time run offers within its games, letting users take offers — anything from a Netflix subscription to a mobile ringtone subscription — in exchange for virtual currency.

Because users could buy items they wanted within games with this currency, offers proved to be popular. But some of the offers were scams, and others were not clearly valuable. Many of the mobile ringtone ones, for example, deceived users into signing up for $10 per month subscriptions; people would only discover the problem when they opened their monthly phone bill.

After facing mounting criticism over the lower-quality offers — which we’ve detailed here – Zynga decided to pull all of them in early November. The company never said that it was done with this revenue stream, though, and in fact we’ve been hearing for weeks from multiple sources that offers are coming back. While Zynga did not confirm those rumors with us, chief executive Mark Pincus has a lot more to say on his personal blog.

First, offers are limited to eight advertisers for now: Netflix, Discover Card, Blockbuster, HSBC Direct, Gamefly, Book of the Month Club, SnapFish and The New York Times. Zynga plans to expand the list over time.

Second, the company has set up a team and technology to carefully police offers for quality. Assuming it continues to carefully select who gets let in, the team might not have much to police.

Third, the company is testing what Pincus calls “brand engagement ads,” which we assume are branded virtual goods and other in-game fare. “PetVille will test ads from Visa, Sprint, xBox, Timberland, MTV, TV Land, CW and HTC,” he says. “This type of brand engagement will allow users to gain currency in a fast and easy way.”

Teen virtual world Habbo Hotel quietly introduced Facebook Connect to its site late last month, in a move intended to increase engagement between it and Facebook — and, the company hopes, to get some of Facebook’s 350 million monthly active users joining its 15 million-strong service.

The integration lets you sign in on its home page or through a Facebook application, confirming with Habbo that “you accept that your facebook friends will have information about your real name in Habbo.” (For teens looking to keep their Habbo identities anonymous, the Connect integration might not be so interesting). In order to link accounts, you also have to provide your Habbo Hotel username and password. Note that Habbo seems to have created apps for each of its 31 countries; here’s Habbo UK’s traffic, for example, in AppData.

Once their accounts are synced, Habbo users can share a variety of information back to Facebook via Connect so friends can see when they build rooms, train pets, send gifts, etc. Many social game developers have gained millions of new users by getting people to share information from games with their friends — FarmVille gifts are a good example of that. Habbo, it seems, has been paying attention.

“Also brands wanting to engage with our international Habbo communities will benefit from the increased viral effect,”  as Timo Soininen, chief executive of Habbo parent Sulake, said in the press release. A branded virtual gift in Habbo, for example, can now appear in the Facebook news feed, too, which could make the company more money.

Shanda Games, a publicly-traded subsidiary of Chinese gaming giant Shanda Interactive Entertainment Limited, just made some big new moves into casual and online gaming outside of its home country. It bought San Francisco-based casual game advertising and analytics service Mochi Media for $80 million, after it locally made a few smaller purchases and licensing deals to add more titles to its catalog.

None of these moves are specifically into social gaming, as defined by games that are built around social features on Facebook and other global social networks. The Mochi purchase is the most relevant, though. The company provides a set of services for third-party Flash game developers — online casual game developers — as well as social networks like Hi5. It offers in-game advertising, analytics, a fairly new virtual currency system and most recently Facebook Connect integration so you can play your Facebook friends and share high scores back to the site from within Mochi games. The 15,000 games it publishes are on 40,000 web sites and reach a total of 140 million monthly unique users, only 29 million of whom are in China.

While Shanda is traded on NASDAQ, having spun out from the company last year, it has until now mostly focused on the China market. The purchase is its latest move to expand, although the company also plans to introduce Mochi’s monetization features in China to help it make more money. Mochi, notably, says it just became profitable last quarter.

Shanda Games chief executive Diana Li told the Wall Street Journal that the company has been “preparing for the U.S. market for two years,” having previously pushed games to parts of Asia and Europe. It has 10 titles that it plans to make available through Mochi. ”We’ve had our eyes on the international market,” Li says, “access to Mochi’s platform will speed up and scale up our distribution of [content] world-wide.”

Casual gaming has become a more mature part of the gaming industry, and nowadays we see a big new focus on social gaming — to the degree that traditional casual gaming companies like Popcap have been focusing on building for Facebook lately. Shanda’s big Chinese gaming rival, Tencent, has been doing the same, testing out games like Treasure Hunter on Facebook.

So, while the Mochi purchase will certainly give Shanda Games a new avenue to expand beyond China, we assume that the company has other plans for expanding into social games (a Reuters article hints that more purchases are in the works). Otherwise, Shanda is still going to miss where a large part of the growth is happening in gaming these days.

