Live-Blogging the Zynga Unleashed Press Event: 10 New Products

We’re here at Zynga headquarters in San Francisco for the Zynga Unleashed press event.

The highlights include the launch of major new or sequel titles on Facebook, HTML5 games that use Facebook’s new mobile platform, and the introduction of Project Z, aka Zynga Direct, formerly known as Zynga Live — a Facebook Connect-based gaming platform that has been in the works for two years.

The following is a lightly-paraphrased transcript of the presentations.

The Live Blog

After a promotional video about Zynga games, Mark Pincus has taken the stage.

10:38 We started a few blocks from here. Tells story about growing from there.

Tells story about the new office — it had been the Sega building back in the 80s. Now it’s getting remodeled.

Zynga launching ten new products, that have been in development for over a year.

Before we show you the products I wanted to take a few minutes to talk about what we’re trying to do. What’s in all these games that we have now. How do you string it all together, tie it back to our mission that we’ve been pursuing for the last five years.

We challenge ourselves every day with the question “how do we get you guys to play.” You don’t have time to sit and play games, yet we really think that play is this macro theme activity that we all need to fit back into our lives. Everything behind the products we’re creating is our mission to build what we think of as a platform for play.

We’re not trying to be the company that makes the next hit game — although we want to do that too. We want to do something broader. Make up a platform for play. We’re going to talk about the technology, infrastructure, behind all that we’re doing to create socialness. To help and inspire you to many more friend connections. In any given session, we’re measuring and tracking how well our teams do with the content. To inspire you to connect with more people in meaningful ways.

We’re trying to design the games — we have some design principles. The First Time User Experience. The FTUE. We believe in those first moments, those first three clicks, why you want it, why you want to check out more of it. It’s kind of a three-click deal — we sold you or we didn’t.

We can’t ask for more than 15 minutes of your time. We don’t want to ask you to change your day. Just like a good show (I’ve been addicted to Breaking Bad lately). Like a good show, if you do like our games, we hope to give you enough depth that you can keep playing for three months or a year.

We hope to enable a platform for direct relationships. Wether on the web or mobile. We hope to create socialness around the game.

Friends from Facebook (corp) are here. We’re excited to be a launch platform for their mobile platform. We’ll be showing you 3 HTML5 versions of our games I think launching today. We’ll start unveiling pieces of Zynga Direct. We hope you’ll see that it’s the deepest integration with FB Connect of any service on the web or mobile.

In terms of the games we’re showing today, including one that launched last night…. with every game we hope it moves the genre, answers the question “how is this more social.”

They took this component of the game — clan fighting — and brought it front and center.

We think that’s going to be a new spin on social crime-fighting. We’re going to show you CastleVille. That game is built by a team in Dallas that has a long track record building Triple-A PC titles like Age of Empires. We think the art and graphics are really beautiful. The design, the user-driven story line, character development, new ways to collaborate and get ahead through partnering with other players in the game.

We’re going to show you another casual game category called Hidden Chronicles. A first for us in the hidden objects and puzzle category, a long established category in the download market. We hope to show a more social spin on it, let people collaborate and compete to do puzzles.

David Ko is going to show you a bunch of mobile titles now and in the next few weeks. We’ve really ramped up our mobile game offering, worked to deliver mobile in social context. With our FB Connect integration, and a lot more firsts for mobile social gaming.

10:50 After going through the first few games in mobile, we’re going to introduce our Zynga Direct offering, which has been two years in development. The first of many many releases that you’ll see in the coming weeks and months.

I really hope you get the chance after this to touch and play the games.

I’m going to turn this over to Cadir Lee (CTO). We’ve worked together since he was 22, when he was in his first job. We both learned product development at the same time. Lucky to have him come back and build out the tech.

I wanted to talk to you a little bit about the tech. Over half the Zynga employees are engineers, and are hard at work making the games better.

I wanted to share some of the highlights. The gaming engine itself: can display thousands of objects in a world, make the world come alive, show animations. All of our game engines focus on making it easy to build game, and enhance game. We’re also hard at work on new capabilities with Flash 11.

We think there’s a lot more to come. We also talk a lot about infrastructure; we’re long-time public and private cloud users. We have our own, Z-Cloud. Worst thing is if you can’t play one of our games. We try to make sure they’re available all the time. We’ve been known to deploy 1,000 servers to meet a game launch. Elasticity of key, makes play always available.

One of the things I want to share with you today.

We’re working on HTML5, R&D to make games entirely from HTML, CSS and Javascript. Snapshot of one of our test games.

Analytics — long been known as an analytics company. Not what to build, but how the things we build are working. How to match up with the right somebody across the street, across the country, across the world. We’re trying to make sure it’s not the data that comes in but the personalization that comes out. How do you make sure the right player with the right skill-set can have a fun and challenging game.

I’d like to introduce you to Roy Sehgal, vice president and general manager.

Today, I’m pleased to unveil a new game genre for Zynga. Hidden object games. Our first game in this new genre: Hidden Chronicles. A new journey for our players, and one we’re excited to share today.

And now for the first time ever, let’s take a sneak peek at the game.

[Video starts.]

The game is about mystery, discovery, social competition. Use skills to find thousands of hidden objects within beautiful scenes. Begin at Ramsey Manor. Here, you’re going to explore, build, discover, customize, the self expression we know our players love.

Compare scores….

Hours of play within a single scene. I’m proud of our team. Unique sound, animatics — make you feel like you’re underwater. Deep, rich, engaging. A new and unique art style for Zynga.

