Social Gaming Roundup: New Zynga Funding, SNAP, New Social Gaming Entrants and More

New Zynga Funding — A number of financial publications reported this week that Zynga is raising a large new round of funding. The Wall Street Journal kicked things off on Monday citing sources saying the company is looking to raise around $250 million at a valuation of between $7 billion and $9 billion, following profit of $400 million and total revenue of $850 million last year. Bloomberg then reported that the valuation could be $10 billion, from T. Rowe Price, and Fidelity Investments. Then All Things D and The New York Times reported yesterday that Zynga is finalizing a $500 million round worth $10 billion from those investors and others; the latter publication said the company is considering an initial public offering as soon as 2012, according to sources.

SNAP Interactive Releases Curious Valentine’s Numbers — SNAP Interactive announced some numbers regarding Valentine’s Day virtual items late last week. Based on their Facebook connected AreYouInterested.com, the holiday marked a significant spike in virtual gifting with over 100% more Valentine’s style virtual gifts being purchased in the past month, over the prior, and a 15% increase overall.

Tribeca Film InstituteTribeca Film Institute & Ford Foundation Partner to Support New Media — The Tribeca Film Institue and the Ford Foundation‘s JustFilms initiative have entered a partnership and launched the Tribeca Film Institue New Media Fund. The $750,000 fund is said to provide support and funding to film projects that incorporate newer media platforms including video games, mobile apps, social networks, and micro-blogging.

Treasure QuestBig Fish Games to Close Treasure Quest — According to Worlds in Motion, Big Fish Games is closing its Facebook title Treasure Quest on March 15th. The game marked the casual developer’s first venture into the social gaming market, but currently only garners around 48,000 MAU.

Nexon Getting into Social & Mobile Games — MapleStory developer, Nexon, is looking to move into making social games for Facebook as well as for mobile, says VentureBeat. In order to differentiate itself, Nexon is looking to hook players through game play that connects users with an online community.

Game ClosureGame Closure Launches Cross-Platform Multiplayer App — According to TechCrunch, Game Closure has launched a new SDK that will allow developers to easily create, host, and deploy HTML5-based, cross-platform multiplayer games. Shown at SSE Labs‘ Demo Day at AOL, the SDK is compatible across iOS, Android, and Facebook apps.

Richard Garriott Plans to Beat Zynga — Richard Garriott and his new startup, Portalarium, is set to release their first title in about a month, and says he’s planning to beat out Zynga, says VentureBeat. Though he has released no specific details about the game, it is noted that it will be released on Facebook, Hi5, and other such networks and will not be a “plagiarized” concept; referring to some of Zynga’s past games.

Two of Playfish’s Cofounders Are Leaving Their Positions at EA

Electronic Arts’ purchase of social game developer Playfish in late 2009 was a watershed event. The deal, valued at up to $400 million, signaled that traditional gaming companies believed social games and the Facebook platform are a part of their future. Disney followed suit with its acquisition of Playdom last July, and numerous traditional gaming and media companies and individuals have also moved into the industry.

Fast forward more than a year, and Playfish appears to have indeed become a more important part of EA’s portfolio — yet questions remain for it and EA. An important part of the deal was EA’s and Playfish’s belief was that it could bring existing hits to Facebook gamers in a big way, and while efforts like FIFA and Madden have gotten it more than 5 million monthly active users between them, that has not yet happened to the scale of the company’s other original hits.

Meanwhile, EA has confirmed to us that two of Playfish’s cofounders will be leaving at the end of March: Sebastien de Halleux, Playfish’s chief operating officer and now EA Interactive vice president, and Sami Lababidi, who has headed up Playfish’s development and technical operations since the company’s founding. Both will continue to stay on as consultants, according to a company spokesperson.

It is not unusual for the cofounders of an acquired company to leave. But in this case, only one of the four Playfish co-founders will remain after the other two depart – chief executive Kristian Segerstale, now general manager of the company within EA. The fourth, Shukri Shammas, left in March of last year, according to his LinkedIn profile; he’d been the chief financial officer before the acquisition, and the senior director for general and administrative, for a short time afterwards.

When the acquisition was announced, EA and Playfish described it as being to a large degree about intellectual property. Playfish would promote EA’s existing titles to Facebook users, creating new formats for classics. The results, so far, have been mixed.