On Mochi’s end, this is a solid exit, especially considering previous reports that some of its investors wanted exits for far less, earlier on. It had raised $14 million to date, in two rounds, from Accel Partners and Shasta Ventures. Also, mark this as another gaming exit for Accel, which also invested in Playfish, and made money when the social gaming company sold to Electronic Arts for up to $400 million last fall.

There’s a final interesting angle to all of this as well, as highlighted by China-based angel investor Bill Bishop in his recently-reconstituted blog. Foreign investment into China-based gaming companies is currently not allowed, yet big Chinese game developers are free to expand in the US.

In October 2009 Chinese government officials explicitly stated that in addition to the existing restrictions on foreign games operating in China, “foreign investment into its lucrative online games industry” is banned. So from a US policy perspective, assuming the US game industry lobby cares about this issue, it seems like an easy argument to make to USTR and the Congress that while China is blocking American firms from a $4B+ market (and growing 30%+/year), the Chinese are piling unrestricted into the wide open US market and have a very good chance of gaining real share.

As Shanda, Tencent and other China-based gaming leaders expand abroad — and as the market opportunities continue to expand — expect this issue to get a lot bigger.

2009 will be remembered as the year that casual gaming stormed social platforms and changed the way millions of people socialized with friends online. With an up-to-$400 million acquisition of Playfish by Electronic Arts, hundreds of millions of dollars in venture investments, and some of the highest engagement numbers that online entertainment has ever seen, social games are now impacting businesses across the media landscape. It’s become clear that there are substantial opportunities for social game developers with virtual goods revenue models, but the market is still evolving rapidly.

Get the Annual Membership Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495 $1,995 USD* OR Buy Single Report: $995 $795 USD* * Pre-order discount ends January 25, 2010. All pre-ordered reports will be delivered on January 26, 2010.

That’s why I’m excited to announce today a new exclusive original research report with co-author Charles Hudson in our Inside Virtual Goods series that is exclusively focused on the future of the social gaming market, entitled Inside Virtual Goods: The Future of Social Gaming 2010. It will be released on Tuesday, January 26, but is available for discount pre-order now.

How big is the market, and where will social gaming go in 2010? How will existing players fare as Facebook shifts the social gaming landscape, and larger and more sophisticated players enter the market? Inside Virtual Goods: The Future of Social Gaming 2010 provides deeper insight into social game monetization, development, customer acquisition, and the key questions facing the space in 2010 than you’ll find anywhere else.

About the Report

Inside Virtual Goods: The Future of Social Gaming 2010 gives you an inside view of the future at this critical juncture in the intersection of social networking and online games.

We have compiled months of original research from dozens of top executives and entrepreneurs from all parts of the social gaming ecosystem to produce eye-opening source data and analysis that is not available anywhere else. At over 80 pages, Inside Virtual Goods: The Future of Social Gaming 2010 takes the closest look at the present state of social games and the future of what’s shaping up to be a very fundamentally strong and profitable industry.

What We Cover

1. Emerging Social Game Development and Studio Models – There is an emerging consensus around how social game developers are choosing to organize themselves for game development. How do small, medium, and large developers organize their teams? What do development cycle times for original titles and “expansion packs” look like? What is the role of testing and metrics in the development process?
2. Social Game Design and Mechanics – The emergence of a few key game genres with proven mechanics and monetization have spawned dozens of fast followers. Understand how publishers are continuing to innovate as we head into 2010.
3. Monetization Data and Payment Trends – Now that developers have proven the virtual goods model, what are ARPUs really like for different game genres? What is the lifetime value of users, and how long do players stick around? We take an in depth look at monetization methods and rates, and shed light on where payments are headed in the coming quarters. One more note on monetization – you may be wondering about everything you’ve heard about offers and alternative payments for virtual goods. We cover:
   • The offers ‘scandal’ and what will it mean going into 2010
   • Changes that advertisers and payments companies have – and haven’t – made
   • How both direct and alternate payment methods are most likely to grow or contract in the coming year.
4. Customer Acquisition and Marketing Trends – As the social gaming landscape has evolved over the past two and a half years, so have the ways that developers acquire and retain new users. How have user acquisition costs changed, and what do Facebook’s changes spell for the future of the marketing funnel? We take an in depth look at data and trends.
5. Facebook’s Platform Changes, Credits, and What’s In Store for the Future – Just when social game developers were settling in, Facebook announced major adjustments that will dramatically alter the way social games reach users through Facebook. Continued change is likely – what will it be, and how will it impact the industry? In addition, as Facebook rolls out its much-discussed Credits currency, how will monetization and the payments landscape be affected? Finally, will we see another dominant platform emerge? Our overview covers these developments, their impact on the industry, and what else is in store.