Mafia Wars 2.

Easiest the edgiest game we’ve had: Franchise, feel, friends and fighting. Mafia Wars launched in 2008. Great honor to work with veterans of Mafia Wars team to create sequel. But even greater to give back to our players from the first game. All about rising up, getting revenge and kicking ass with your friends.

[Video starts]

11:00 Epic missions with your friends. Example: blowing up casino and getting stacks of cash. Happened asynchronously, but shared social experience. Moment that’ll continue through the game.

Also bosses: very important story points in the game. A don is sending thugs to take cash — won’t stop until I fight back. Use power-ups and defense, call friends. Also hit boss on my game board. First boss. Took him out. Future bosses are super tough, have lots of tactics to defeat.

Fighting: bone yard, any weapons. Any guns. Shotguns, rocket launchers, even chainsaws to cut people up. Lots of sophisticated matching. Lots of fun rewards.

[Our review here.]

Go to others houses. Take their cash, products. Then they call their friends and come fight you. Friend bars. But we built a rival bar — keep track of the friends you hate. Keep these cycles going. That’s a little taste of Mafia Wars 2.

Before I go. We also just went live on Google+ with Mafia Wars 2.

Here to talk about Zynga Poker, our first social game. Launched in July 2007. Still the world’s largest and most social social game. While the game is traditional Texas Hold’Em poker, we have social features — fantastic presence across Facebook, Google+, Android and special interface for iPhone and iPad. We realized we could broaden our scope and go beyond.

We’re launching a new franchise. Zynga Casino. We’re bringing fans the full Monte Carlo experience with the launch of Zynga Casino. You can’t always take your friends on a plane to Vegas. But you can on Zynga poker tables and other rooms.

Joining the franchise: Zynga Bingo. This is the first new game in the Zynga Casino Franchise. It was created by our talented New York team with our poker studio.

Zynga Bingo features a number of themed rooms. The Zynga ball shoots out of a Cadillac. Or  a sweet shop. Or FarmVille background. Fun social twist — friends with benefits. More friends playing, more advantages in the game.

Launching on Facebook soon.

11:10 We’re bringing players a new way to play. Also on Zynga devices.

Bill Jackson, creative director from Zynga Dallas. Before we were Bonfire Studios — Age of Empires, Age of Mythology, Halo Wars. Zynga was *the* company putting social in gaming. We’re very proud to be putting on the next “-Ville” game. CastleVille. FarmVille was about social expression, brought social games to mainstream like no other.

Frontierville was all about narrative. Then CityVille, fastest-growing of all time. Number one on Facebook.

CastleVille is latest, most beautiful to date. New level of social. Caste of characters: Giselle a singer, dragon-slayer Tom, Sonia the pirate, George the viking. Antonio the playboy woodsman.

[Video starts.]

We put a lot of love and attention to detail to our characters.

CastleVille: true manifestation of Zynga’s social magic. Improves upon each of the things of the games before. Build castle, craft art, armor, potions. Help friends with those, as we progress through the epic journey through the game.

Go through the free market to trade. Work with friends to defend against Beasties that lurk outside of the castle walls. New storytelling in a personal way. Players create their own story, own path through games. New locations, items, hidden characters. Your journey will be different from your friends. I might meet Antonio, you might meet Giselle. We learn the characters’ stories as we work our way through the games. Zynga is bringing massively multi-player role-playing games.

One more thing is music: orchestral arrangements.

Couldn’t show you without heart and soul that Dallas team puts into it.

I hope we’ve given you a taste, a flavor of where we’re taking the Ville franchise.

Mark is back on stage. Turns out there’s an open building space with five stories packed full of Zynga employees watching us cover the event. Sort of surprising.

11:20 Introducing John Schappert, new COO (until recently at EA).

[Video starts about players.]

People want to play everywhere. David Ko, chief mobile officer, now on stage.

Super excited to talk to you today about Mobile. Update you on many of the exciting initiatives that the team is working on. You’ve heard about Zynga equaling play. Delivering where our players are. Not just because I’m the mobile guy, although I may be biased.

Talks about Words With Friends going across platform.

Talking about HTML5 initiative. Launching three on the platform.

Words With Friends and Poker.

New game is FarmVille Express. Wanted to do some actions on the go. Harvest, plant, plough. That’s what we’re offering.

Fourth game, which I’m excited to talk to you about, is Mafia Shakedown. Here’s the gist of the game. The don of all dons has been killed. Bunch of things that you’ll do with requests, missions, gives you opportunity to become the next don. You can steal from your friends. This game will be coming shortly so stay tuned.

Lastly, this fifth game is called Dream Zoo. Zynga’s first game in zoo genre. You get to manage the dream zoo, no cages, the animals get to roam.

[Video starts.]

You can create all sorts of animals….

11:30 Schappert back on.

In addition to mobile and social. More than 60 million daily active players. We know that because we have great stats. We learn a lot more not just from stats but from talking to them. Yes they like our games, play them a lot. Playing our games with friends.

Sneak peek of something new: Project Z.

Centered on bringing players together, giving them what they want. Social environment just for games. Facebook Connect-enabled platform to play environment tailored just for games. Here’s a sneak peak.

[Video starts.]

Link is: Zynga.com/ztag

Can reserve own Zynga tag at Zynga.com. Having own alias. At work I’m “Jon” or probably other names. But online: SchappAttack.