Value of Existing IP Still Generally Unproven in Social Games

Playfish has retained its spot as the runner-up to Zynga in terms of traffic, according to AppData, our independent tracking service covering Facebook applications and developers. Comprising the main portion of EA Facebook properties, Playfish is currently the third-largest social game developer on the Facebook platform by monthly active users, at around 36 million as of today. Zynga is in first place with 276 million, Crowdstar is in second with 41.4 million. Looking at daily active users — a better metric for estimating how well social gaming companies are able to monetize — Playfish is in second, with 6.19 million DAU. That’s healthily above most other competitors, but still dwarfed by Zynga’s 60.1 million.

Another important point on traffic: when Playfish sold, it had around 60 million MAU and 13.6 million DAU. While social gaming companies have greatly improved monetization in the past year or so, that halving of traffic likely mitigated those successes. As we’ve covered elsewhere, most of the largest developers on Facebook had significant growth challenges in 2010, even as dozens of smaller developers built businesses targeting niche audiences.

Playfish continues to be a valuable part of EA. Combined with other mobile and online properties, including EA Mobile and Pogo, it will help account for fiscal year digital revenues of $750 million — a bright spot in EA’s overall business.

And yet, an important part of the deal’s premise was that Playfish would bring its hit franchises to social gaming, creating an upward spiral of cross-promotion of usage and revenue between Facebook and the rest of EA’s games. How have they fared? Take a look at the list below. It shows the 20 largest EA games on Facebook, including Playfish and all others, based on MAU.

Name MAU DAU
1. Pet Society 11,419,929 2,042,183
2. Restaurant City 7,222,537 1,636,875
3. Hotel City 3,523,047 464,101
4. EA SPORTS FIFA Superstars: Real football & soccer! 3,304,339 535,702
5. Madden NFL Superstars 2,198,535 273,581
6. Country Story 2,100,769 314,267
7. SCRABBLE 1,185,630 366,981
8. My Empire 1,112,379 104,044
9. Bowling Buddies 662,062 63,759
10. Word Challenge 607,642 62,986
11. Geo Challenge 447,812 36,550
12. Pirates Ahoy 440,512 70,165
13. Who Has The Biggest Brain? 408,810 24,540
14. Crazy Planets 389,094 33,930
15. Monopoly Millionaires 314,584 90,177
16. Pogo Games 182,418 24,057
17. EA SPORTS™ PGA TOUR® Golf Challenge 139,354 11,040
18. Poker Rivals 120,440 16,392
19. Gangster City 117,345 11,763
20. Minigolf Party 70,639 3,021

Pet Society and Restaurant City, formative simulation-game hits on Facebook, that were widely copied by other developers in 2009, are still in the lead. Meanwhile EA titles like EA SPORTS FIFA Superstars and Madden NFL Superstars have gained respectable traffic numbers — it’s possible that these games and others you see on the list have accomplished what EA intended in terms of cross-promotion. But it’s hard to tell. Hotel City, an original-IP title launched by Playfish in early 2010, is instead the third largest on the platform.

It is possible that EA/Playfish will come out with major new titles in the future that utilize EA branding from other parts of the company.

But the most significant new social games today continue to be original works. For example, Zynga has succeeded by iterating on original concepts proven by other developers, then using its own game-design skill, cross-promotion heft, and large advertising budget to make itself the biggest winner — FarmVille and now CityVille being the quintessential examples.

While EA’s entire market cap is $6.12 billion today, Zynga is reportedly trying to raise more money from investors at a valuation of between $7 billion and $10 billion.

Looking forward, Playfish continues to be busy hiring employees and publishing more games. It has so far done as well as anyone trying to cross-promote games between Facebook and the rest of its properties (Disney’s ESPNU College Town is another solid example), but now EA will need figure out how to continue building on the business now that most of the founders are moving on.

Top Social Games Get Affectionate For Valentine’s Day

One of the biggest commercial holidays of the year is here and social games aren’t going to be left out of the loop. A number of developers are up to something special for Valentine’s Day, so we decided to take a look at some of the top titles.

Here is our roundup of what the top social games on Facebook are doing for the annual day of love, based on their monthly active user rankings on our tracking service, AppData.

CityVille1. CityVille — The largest title on Facebook with nearly 96.3 million MAU, Zynga‘s CityVille is certainly involved in to the Valentine’s scene. However, all that is currently offered, of significance, are some special “Valentine’s Roses” at the cost of five Cash (virtual currency): the vibrantly colored flora does offer significant amounts of Goods for players that plant them.

However, players, at one point, could also create custom virtual cards to send to friends, as Games.com notes. Though the feature appears to no longer be available, users could receive these cards, which would grant them access to various Valentine-themed items. Additionally, to help with the purchases, offers to earn extra City Cash have also been tied to some useful real purchases including savings from ProFlowers and some nifty chocolate covered strawberries from Shari’s Berries.