What you get

In addition to our deep dive into key aspects of the social gaming ecosystem, the report also offers extended coverage on:

• A brief history on the evolution and growth of this space in the US, including a description of all key players and how they rose to the top.
• Total social gaming market size estimates for 2010, including estimates on the “big three” developers.
• Our take on the key issues facing the growth of social gaming, including our outlook and projections for 2010.

See the full table of contents below:

Table of Contents

Section I: Overview

1. The Evolution of Social Gaming

• What is Social Gaming?
• Why do Social Games Work?
• A Brief History of the Major Eras in Social Gaming
  • Era I – The Virality Era
  • Era II – The Emergence of Paid Distribution
  • Era III – Rise of the Big 3 and the Network Model

2. Social Game Development and Design Processes

• Studio Composition
  • Small Developers
  • Medium and Large Developers
• Platform Services
• Development Cycle Time
  • Expansion Packs
  • True Serial
• Developing Franchise Titles
• Role of Testing and Metrics
• Multi-platform Development

3. Social Game Design and Game Mechanics

• Emergence of Key Genres
• Fast Followers vs Innovators
• Templates / Engines
• Intellectual Property
• Barriers to Entry

4. Monetization

1. How do social games monetize?
   • Virtual Goods
     1. Functional Virtual Goods
     2. Decorative Virtual Goods
     3. Consumables
   • Advertising
     1. Sponsorships
     2. White Label Games
     3. Branded Virtual Goods
2. Monetization Rates
   • How do social game developers manage their businesses?
     1. Social RPGs
     2. Farm Games
     3. Pet Games
     4. Aquarium Games
     5. Poker Games
     6. Flirting Games
     7. Arcade Games
   • Monetization rates of key social game genres
   • How has monetization changed over the last year?
3. Consumer Demographics
4. Payments Breakdown
   • Understanding Offers and the Offer Controversy
     1. The Offer Controversy
     2. Offers in Social Games
     3. Increased Competition
   • Mobile and Alternative Direct Payments
     1. Large Payment Platforms
     2. Direct Payments vs Offers
     3. Direct Payments Breakdown in Social Games
   • Direct Payments
     1. Mobile Payments
     2. Pre-Paid Cards
     3. New Payment Providers
5. Lifetime Value of Social Game Players (LTV) – What do we know?
   • How long do players stick around?
   • When in their lifecycle do users monetize best?
   • Seasonality and monetization lifecycles in social games
   • Banner advertising’s role

5. Customer Acquisition and Marketing

• The Rise, Fall, and Re-rise of Viral Acquisition
• Cross Promotion
• Paid Acquisition
  • Facebook Ads
  • Third-party Facebook Platform Ad Networks
• Network Strategy and Economies of Scale

6. 2010 Market Size and Top Developers Revenue Estimates

• 2010 Social Gaming Market Size
• Top Developer Revenue Estimates
  • Zynga
  • Playfish
  • Playdom
  • Crowdstar

Section II: The Future

1. Facebook Platform Changes and the Relationship Between Facebook and Application Developers

• Impact of Platform Changes
• Developers and Advertising Spend

2. What does the emergence of the big 3 mean for small and medium sized developers?

• Marketing and Customer Acquisition
• The CrowdStar Example
• Can an independent developer dominate a category?

3. Facebook Credits, Offers, and the Changing Monetization Landscape

• Impact of Facebook Credits
• Offers and Performance Advertising
• Role of Alternative Payment Systems

4. Off-Network Games with Facebook Connect

• Intersection of Social and Mobile
• Open Internet – Farmville.com and Facebook Connect

5. Will Another Platform Other Than Facebook Emerge?

• MySpace
• Twitter
• Global Social Networks
• Global Portals
• Search Engine Application Platforms

6. Investment Landscape

• Venture Capital
• M&A and IPO Landscape

7. Competitive Response in the Broader Media and Games Industry

• Casual game developers
• Console Games Companies
• Casual MMOs and Virtual Worlds
• Diversified Media Companies

More Data, More Actionable Insights

In 2009, social games began to show what kind of value can be created on top of social networks. 2010 will be an even more important year.

Social gaming, powered by virtual goods, is this year’s industry to watch. If you’re involved, or are considering jumping in, Inside Virtual Goods will be one of your most important tools.

One year of original data and exclusive in-depth reports delivered on a quarterly basis is $2,495 and contains:

• A detailed overview of the current state of the industry
• Specific estimates on market size by segment
• Diagnosis of key opportunities and issues by segment

Get The Annual Membership

Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495 $1,995 USD*

OR Buy Single Report: $995 $795 USD*

* Pre-order discount ends January 25, 2010. All pre-ordered reports will be delivered on January 26, 2010.