Coming to you. Bringing back MarkPinc to close out the show.

We tried to share a lot with you guys. Hopefully in pretty quick order. More efficient way to share product launches. Even tried to share some things that are works in progress. Project Z, Z Tags, games that aren’t launching yet.

We really want to build a platform for Play. Committed to one vision, one mission, hasn’t changed since we founded the company. You should expect it won’t ever change in the future.

We want to be the biggest macro bet on social gaming. We believe in social gaming, we believe that how more than us in this building, how everyone in the world will embrace play in our lives. Everything we’re doing is an attempt to bring that to life. It’s early, it’s primitive. The game play and socialness is at an early point. We know that in the next couple years its going to come to life, be mobile. More of the WoW feeling, but packaged up in something you can understand and like in 3 clicks, and play in 10 to 15 minutes.

We hope we gave you some more of our flavor, our team, a bunch of our leaders.

[Zynga employee photo courtesy of Anthony Ha.]

At f8, Facebook Developers Could Get a Smarter Way to Structure Their News Feed Stories

While Facebook product launches tend to get the most speculation before the f8 developer conference — there are 750 million users who care, after all — the company has often used the conference to push grand presentations that instead target developers.

That trend may be the case again next Thursday, we’re hearing from a trusted source with some knowledge of what the company has planned.

Developers might be getting new access to Facebook’s news feed, building off of the graph API that Facebook presented at last year’s f8. They’d be able to provide new structure to the information they share into the news feed, allowing Facebook’s news feed algorithm to present it to the audience most likely to find it relevant and engage with it.

> Read the rest on Inside Facebook.

Vote to See Inside Social Games and Inside Network Panels at SXSW

The Inside Network editorial team has proposed several panels for this year’s South By Southwest Interactive and Music Conferences, but we need your votes to get them on the program — and voting is just about to end, so now is the time to check them out if you haven’t already.

The panels look at:

  1. The ways film and TV studios are integrating with social games
  2. How Facebook Credits can power digital media sales and be used as ecommerce purchase incentives
  3. How musicians can best market themselves using Facebook
  4. Why brands need third-party Facebook service providers such as Page management and Ads API companies

Here’s a closer look at the four panels we’ve proposed. If you think these are important issues, please follow the links and vote for them. Help us out even if you aren’t planning to attend, as some panels will be livestreamed, and we’ll publish coverage of the discussions.

TV & Film in the Age of the Social Game

What does Jersey Shore have to do with FarmVille? Major media producers like Starz, A&E and MTV are capturing new audiences both online and off by leveraging the power of social games on Facebook. As more licensed entertainment brands integrate with social games on the platform, what are the greatest risks, and who is taking the lion’s share of rewards? Join us for a critical look at social game integrations that are headed for a crash, and the ones that are getting it right.

Moderated by Amanda Glasser, Lead Writer of Inside Social Games. Panelists include:

  • David Katz – Director of Digital Media, Starz Media, television
  • Kris Soumas – A+E Networks Digital (Games), television and games
  • Catherine Herdlick – Product Manager, 6waves, social games

Vote here for “TV & Film in the Age of the Social Game”

Facebook Credits: Not Just for Virtual Goods

Facebook Credits, the social network’s virtual currency, has become the exclusive payment method for all Facebook games. Now, more users are maintaining a balance of Facebook Credits, and more users want them. This has opened new business and marketing opportunities. Content owners can license streaming access or downloads of their content in exchange for Facebook Credits. Meanwhile, ecommerce companies can reward users with Credits for marking purchases or signing up for email lists.

Representatives of companies pioneering the use of Facebook Credits outside of social games will discuss the current state of Facebook Credits and their typical uses, explain how virtual currencies are already disrupting several industries, and debate which types of transactions are the next to be changed by the emergence of a virtual currency that is in demand and cheap to distribute.

Moderated by Eric Eldon, Editor of Inside Network. Panelists include:

  • Suchit Dash, Co-founder, Ifeelgoods, Inc., virtual goods incentives
  • Dean Alms – VP of Marketing and Biz Dev, Milyoni, ecommerce
  • Jennifer Taylor – Manager of Product Marketing, Facebook Inc., social networking

Facebook Music Marketing: Pages, Feeds, and Games

Musicians are adopting Facebook as a core component of their online marketing strategy as the importance of Myspace fades. But which of Facebook’s social channels should artists focus on? Streaming music from their Facebook Page? Gaining fans by trading news feed posts with other musicians? Selling music and and driving listens within social games?

Heads of some of most influential Facebook music marketing companies will debate which of these channels is most important, and we’ll discuss how bands can tie the channels together to conduct successful marketing campaigns that don’t spam Facebook’s users.

Moderated by Josh Constine, Lead Writer of Inside Facebook. Panelists include:

  1. J Sider – CEO, RootMusic, musician profile apps
  2. Mike More – CEO, Headliner.fm, news feed post exchange
  3. Albin Serviant – CEO, MXP4, music games
  4. Meredith Chin – Manager of Corporate Communications, Facebook, social networking

Vote here for ”Facebook Music Marketing: Pages, Feeds, and Games”

Brands Need 3rd-Party Tools to Succeed on Facebook

Can brands succeed at Facebook marketing on their own? We’ll discuss with the heads of the biggest service providers on the Facebook Platform what problems third-parties can solve for brands more efficiently than they can solve on their own, including advertising, brand presence, and promotion.