[image via  Games.com]

FarmVille2. FarmVille — Even if FarmVille is now the second-largest title on Facebook, its veteran team has filled it with a tremendous variety of Valentine’s gifts and goods. Aside from the ability to gift unique Valentine items once a day, for 12 days, for a special bonus prize (all of which can be bought with virtual currency), players may have also noticed a curious new marketing mechanic. Users can actually visit a pre-designed farm that allows them to see all of the new items on display (think furniture showroom) and purchase them with a mere click.

Also of interest, FarmVille is using the special gifted of currency of “Valentines” sent via a special item and uses them to purchase other special goods; the same way it did with Thanksgiving and Christmas. Additionally, for those that might not be into the whole “lovey-dovey” element of the holiday, the game also offers some darker items such as the Black Cherry Horse, Broken Heart Home, or Black Rose Arch. To top it all off, this past weekend, players could purchase Farm Cash at a 20% discount. Also, players can also participate in offers from ProFlowers (as a note, the ProFlowers offer is available for most of the Zynga games) here as well.

3. Texas HoldEm Poker — Sadly, the third-largest game on Facebook, Texas HoldEm (Zynga) Poker, had nothing special for Valentine’s Day that we saw.

FrontierVille4. FrontierVille — FrontierVille actually had one of the more interesting Valentine’s Day mechanics. What better way to get into the holiday then let players play a digital Cupid. Zynga actually incorporated a series of special Valentine’s missions to participate in, but of particular interest are those involving the “Kissing Tree” and a little matchmaking. Building the tree with help from friends, players can actually choose the romantic outcome of the love triangle between the characters of Hank, Fanny Wildcat, and Bess, pairing any two together. After the pairing, extra missions unlocked for bonus experience, coin, and so on.

5. Cafe World — Cafe World actually got into the contests this year with its Valentine’s Day Sweepstakes. Yes, the game has Valentine-themed virtual goods, but along with this, players can participate in an eight part mission series in order to get two characters – “Espresso Joe” and “Lisa Latte” – together. Once completed, either through the help of friends or virtual currency, players are eligible to win some pretty hefty prizes including a Tiffany’s Pendant, an iPad, an iPod Touch, or 50 “Instant Thymes.”

Mafia Wars6. Mafia Wars — Love happens in the criminal underworld too. The Valentine’s implementation here isn’t as involved as the virtual space-oriented Zynga titles, but Mafia Wars players can participate in the mission “Love Is Hard to Find.” By performing jobs, picking fights, robbing players, or gifting, users have a chance to find “Broken Hearts” which can be redeemed for special Valentine-themed armaments.

7. Millionaire City — Though the popular Digital Chocolate title, Millionaire City doesn’t seem to have any direct Valentine influence, we did notice some special offers directly tied to real-world Valentine’s Day gifts. One such offer stems from FTD Flowers in which players can purchase flowers at 20% off and earn 90 Millionaire Gold while doing so.

Treasure Isle8. Treasure Isle — Yes, Valentine virtual goods and gifts are here as well. As it has in past holidays, Treasure Isle comes with some special quests for players to complete. For the most part, it is more of the same, meaning that players collect items from friends, and get help on a daily basis to build or train X, Y, Z (this time a Kissing Booth to collect Valentines from friends that exchange for virtual items and Cupid Monkey). But now there’s a little extra incentive. Players that complete all of the Valentine’s Day tasks will be entered to win 15,000 in the virtual currency, Island Cash.

9. Pet Society — Playfish has entered into the Valentine’s spirit with a range of specially themed items in Pet Society; but, better than that, users can also create some very nice Valentine video cards. Played against a cute, pre-made video, users can input their own messages and send them to their friends. Not enough for you? Well, until the 15th, there is a special offer dubbed “From Playfish With Love” offering 50% extra free Playfish Cash with virtual currency purchases. Furthermore, Playfish has special virtual currency earning offers from ProFlowers, Shari’s Berries, and one extra, Red Envelope. Unfortunately, while the latter offers more unique gifts (aside from candies and flowers), there is no special discounts involved with this offer.

Bejeweled Blitz10. Bejeweled Blitz — Though one probably wouldn’t expect it due to the nature of the game, PopCap‘s Bejeweled Blitz actually did have some Valentine’s implementation. By mousing over a friend that plays, users can hit the “Jabber” button and create simple e-cards to send and share.