Although the report will not be released until next Tuesday, January 26, we are offering a special pre-order discount for those who purchase now. A one year subscription is $1,995 until January 26, at which point the price will go to US $2,495. The one year subscription includes three quarterly updates on key developments in the space.

Or, you can download just this report. The pre-order price is $795 until January 26, at which point the price will go to US $995.

An interesting Chinese virtual space game called Happy Hotel showed up on our most recent list of the 20 applications that gained the most monthly active users in the past week.

Is this game — and no doubt, others that inspired it — a sign of social games to come? Market leader Zynga may think so, as the company recently trademarked the names Hotelville and Hotel World.

Made by a developer called Play Crab, Happy Hotel has steadily grown to 900,000 monthly active users since we began tracking it at the beginning of the year. In the game, the player runs their own personal hotel with the singular goal of building it up to be a successful business.

Although it seems to focus on the Chinese-speaking audience, the game’s English directions and tutorial were quite easy to comprehend (as far as translation goes) and the player is quickly on their way. Users start with four rooms: Three are for guests and one for the player’s customizable hotel owner.

Decorations are easily purchased and placed in a flat, 2D room (think Pet Society). What is interesting though is that the quality of furniture directly affects the value of a room per hour. As an example, a starting room may be worth 37 gold per hour. If the player adds some fancy décor, then it might be worth 50 gold an hour. Of course, that value is a moot point without a tenant to fill it and that’s where recruitment come into play.

After decoration is completed, it’s time to earn some coin the way a hotel manager should. Here is where the game starts to get a bit more complicated. In order to fill the room, you need a tenant, and this can be from one of three categories: Regular Guests, Celebrity, or Friends. Friends initially seem to be a random group of real Facebook users. The other two guest types are non-player characters (NPCs) that cost an initial fee (consider it an investment). The more expensive the character, the more of a room value percentage they will tip, and thus, the more money the hotel owner makes.

As a note, Regular Guests don’t really pay a whole lot in the beginning, but then again, when does any game have a high pay off when you first start playing?

As for celebrities, these NPCs are extraordinarily expensive, but they can earn the player photos that can be exchanged for much better furniture in a special store called the “Market” (rather than gold, special items are traded for here using medals earned in-game – like achievements, it seems – and celebrity photos). What is most amusing, though, is that celebrities can be anyone from any time, ranging from Confucius to Marilyn Monroe.

As players continue to play and take new actions, they also garner experience which eventually leads to new levels and new bonuses and privileges (such as increasing your hotel rating). This is where the game tends to get vague and really requires some play to figure out. Apparently, you can also be lodged, yourself, in other hotels as a major means of earning experience — somewhat like cleaning a friend’s fish tank or weeding their farm in other social games.

In Happy Hotel, the feature is logical considering that you can put friends in your rooms, but as was stated before, there are random other users within the in-game friends’ list that are not your current Facebook friends when the player starts out.

Going to another person’s hotel isn’t exactly at the forefront of the average users’ mind. The thought is more along the lines of “Who are these people?” Regardless, taking shelter in another player’s hotel takes some funds from you, but seems to earn you experience toward new levels in return.

Frankly, this falls under one of the major complaints with Happy Hotel. This game has a deluge of features circulating within it, but the tutorial, while in decent English, on how to use them all is nothing but text and clicking. What happens to the average human when asked to remember a myriad of things all at once? They forget most of it! Such was the case with this app. Other than the virtual space aspects of the game, most of the features and how-to elements were forgotten and had to be relearned through trial and error, and truthfully, became a bit annoying (and please note, that stated features thus far are only some of the major ones).  A few examples of forgotten mechanics were how to actually get tenants, how to upgrade furniture, and even how to check your avatar into other hotels. Furthermore, this was made more obnoxious by the fact that the tutorial couldn’t be referenced again; which, quite frankly, is an issue that most social games seem to have.

On a more positive note, the overall style of Happy Hotel is fantastic. The artwork is warm and cute-looking and very appealing aesthetically so long as you don’t dislike Chinese décor and themes. Between making cute characters happy with kisses and the very zen-like proverbs and sayings that appeared in parts, this game was very amusing.

In the end, Happy Hotel is a most interesting idea. It’s hard to say if it is “good,” because the vast amount of features with marginal teaching truly pulls down its potential. Nonetheless, if you do have the patience to figure everything out, then Happy Hotel is kind of fun.

Past successful social gaming genres, like farming and animal-caring, were created by Asian developers and got big in Asia before they made it on to Facebook and got emulated by Western developers. This title, at least, seems to be making early gains — we’ll see how “HotelVille” or other Western versions do as they (we assume) launch.