We’ll also look at some of the biggest questions brands are confronted with when choosing service providers, and why marketing on a social platform requires different partnership strategies than what brand are used to.

Moderated by Josh Constine, Lead Writer of Inside Facebook. Panelists include:

  • Michael Lazerow, CEO, Buddy Media, Page management
  • Victoria Ransom, CEO, Wildfire Interactive, Page management
  • Patrick Toland, US Managing Director, TBG Digital Inc., Ads API

Vote here for “Brands Need 3rd-Party tools to Succeed on Facebook”

Slide Confirms Game Closures, Ending a Long and Wild Journey Building Social Apps

Some social gamers are going to miss SuperPoke Pets. But in Silicon Valley, social developer Slide will be remembered for how it saw the opportunity in social apps early on, and for how it doggedly and sometimes successfully adapted as social platforms changed.

It will also be remembered for how it didn’t quite hit the key part of the trend at the right time as the industry evolved. Zynga instead cornered a big portion of social gaming, and is now heading towards an initial public offering worth billions.

After being acquired by Google in 2010 for more than $182 million, Slide initially seemed poised for a second wind (or more like a fourth wind) helping to lead the creation of a product to go against Facebook. Instead, some of the team continued running SuperPoke and other apps — it still has nearly half a million monthly active users on Facebook — or worked on new ones like photo-sharing mobile app Photovine. Those efforts were more on the peripheral of Google+ products, if not in competition with them. Tellingly, Slide’s games weren’t even included in its games launch earlier this month.

So, it’s not all that surprising that Slide announced to the company yesterday that it would be shutting down almost all of its apps.

AllThingsD, which broke the story, also reported that founder Max Levchin is leaving, and so is up-and-coming product leader Jared Fliesler, who will join fellow former Slide executive Keith Rabois at mobile payments company Square.

This still isn’t a failed acquisition in the way that other recent big ones have been, like Cisco’s closure of its Flip device line. Most Slide employees are staying to work in other parts of the acquirer, and we’ve heard that attrition to date has already been very low. And because Google is busy hiring anyway, including for its game platforms and social products, these 100-some veteran employees are still in a good position to make an impact.

A Look Back at Slide’s Products Over the Years

The company began life as a desktop photo browser app back in 2005, but quickly transitioned to take advantage of MySpace. It built an online photo app of sorts that users could embed in their profiles. To get a sense of how early this was in the industry, MySpace sometimes viewed third-party developers as threats and at various points tried to block their embeds.

Along with other older social competitors, like RockYou, Slide eagerly jumped on to Facebook’s platform when it launched in May of 2007. It already knew how to get social distribution without a host platform’s support. With official communication channels at its disposal, Slide quickly grew to become one of the largest developers in Facebook, with hits like profile embed Top Friends, and the unofficial wall app FunWall (later FunSpace).

Facebook effectively crippled many of these apps through a variety of product and policy changes in 2007 and 2008, removing profile boxes, banning apps that mimicked its official profile wall, and altering the news feed and notifications.

It was many of those same changes that game developers, notably Zynga, Playdom, Playfish and a few others, took advantage of to build social games in 2008 and 2009. When Facebook product and policy changes in turn hit these developers, they had already built up sizeable audiences — that monetized through virtual goods.

Slide spent much of the time focusing on a variety of other social products, like social sponsored television and ads. And although it fought its way into social gaming, it was going uphill against fresh incumbents in new terrain.

A Case Study in Perserverance  

Future business case studies might draw all sorts of lessons from Slide. Certainly, today’s entrepreneurs are.

It was right that social app development was a big new market. It hit at a good enough time to gain millions of users and become a leader on MySpace. It transitioned to do the same on Facebook. In the scope of the market, it also became caught in the paradox that faces all incumbents — it invested so much in earlier iterations of social apps that it wasn’t in the right position at the right time to take advantage of social gaming.

It also arguably fought cleaner than many competitors. Although it observably spammed users in some of its apps, especially at earlier points in its history, it made a point of acting in the interests of users on Facebook when many game developers were merrily breaking the user experience to grow or make money. It never touched the scammy advertising offers that most social game developers initially relied on to generate revenue from virtual goods.

So all in all, despite not being a full win, Slide shouldn’t be seen as a failure.

The company went about it the hard way, but got to a successful exit, and appears to be offering some ongoing value to its acquirer. And don’t forget that the acquisition appeared to be a profitable return for stockholders — while the company was at one point valued at half a billion dollars, the final sale price was healthily above the $78 million it raised.

We had thought that Slide, given all of its experiences building social apps across platforms, could provide some hard-earned wisdom in Google’s social product and platform development. And in fact, maybe it is and the results just aren’t labeled clearly now.

If nothing else, we hope that the remaining Slide employees at Google help their company design great social products with high user value, low spam and no scams — and avoid some of the difficulties that MySpace, Facebook, and the various developers on their platforms, have had over the years.

[Photo browser via CNET. Top Friends screenshot via All Facebook. SuperPoke screenshot via Flickr/Lucy Takakura.]

Social Developers Hopeful About Google+ Platform Potential

Facebook has had a de facto monopoly on social platforms over the last couple of years, and until the launch of Google+ the main other options for developers have been mobile — and those require a distinct set of product and marketing skills.