11. Ravenwood Fair — You can bet that the LOLapps game Ravenwood Fair is hosting some specials for Valentine’s with a handful of decorations, games, and characters. In terms of the former, players can purchase, for Facebook Credits, items such as the Tunnel of Love, and even “try” it by placing it in their virtual space for a few minutes just to see how it looks. In addition to this, users can buy a handful of new characters to enthrall their guests including Cupid, Eros, and the goddess of love herself, Aphrodite.

It Girl12. It Girl — If you’re looking for something to make him blush, ladies, It Girl from CrowdStar, is the way to go for Valentine’s Day. Though it is technically still virtual goods, the virtual clothing from this game looks straight out of a Victoria’s Secret catalog, as it includes a collection of sultry lingerie and dresses.

Regardless, if this isn’t your style, it’s also possible to participate in a series of Valentine-oriented quests in order to earn a special dress, or if you’ve aquired a digital boyfriend in game (though doesn’t have to be), you can take part in the “7 Days of Kisses.” By digitally kissing a guy each day, from the 8th to the 14th, players could earn a sexy Cupid outfit; complete with wings. If you missed it, you can always make the purchase with Facebook Credits.

13. MindJolt Games — It’s not much of a direct implementation, but MindJolt Games, from MindJolt, has some minor Valentine’s addition in the form of a few themed games as part of its collection. Such titles includes games like Dodge Cupid and My Secret Valentine.

Happy Aquarium14. Happy Aquarium — CrowdStar’s Happy Aquarium is a bit less involved than It Girl, but it isn’t without its feelings of love. This fishy title comes with a number of love-themed animals, decor, and backgrounds for all your Valentine’s needs. Most cost virtual currency or Facebook Credits, but no need to worry, as offers from some of the noted real-world businesses are also available (ProFlowers, Shari’s Berries, etc.) so players can get some of these items, and possibly get out of the dog house if they haven’t bought a gift for that special someone yet.

In addition to this, there are specials for 20% off Love Potions today, that allow for users’ fish to mate more than once a day. All they need now is a little Barry White.

Car Town15. Car Town — Cie Games didn’t do anything noticeable for Valentine’s Day in Car Town, but they did implement some special Valentine offers in order to earn virtual currency. Along with the other noted offers in previously mentioned games, Car Town also incorporated savings on Ghiradelli chocolates.

16. Restaurant City — You’d better believe Playfish has Valentine’s spread throughout Restaurant City. As with Pet Society, the game offers 50% extra Playfish Cash with its “From Playfish with Love” offer,  but in addition to this, provides a whole myriad of new Valentine’s Challenges (which require friends to gift candy hearts to one another), special decorative items, and recipes (which seem to be earned via the gifted candy). As an added bonus, Restaurant City is having a “Clearance Sale” with many of their premium items, including the Valentine’s ones, costing as little as 1 Playfish Cash.

PetVille17. PetVille — As far as PetVille goes, the specials are a little basic, consisting of a large collection of Valentine-themed virtual items costing either in-game or virtual currency. That said, there’s also a nice added feature to create a personal bouquet of flowers and share it with friends. Nevertheless, though it fits well with the holiday, this does not necessarily feel specific to Valentine’s Day. Having the flowers, will attract a “Golden Butterfly” that will give coins daily.

18. Games — Despite being a meta-app comprised of many smaller games, GSN‘s Games title is all alone this Valentine’s Day.

19. Crime City – Looks like Funzio has robbed Crime City of love this year as it has no Valentine’s specials of notice.

Mall World20. Mall World — It Girl predecessor, Mall World, from 50 Cubes is throwing in its lot with Valentine’s Day in a similar fashion, offering its female player base a multitude of themed items, including its own selection of spicy lingerie and dresses for the ladies. Moreover, this app too is offering virtual currency by making use of ProFlowers specials. Oh, and if players are looking to send out some valentines of their own, Mall World also has a nice greeting card creator so users can send them off to all of their friends.

Facebook Posts Implementation Details for Frictionless Payments and Buy With Friends

Facebook has released more details about Frictionless Payments and Buy With Friends — two new ways to spend its virtual currency Facebook Credits that it announced out our Inside Social Apps 2011 conference last week. Buy With Friends stories will only appear to users who play the game hosting the deal, and instructions for how developers can implement the two features has been added to the Credits API documentation.

Frictionless Payments Implementation

Frictionless Payments allows users to spend up to 30 Credits within a game without interrupting play with an “Are you sure?’ dialog. Users don’t have to go through the standard Credits interface, but instead make purchases directly through the game’s UI.