So you’d expect social developers, especially companies wanting to diversify beyond Facebook on the web, to be pretty interested in what happens with G+. Even so, we’ve been surprised by the optimism among companies we’re talking to, and they’re not just having wishful thoughts. The specific reasons: Google+ is a respectable product, it’s grown quickly, there are clear social communication channels like Streams where developers could promote discovery and engagement, and the transaction fee is likely to be quite low.

Here’s a look at where G+ is so far, followed by details about what a platform launch might mean.

Good Product and Solid Early Traffic Growth — What’s Next?

The initial set of features in G+ accomplished what at least a noticeable subset of internet users have been wanting — Facebook features without the Facebook part. Between the Stream, Circles, the integration with other Google products, and complementary launches like Hangouts, users can experience many of the positive social interactions and information-sharing dynamics that Facebook has defined. The initial result has been impressive traffic growth, with G+ reaching 25 million, according to comScore — and as every would-be platform company knows, the first step to attracting developers is having users to connect them to.

It’s clear that users who love Google and/or hate Facebook are on it in force. And that audience, in and of itself, ensures some sort of longevity for the service. The big unanswered question is how quickly Google+ is going to be adopted by mainstream users, especially considering that the majority of the US and many other countries are already on Facebook. Already, some third-party measurement firms are showing traffic slowdowns (although that data is qualified by the fact that Google has not yet fully opened registration to all users).

Still, the results so far are much better than its past efforts. Its OpenSocial platform standard was widely adopted by other Facebook rivals, but didn’t manage to create big alternative platforms. Buzz, an earlier social product meant to take on Facebook, had a variety of privacy issues and never fully got off the ground.

Going forward, Google is pushing big marketing campaigns and developing tighter integrations with its other products — one can imagine a version of G+ being quite useful for companies using Google Apps, who want a Yammer-style interface for sharing and discussing changes to Google Docs, emails, calendars, etc. All of those efforts should drive many more users.

But what will keep people coming back and socializing? Google still can’t duplicate anything like what Facebook did — launching quietly to closed groups of real-world young people, building on key viral features like Photos — that feature got college students to share their party photos with each other (and tag each other) back in 2006, and that type of voyeurism has been a key ingredient in Facebook’s growth, as evidenced by the massive ongoing popularity of its Photos product.

While Google has been integrating various other content properties, like its Picasa photo service, it doesn’t have the same set of compelling social features that Facebook has offered. And that’s where developers hope a social platform could come in, providing consistently entertaining activities for at least a portion of the user base.

What a G+ Developer Platform Might Look Like

Google has made a few official statements about a developer platform, but there’s plenty of evidence about what the company is up to.

It has been hiring product managers to do things like “Drive feature requirements for Google’’s gaming platform.”

It has a site up for developers interested in working on its platform to sign up for more information.

In an official guide to G+, a now-deleted line informed users that they could find game information in a dedicated “Games stream” that has not yet launched. This stream would presumably be similar to Facebook’s Games and Apps Requests bars on the left-hand column of its user home page, and serve the dual purpose of helping gamers play while keeping the inevitable social spam from polluting the Streams of everyone else.

Google+ source code includes some language about how Game invites might be phrased.

On top of product evidence, Google has also been busy hiring and acquiring gaming and platform talent. The biggest is Slide, a top social app developer on MySpace and Facebook in past years. After selling to Google for up to $228 million a year ago, some of its executives have taken on expanded roles building Google social products, while others are continuing to maintain games like SuperPoke Pets. Having seen all the pros and cons of platform live from a developer perspective, Slide’s team could help shape a platform that strikes the right balance for users and developers.

Other acquisitions include payments service provider Jambool, which more or less got forced off the Facebook platform when Facebook made Credits the exclusive paid currency, and is now helping to lead Google’s new in-app web payments product. Pricing, in contrast to Credits’ 30%, is apparently just 5% of the transaction revenue.

And, Google has also been investing in social gaming companies. At some point it put a significant amount of money into Zynga, although it didn’t confirm reports on the matter until it listed Google as one of its investors in its S-1 filing (which it was legally obligated to do). Earlier this year, it also led a big new round in hardcore social game developer Kabam. Now, both investments could be purely about making money on any platform, but an obvious line of thinking is that these two companies might be launch partners when the platform goes live.

Conclusion: Can Games Make G+ Entertaining?

Developers have regularly gotten hopeful about social platform alternatives to Facebook, but so far the main platform alternatives to emerge have been the not-very-social iOS and Android mobile platforms.

The early growth of G+, the long-term means that Google has to make it keep growing, and in particular the social and low-fee environment, look far more promising than anything else that social developers have seen in years. Some developers have told us that Facebook has been feeling the same way, and has gotten noticeably more responsive to developer issues in recent weeks (although to be fair, Facebook has been trying to improve developer relations since last year).

Expect Google to work hard to woo developers, and expect developers to experiment with G+ more intensely than they have been elsewhere.

What Do Facebook’s Developer Traffic Targets Really Mean for Zynga (and Everyone Else)?

Many social game developers were surprised this month when Zynga published terms of its agreements with Facebook as part of its S-1 filing to go public, because it seemed to show that Facebook was promising traffic for Zynga’s games on web and mobile platforms.

By agreeing to make Facebook Zynga’s exclusive social platform, the document said, Facebook would in turn make sure that Zynga achieved certain web and mobile traffic goals or else the exclusivity would no longer apply.

Complicating matters, the target numbers and key terms around them were redacted from the published document, so Zynga’s competitors — and the investors who are considering buying Zynga’s public stock — have been left guessing about what the numbers really mean. Facebook could be promising .01% growth or 100% growth. Or, more fundamentally, it could be promising something vague, like the platform growing by a certain number of users overall, and the developer simply seeing growth as part of that. Without more information, other developers we’ve spoken with have tended to assume that the impact was significant, and unfair.

Facebook Responds

But now Facebook is trying to explain what’s really going on, although it’s still not discussing the specific agreements with Zynga and other developers. The traffic targets aren’t as meaningful as they might seem, says Dan Rose, Facebook’s vice president of partnerships and platform marketing. “We aren’t doing anything — we’ve never done anything — that was designed to grow any one developer at the expense of others. Everything we’ve done has been for the platform, and developers with great games benefit from those products.”

Facebook, he explains, is not specifically promising any developer that their games are going to reach certain traffic numbers because they signed on to this agreement. Without going into much detail, he says that the targets are more about Facebook outlining how it hopes to grow the platform, and how the particular developer will benefit from that growth. In fact, from Facebook’s perspective, it’d be great if the company could get every developer signed on to this type of agreement.

“There are no special advantages around growth targets or anything else. Period,” he emphasizes.

So Is There Evidence of Any Special Benefits?

Overall, Zynga’s main traffic growth occurred over 2009, when it launched a range of iterative simulation titles, and grew them through aggressive viral tactics, Facebook ad spending, and cross-promotion from existing titles. Since then, its traffic has had overall declines except for when it launched new games, with total its DAU count (not the target “monthly unique user” metric in the addendum) never passing its 2009 peaks.

Other developers have in the meantime been watching for any oddities around Zynga traffic that might show some sort of special benefit.

Example 1: When CityVille launched late November of 2010, a number of factors went Zynga’s way, as this anonymous Quora user notes. At launch time, Facebook began testing out a new viral channel: requests as notifications. While some other developers were, from our understanding, getting access to this feature around the same time, the then-new feature could have helped CityVille get an all-important wave of early traffic. So did a 3-day bug that exposed CityVille traffic to non-gaming users — something Facebook had otherwise stopped doing months earlier. It also seemed as if Zynga was beating certain spam limits on email, as we and others observed at the time.

But do these instances add up to a special deal? The addendum was only signed at the end of December, weeks after the launch, so the CityVille launch wouldn’t have been covered by it. And each of the examples above can sort of be explained. The news feed issue could have been an accident — we doubt Facebook would ever intentionally introduce a bug. And as far as the email spam goes, Zynga may have just been committing some platform violations. If it was, it would have (or at least should have) been hit with Facebook’s long-standing methods of terms enforcement, such as algorithmically reduced invite allocations based on user feedback.

Rose says that Facebook does test new features with some developers before turning them on to the user base.

Example 2: Some developers are now pointing out that Zynga’s latest Facebook game, Empires & Allies, has nearly flat traffic by monthly active users at slightly under 45 million, according to our AppData tracking service. The speculation is that Facebook is somehow propping up these numbers instead of letting them fall naturally.

But that’s a logical leap, as Zynga could be taking any number of steps, from running ads, to pushing cross-promotions and other normal efforts to keep numbers at that level (although that precise of a flattening is not easy to create).

Conclusion

Facebook seems to be achieving its larger goal in any case. Zynga began pulling its games off of other social networks last year, including from Tagged and MySpace. Up through the launch of Zynga City on Tencent in mainland China later this month (where Facebook is banned), all of its social platform launches have occurred on Facebook, at least that we know of. And web-based Zynga games like FarmVille.com and the relevant mobile apps have also shown the Facebook integration spelled out in the addendum, rather than relying on other social platform providers.

So, overall, we still don’t know all the details of the agreement. But at least Facebook is now explaining itself. And up to this point, there hasn’t been convincing evidence showing otherwise.

We’re interested to hear back from other developers who have signed similar agreements, or are considering doing so. Please email eric (at) insidenetwork (dot) com if you’d like to discuss on or off the record.

New Zynga S-1 Docs: Traffic Guarantees From Facebook, but No Canvas Ad Revenue

A recent set of updates to Zynga’s S-1 document sheds new light about the company’s business position, as it prepares for an initial public offering. For starters, Google has indeed invested, although the terms were not disclosed.

More interesting is the special relationship that Facebook and Zynga have formalized over revenue and traffic, in two developer addendums. (You can find the full set of docs here, although sadly some of the most interesting bits have been removed).

At first glance, the terms read as if Zynga had a special deal with Facebook, where it gets a portion of the ad revenue from Facebook ad units that run alongside its games in canvas apps. However, the terms specified that it is not canvas app ad revenue — instead, it’s referring to Zynga web sites like FarmVille.com, or even Facebook ads that might run within games.

We asked Facebook about the matter and got this response: “We don’t have agreements with any developers, including Zynga, to share revenue from ads next to their Facebook canvas apps. We did agree with Zynga to work together in the future on providing ads on their properties beyond Facebook, but we have no current timeline for when we might start working on that.”

Facebook also appears to have guaranteed Zynga certain growth targets in exchange for continuing to invest in games on the platform, whether web or mobile. Facebook has, since the launch of the platform, rewarded and punished individual developers through increasing or decreasing the number of invites, notifications and other communications allowed per user, or by providing some games with special access to features or in-house advertising.

However, Facebook has not to our knowledge previously guaranteed traffic levels in writing. Other developers are no doubt wondering if they can get the same sorts of guarantees, and why they haven’t gotten them in the past. Unless they have their own undisclosed agreements, of course.