The system is one of the incentives Facebook is offering to developers that exclusively use Credits.Developers are required to display a user’s Credits balance somewhere in their app. If users have insufficient Credits to make the purchase, the app must pop up the Credits pay dialog so users can buy more. The Frictionless Payments API can only be executed within 30 minutes of a user interacting with the app.

The API call for Frictionless Payments is:

POST https://graph.facebook.com/[app id]/payments?access_token=ACCESS_TOKEN&from=USER_ID&to=APP_ID&order_details=ORDER_DETAILS

Monetization Boosts and Concerns

Frictionless Payments allows for impulse buying, and therefore increases conversion rates. Lolapps’ Ravenwood Fair has doubled its monetization, and OMGPOP’s Draw My Thing tripled its conversion rate by by implementing Frictionless Payments. Arkadium’s Mahjongg Dimensions has also implemented the streamlined purchase flow.

Developers may look to price their virtual goods below the 30 Credit cap to take advantage of Frictionless Payments. Users may grow accustomed to paying up to 30 Credits, and begin viewing anything costing more as a serious purchase that requires consideration.

There are some concerns that Frictionless Payments might lead to accidental purchases, though Lolapps chief executive Arjun Sethi has previously said that his company hasn’t received any refund requests. Others worry that malicious developers could manipulate users with system, such as rendering invisible purchase buttons within their app, causing users to spend Credits without knowing it. However, Facebook is currently only offering developer access to Frictionless Payments via an application process, and may deny developers based on their track records.

Buy With Friends Implementation

Approved developers can allow users who make in-game purchases to share a discount on the same item with their friends who play the game. Users are shown an update composer with the prompt “Unlock a [#]% off deal on this item for your friends by telling them about your purchase.” Friends can either make the discounted purchase in-line from the the news feed or follow a link and buy within the game.

Developers determine which items generate the Buy With Friends prompt when bought, the discount percentage, and the duration of the deal. Developers must configure a product and deal through the Graph API, determine if the user has access to the deal, and then may initiate the Buy With Friends flow. Developers can find sample code and a detailed description of the different purchase flows in the Buy With Friends documentation.

Impact of a New Viral Channel

Facebook says the developers who’ve tested Buy With Friends have found that “more than half of people who were offered a deal in-game decided to share it with their friends, and the engagement and conversion rates on the resulting posts were also strong.”

As there is no per unit cost for creating and selling virtual goods, discounts and sales can be a good way for developers to increase revenues. They can re-engage former players and inspire users who otherwise wouldn’t have converted to make a purchase because of the perceived value they gain from the discount.

As with other game content stories, only friends who play the same game will see Buy With Friends stories in their news feed. The feature may inspire users to form more friendships with people who play the same games as them in order to gain access to the discounts, which could increase the volume of unsolicited friend requests sent and dilute friend lists with people users don’t actually know.

Facebook hopes that the easier Credits are to spend, the more users will buy. As they are proving to support application monetization, Frictionless Payments and Buy With Friends may convince developers to accept 30% tax on Credits, which all applications will be required to use exclusively starting July 1st. Developers can apply for access to the APIs on the Credits Special Incentives support page.

This Week’s Headlines on Inside Facebook

IF LogoCheck out the top headlines and insights this week from Inside Facebook— tracking Facebook and the Facebook platform for developers and marketers.

Sunday, January 23rd, 2011

Monday, January 24th, 2011

Tuesday, January 25th, 2011

Wednesday, January 26th, 2011

Thursday, January 27th, 2011

Friday, January 28th, 2011

Social Gaming Roundup: Zynga, Foursquare, Booyah, & More

Mike MurphyMike Murphy Takes Advisor Role at Zynga — According to All Things Digital, former Facebook head of advertising sales Mike Murphy is now taking a part-time role at Zynga, advising on its advertising strategy. In addition to this, Murphy will be focused on team growth, advertising products, and creating new relationships with major brands.

[image via All Things Digital]

Mafia Wars Expands to Four New Languages — Earlier this week, Zynga announced that it’s long running Mafia Wars title will now be available in French, Italian, German, and Spanish. According to the developer, approximately 15% of the game’s daily players speak one of these four languages.

Cute CastleCastle & Co Launches in Chinese — In more localization news, Ubisoft’s Castle & Co is getting a Chinese language version this week. The new app is entitled “萌堡奇緣” or “Cute Castle, Amazing Encounter!

SiXits Jumps into Social Games — A new startup by the name of SiXits is getting into social games says VentureBeat. Using cross-platform games, the company is hoping to set itself apart by incorporating more engaging games. Their first title, dubbed Babies Everywhere, centers around users caring for a cartoon-like baby.