As part of the addendum terms, Facebook appears to have gotten Zynga to agree to make Facebook the exclusive “Social Platform” that it uses, for the unspecified time-frame of the agreement. This helps explain Zynga’s closure of its games on Tagged, MySpace and other social networks, although we’re not sure how that might conflict with anything Google might want to launch with Zynga’s participation. Facebook also appears to have required Zynga to include itself as an option for mobile apps, for the agreement’s duration. However, Zynga can also use mobile platforms as well.

Another interesting point here is that Facebook has given Zynga permission to create some sort of “Zynga Platform,” although we don’t know what that is. It also has given the developer access to new features, including a proposed “Game Friends Protocol” API, apparently offering a new way for social gamers to find and play together.

Finally, with Credits, the virtual currency exclusivity kicked in for most of Zynga’s major games over the third quarter of 2010. As we examined when the filing first came out this month, the company has continued to grow revenues after the Credits implementations kicked in; some growth rate decreases are visible, but other factors, like communication channel reductions, appear to have affected it as well.

Zynga Shows Off Strong Financials but Questions Remain Around Impact of Credits, Off-Facebook Revenue

It’s been a hectic four years since Zynga launched on the Facebook platform, and in most ways the business the company is now showing off to the public is extremely impressive. Revenue is on a run-rate towards $1 billion this year, following nearly $600 million last year, and the company’s games reach nearly 60 million people around the world every day. There’s a lot for investors to like once Zynga makes its initial public offering.

As you can see in the graphs we’ve made above and below using data from Zynga’s S-1 filing today, the company has grown its way to profitability, even as it faces an increasing set of costs associated with the business. Total revenue is climbing towards $250 million per quarter, and since last year it has been handily beating total costs.

Digging into the costs, you can see in the second graph that research and development has taken a bigger place at Zynga, which isn’t surprising given its push to improve its technology, build higher-quality games, and expand into new areas like mobile and a site it is reportedly working on called ZLive.

The weakness that many developers know well, and that the filing details in the risk section, is the company’s dependence on Facebook. It explicitly notes that communication channel changes and a variety of other factors that have and will affect the business, with Credits being the latest issue.

Zynga says that it completed its move to using Credits exclusively as of this past April, having begun in June of 10, shortly after Facebook required it to sign on to the virtual currency. In one section, it says that “[t]he increase in online game revenue in the three months ended March 31, 2011 was negatively impacted by our adoption of Facebook Credits as our primary in-game payment method beginning in the third quarter of 2010.”

By the start of this past year it had largely converted direct payment options to Credits across all significant titles. So one would expect revenue numbers to reflect this time frame, given that virtual goods are 95% of its business.

It’s more complicated because Zynga has obscured the exact difference because it only accounts for the 70% of Credits revenue that it is paid through the agreement. Before, it did account for payment processing fees directly, noting in the filing that those costs usually came in between 2% and 10%.

The revenue and bookings graph seem to show steadily growing revenue despite the additional Credits costs, which is a great sign for Zynga’s long-term health. Note that Bookings is a term Zynga uses internally that it defines as the “total amount of revenue from the sale of virtual goods in our online games and advertising that would have been recognized in a period if we recognized all revenue immediately at the time of the sale.” It says this the main top-line metric it looks at.

The Adjusted EBITDA graph (a metric commonly used by investors) shows slower growth in 2010 and early 2011. The numbers plateaued around the time that Facebook began changing viral channels, including removing notifications, altering the news feed default back to the algorithmic view, and altering the news feed to group multiple news feed stories into a single-story view. Zynga’s growth stopped over a similar period.

A wider variety of expenses also started to come in over 2010. The company hired the majority of its 2200 employees last year, paid for large volumes of increasingly expensive ads on Facebook, increased its focus on mobile development and greatly expanded its technical infrastructure to support new growth. A number of acquisitions, like NewToy, also upped the costs in more recent months.

Margins fell to 5% last quarter from 15% in 2010. Zynga says the cost of revenue increase in the past quarter was “primarily due to web-hosting costs associated with higher-than-expected player activity that required us to purchase additional, more expensive temporary capacity.”

There are other ambiguities around Zynga’s numbers. We don’t know how much of its revenue is coming from any of its off-Facebook properties, as well. FarmVille.com, for example, still includes the non-Credits payment options even though it relies on Facebook Connect to provide user identities. None of Zynga’s booming mobile properties use Credits, either. And for most of the past years, including 2010, Zynga was also running games on other social networks, like MySpace, and according to many accounts monetizing well.

Still, between how Zynga has presented the numbers, and what else we’ve heard about its efforts over the years, we can safely conclude that the vast majority of the revenue is coming through Facebook.

So it’s quite possible that Facebook will make more than $300 million in Credits revenue from Zynga alone this coming year, which added together with what Zynga and other social game developers spend on ads could make Facebook up to $1 billion this year.

Additional reporting by Kim-Mai Cutler.

Zynga Files S-1, Plans to Go Public and Raise $1 Billion, Overcoming Credits Costs

Zynga, the leading social gaming company on Facebook, has filed to go public today, submitting its S-1 document detailing its business to date and its prospective valuation. The long-speculated numbers are finally in. The company made $597 million in revenues over 2010, with $235 million in revenues for the first quarter of 2011. It expects to raise up to $1 billion in the offering, giving it lots of ammunition for expanding across mobile and social. Although the company also appears to be sitting on nearly $1 billion in cash.

Our Inside Virtual Goods report estimated that Zynga had made over $500 million in 2010, while other reports put it significantly higher.

Net income came in at $90.6 million for 2010, with $11.8 million so far for the first three months of this year. The introduction of Facebook Credits, the exclusive paid virtual currency for virtual goods purchases on Facebook, appears to be cutting into profits as it has been rolled out in recent months.

Here’s some of what Zynga says about Credits and its Facebook business in the doc:

“In July 2010, we began migrating to Facebook Credits as the primary payment method for our games played through Facebook, and by April 2011, we had completed this migration. Facebook remits to us an amount equal to 70% of the face value of Facebook Credits purchased by our players for use in our games. We record bookings and recognize revenue net of the amounts retained by Facebook.”

Facebook has continued to say that its goal around Credits is to make it more profitable than any alternatives for all involved. Investors will now be keen to figure out exactly how effective it might become.

Overall usage is what we’ve regularly covered in our AppData tracking service. It has 148 million monthly unique users, which clarifies the otherwise nondeduplicated total monthly active user count that we track by adding together the traffic for each app on Facebook. The number also includes mobile users. It has 60 million daily active users on Facebook, according to AppData, which it cites.

Bankers on the deal include Morgan Stanley, Goldman Sachs, Bank of America, Merrill Lynch, Barclays Capital, J.P. Morgan and Allen & Co.

Here’s the link to the filing. More to come.

A List of Current Options for Buying Facebook Credits Around the World

We’ve been covering Facebook’s expansion of options that users have available for buying its Credits virtual currency, which as of July 1st will be the only currency that users can obtain for games on Facebook using real money. Here’s quick update about that — a country-by-country list of methods of inputting direct payments, previously published by Facebook in its Help Section.

Country Payment Methods
Argentina Mobile*, DineroMail, Moneybookers, Western Union QuickPay
Australia Mobile*, Moneybookers
Belgium Mobile*, Bank Transfer, Mister Cash, Moneybookers, PaySafeCard, WallieCard, Western Union QuickPay
Brazil Mobile*, Boleto Bancario, Debito Brandesco, DinheiroMail, Moneybookers
Canada Mobile*, InteracOnline, Moneybookers, Western Union QuickPay
Chile Mobile*, DineroMail, Moneybookers, Western Union QuickPay
Colombia Mobile*, Moneybookers, Western Union QuickPay
France Mobile*, Bank Transfer, Carte Bleue, Moneybookers, PaySafeCard, Ukash, Visa Electron, Wallie Card,
Germany Mobile*, Bank Transfer, ELV Direct Debit, GiroPay, Moneybookers, PaySafeCard, Sofortüberweisung, Ukash, Visa Electron, Wallie Card
Greece Mobile*, Moneybookers, PaySafeCard, Visa Electron, Western Union QuickPay
Hong Kong Mobile*, MyCard – Card Redemption, MyCard – Pay Via MyCard Member Account, Western Union QuickPay
Indonesia Mobile*, Moneybookers, MyCard – Card Redemption, MyCard – Pay Via MyCard Member Account, Western Union QuickPay
India Mobile*, MOLPoints, Moneybookers, Western Union QuickPay
Italy Mobile*, Bank Transfer, Moneybookers, PaySafeCard, Ukash, Visa Electron, Western Union QuickPay
Malaysia Mobile*, MOLPoints, Moneybookers, MyCard – Card Redemption, MyCard – Pay Via MyCard Member Account, Ukash
Mexico Mobile*, DineroMail, Moneybookers, Todito Cash, Wallie Card, Western Union
Phillipines Mobile*, Moneybookers, Western Union QuickPay
Portugal Mobile*, PaySafeCard, Visa Electron, Western Union QuickPay
Spain Mobile*, Bank Transfer, CashU, Maestro, Moneybookers, PaySafeCard, Ukash, Visa Electron, Wallie Card, Western Union QuickPay
Taiwan Mobile*, Gamania GASH – Card Redemption, Gamania GASH – Pay Via GASH/BeanFun Member Account, yCard – Card Redemption, Moneybookers, MyCard – Pay Via MyCard Member Account
Thailand Mobile*, Moneybookers, Western Union QuickPay
Turkey Mobile*, CashU, Moneybookers, OneCard, Ukash, Wallie Card, Western Union QuickPay
Great Britain Mobile*, Maestro, Moneybookers, PaySafeCard, Ukash, Visa Delta/Debit, Visa Electron, Wallie Card
United States Mobile*, Western Union QuickPay
Venezuela Mobile*, Moneybookers

Facebook’s explanation of the asterisk: “*Mobile payments are powered by Boku or Zong depending on your mobile carrier. For more information about mobile payment options, click here.”

As a bonus, we’ve included a video found via Lolapps that shows Nestea running an advertisement in Taiwan that promotes a giveaway for MyCard credits, which one can in turn use to buy Facebook Credits. MyCard is a pre-paid card service already popular as a way of buying into all sorts of online games, and in the embedded commercial you can see that Facebook — despite the two degrees of separation from the topic of the commercial — is being prominently featured.

We don’t know if Facebook itself had any involvement with this particular campaign, but we have seen MyCards make a big deal out of its “strategic relationship” with Facebook before. Whatever the cause, third-party promotions of Credits like this should help the currency continue to gain traction with users around the world, and eventually result in more money going to developers.

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