Pocket GodPocket God’s Episode II Launches on Facebook — Frima Studio and Bolt Creative have announced the launch of Pocket God’s latest update, Episode II: Clash of the Frightened! for Facebook. The new version includes new social quests, friend taunting, extra idols, and more.

PopCap Goes Cross-Platform with Bejeweled Blitz — PopCap Games appears to have gone cross-platform with its popular Bejeweled Blitz title for Facebook and iOS. Based on information from W3i’s blog, users can now connect and compete with one another from either platform.

WhereoscopeZynga May Acquire Whereoscope — Social developer Zynga may be close to acquiring a company by the name of Whereoscope, who helps parents keep track of their kids using a location-based application on smartphones.

Zong & Boku Partner with Verizon — Mobile payments companies Zong and Boku have announced a direct carrier billing service with Verizon through BillToMobile, says TechCrunch. Now, the companies can now offer services at a much lower transaction rate than SMS payments.

FoursquareFoursquare Grows 3400% in 2010 — Foursquare released some interesting numbers this week, noting that it had grown 3400% in 2010. In addition to this, the company has totaled 381,576,305 check-ins last year, one of which was from the International Space Station. A full compilation of top check-in locations, numbers, and States, can be found here.

Spartacus Comes to Facebook — In more social gaming news, the recently previewed title Spartacus: Gods of the Arena has launched on Facebook. Published by 6 Waves and developed by Large Animal Games, the Starz show marks yet another franchise to make its way onto Facebook.

Facebook to Focus on HTML5 — After noting the growth and potential of HTML5 at ISA 2011, it looks like Facebook is now focusing more heavily on it with JSGameBench version 0.1.

Drop the BassBooyah & Indaba Music Present Nightclub City Album — Booyah and Indaba Music have announced the release of a new music album, Drop the Bass. Centered around the music of Nightclub City, the tracks are all created by members of IndabaMusic.com as part of the “Drop the Bass” contest held late last year.

HeyZap Gains First Unity3D Game — A previously reviewed title by the name of Foxie Hunny Jump is coming to HeyZap this week. Of particular curiosity, it is noted as the first title to utilize Unity3D on the platform, says the developers, Fusion Studios.

At YouWeb, a Constant Quest to Anticipate Social and Mobile Gaming’s Future

It’s not easy to create a successful company in Silicon Valley; by popular estimates, only about 1 in 10 will survive, much less be successful. One of the ways entrepreneurs can try to hedge their bets is by joining an incubator, like YouWeb, a well-known venture started by former tech exec Peter Relan. In three years YouWeb hasn’t yet had an exit, but it has managed to produce three companies – CrowdStar, Aurora Feint and Sibblingz — that look like good bets, with more waiting in the wings.

YouWeb has definitely developed a specialty over its short lifespan. CrowdStar, the first YouWeb company to enjoy some large-scale success with its early Facebook games, is the content producer. OpenFeint, which initially tried to do mobile gaming, is creating iterating on a social platform with over 50 million users, which should allow companies like CrowdStar to succeed in mobile. Sibblingz, a less-known company, is working on ways to efficiently cross-publish web games to mobile. Another, iSwifter, is coming at the same web-to-mobile problem from a different angle, with a model that’s similar to the streaming game companies OnLive and Gaikai.

These companies are obviously related, but are they backed up by a grander plan? We recently got a chance to ask the entrepreneurs and YouWeb founder Peter Relan that question directly.

MeWeb

The structure and rules of YouWeb aren’t terribly unusual for an incubator. Relan invites in expert developers to spend a year working on their ideas. Each gets three tries to succeed, and if their ideas don’t pan out, they have to move on. The rules aren’t ironclad; Jason Citron founded Aurora Feint on his fourth try, according to Relan. Sibblingz founder Ben Savage started as an intern, not an entrepreneur.

Once a company gains some traction, it gets its own offices in the bank building that houses YouWeb in Burlingame. There’s also a YouWeb branch in New York City, started by an entrepreneur who decided he preferred Relan’s job, but it’s at an earlier stage than Burlingame.

As close as the companies are to each other, each told us that it’s focused on its own niche. One, Aurora Feint, may even be preparing to move on from YouWeb. “We’re kind of at the point now where we’re starting to really separate from them in a positive way,” says founder Jason Citron.  “Peter’s whole thing is this incubation, they bring in entrepreneurs and teach business strategy until they grow up and exit the nest. We’re now getting to the part where we’re kind of starting to exit.”

Still, he says, that plan doesn’t prevent a constant interchange between YouWeb’s members. “We sometimes do pretty atypical but friendly collaborations that can be hard to do with a regular company,” Citron says.

For Suren Markosian, a co-founder of CrowdStar, the tie that binds is Peter Relan – doubly so, now that Relan has taken over as CEO of his company.  “On a personal level all the managers are friends … we have a common friend, Peter, who’s very much like us but has a lot more experienced. He propagates our learnings throughout the company,” says Markosian.

Ben Savage, the Sibblingz founder, also has a personal take, having been mentored from his position as YouWeb intern to Sibblingz CEO by Relan. “He has a very good understanding of the whole space, but he can also see how each company’s strengths can complement the other. This is something that most companies don’t have the opportunity to do,” says Savage.

As much as each company agrees that YouWeb is useful for partnerships, though, they don’t express any enthusiasm for the idea of working toward a single objective. Relan, on the other hand, does find the idea attractive.

“The analogy I use is, each of you is in your forests, I’m like the helicopter overhead, and you’re carving a path. Anytime, they can radio me – am I headed into a pit? In the case of YouWeb, I say, do we have a big ecosystem that can make a play?” says Relan.

The answer seems to be yes. “It’s true that a company like Zynga will have the internal company engine to be cross-platform,” says Relan. “They’ll produce both Facebook and mobile, and there’s some talk of their zLive social gaming network. That sounds a bit like the YouWeb portfolio. The difference in approach is, Zynga believes all that value will be in one company, while I think if it’s true, all the companies will independently discover that for themselves.”

Asked whether he really sees YouWeb operating as a collective, though, Relan demurs. “I’m not going to force them to do it, because they’ll do better as CEOs than VPs of some giant company,” he says. “I believe, give all these people chances, and maybe someday they’ll buy each other. Many of the projects I can imagine being a giant collective, but for now I like that there are eight different companies.”

What’s Next

Whether a cross-platform ecosystem can develop at YouWeb depends, of course, not just on the entrepreneurs or Relan, but on the market itself. But here, also, each founder has his own thought process.

Markosian, at CrowdStar, thinks about the content. “I don’t personally believe in a one for all approach, where one product works on all the platforms,” he says. “I think each platform is its own userbase and users have their own behavior and expect different things from products. I believe in having enough understanding and expertise to deliver on each platform.”

CrowdStar hasn’t specialized in any one area yet, according to Markosian, so it can easily try out mobile gaming this year. “Mobile is the next obvious platform to go to. It’s not like a console, it’s much more mass-market,” he says.

Not all has gone smoothly at CrowdStar, of course. While competitors Playdom and Playfish sold to larger companies for massive sums, and Zynga has continued to hire and acquire its way past a thousand employees, CrowdStar recently laid off about two dozen of its hundred employees and replaced CEO Niren Hiro with Relan.

But Markosian isn’t worried by persistent rumors that his company can’t follow up its early strong performance on Facebook. “The last couple months has been an interesting experience for us. We’ve learned to optimize our teams around being more profitable. We have had restructuring, and some people left the company. It’s much more efficient now. We also shifted much more responsibility into game teams. So far, it’s our best quarter ever,” he says.

At Aurora Feint, Citron is already casting his eye beyond the biggest mobile platform, the iPhone. “I think 2011 will be the year of Android, and some developers will make a lot of money, kind of like the first year of the App Store,” he says.

“A big part of it is enlightening these guys on how to best use virtual goods. A lot of people on iPhone don’t have experience with that model, and we have people who do understand. So we want to elevate the tide for everyone,” Citron continues. “Our focus is on the developers. The fundamental thing about OpenFeint is that it’s a developer product first, a user product second, because the developers take it and make it part of the experience.”

At Sibblingz, Savage is focused on the technologies behind the content, whether it’s on the web or mobile devices. “We’ve taken a massive step back in technology in going to the browser, then again in going to mobile devices,” he says. “The reason we write for Flash is that 99 percent of people have it installed … I think gaming is on its way to being a very universal thing. From a tech standpoint that means, can we take gaming everywhere? Can we make it cross these artificial boundaries?”

Given the collection of expertise at YouWeb, the incubator should be one of the more interesting tech centers to watch over the coming year. Some of the smaller companies that may emerge include streamed games, a social television, next-generation social games, location-based games and even edutatinment, according to Relan.

ISA 2011: Live-Blogging the Mergers and Acquisitions Landscape for Small and Mid-Size Developers

In the last panel of Inside Social Apps InFocus 2011, we’re examining the merger and acquisition landscape for small and mid-size developers.

The panelists:

Terence Fung, Head of Corporate Development, Zynga
Sean Ryan, Director Games Partnerships, Facebook (former EVP and GM Games, News Corp)
Atul Bagga, VP Equity Research – Games, ThinkEquity
Raph Koster, VP Creative Design, Playdom (former President, Metaplace)

EE: What do you do if you’e a game developer and you’re considering merger and acqusition options?

RK: I hope you get into the business because you have a passion for entertaining people. Hopefully you’re not here just to merge and acquire and sell. What makes you valuable is being good at being an entertainer. It’s a creative business that’s driven by passion.

EE: Why did you sell?

RK: It’s so dependent on the circumstances. Are you reaching your goals? Are you bored with what you were doing? Were you running out of money? There are plenty of reasons someone would want to sell. It’s far too personal a question to give a blanket answer.

EE: Why did you sell to Playdom?

We had pivoted from doing a UGC virtual world we’d been working on for three years, then we pivoted to doing social games and got to touch more users in one day than in three years as a virtual good. Playdom said, “you can touch even more, we can help you.”  It was the opportunity to touch a lot of people and it was an exciting time in entertainment.

SR: The standard console cycle is 7 years long. We believe as a company that this is only the beginning of what the social ecosystem is.

We cut back on virality, but we’re going to be expanding the ecoystytem this year.  The question is ‘are you making something in an area that’s growing?’ We’re gonna grow the game business, Apple and Google are going to build their games businesses. What the best way to maximaize creativity? Value to investors?  To your self?  [The market] slowed down a bit, had some very big outcomes. Now people are looking to see if it is slowing down. There’s growth amongst the mid-size developers.

Is the ecosystem you’re in growing? Can I raise money? Can I get profitable quickly? Can I grow, if not you should sell, if you can, you should invest in your business.

[Facebook] has more plans and features coming.

AB: What we’re seeing in the social gaming industry – there are RPGs, there’s a lot of space to explore. Mobile is just getting going, monetization has only been 1 or 2% – a huge opportunity. The space is going to evolve – we estimate to be a 12 billion dollar market over the next 5 years.

EE: Zynga’s been buying a lot of comapnies since launch – from the guys who did FarmVille to people making RPGs. What’s next?

TF: We manage a large pipeline of opportunities. We look at lots of games studios. We encourage anyone witha an app, technology, or product that’s intersting to come to us. We believe there are synergies. You might not seem like they fit with Zynga, but we have a tactical view of where we’re going in the next 6 months.

EE: What do you tell people like RK?

That’s exactly how you should look at it. We tell people thinking about joining Zynga that we have network operations, analytics, recruiting. As a manger of a company you would be thinking about payroll, but if you’re about making a big game, that’s an ability we can integrate. Come work with really smart talented people, come join Zynga.

EE: We’ve seen toolbars do well, where games can share traffic with each other. Are there other platform service providers or non-gaming companies that have a lot of potential right now?

TF – There’s a lot of dislocation in the market. People are trying to get a steady feel for the market. Applifier is a good example of the disruption in the market. Overtime, developers gravitate towards a network with signifcant power behind it. We’re trying to create a Dog-powered network – when you see the dog (Zynga’s mascot) on Facebook or mobile, you equaite it with fun. We’re working with independent developers to bring innovative things into our business.

SR: [Upon acquisition}, there's a tendency to pull features. When google bought social gold, people held their breath to see what that meant. When Apple released Game Center - what did it meant to OpenFeint? You need to move either faster or get bought or just be differenet enough. Lots of ways value creation opportunites. The things that a are closer to a platform tend to have the platform (replicate) them. But OpenFeint have continued to thrive, despite Game center.

EE: Were all those [acquisitions] worth it?

TF: Yes, I’m dead serious.

EE: Even with people leaving quickly?

TF: All of the acquisitions were very positive. What we encourage is for any acquisition target who considers us to speak with other people who’ve joined about the good, bad, and hopefully not too much ugly, and come in with eyes wide open.

EE: Do you feel burned by some acquisitions in the past?

TF: Is buying struggling games makers a good or bad strategy? We see that there’s a large pipepline of struggling developers. It is a challenging market, not that there aren’t talented teams and founders. We look for people who’ve looked at their mistakes, say “this is how I messed up. We wanted to focus on a feature and it didn’t really produce DAUs.” But we don’t throw the baby out with the bathwater.

EE: If you’re starting a new gaming company, do you start on Facebook, Mobile, iOS, Android?

SR: If you’re building something social, why not build on the biggest social network that’s still growing like crazy. But not all games are social. Angry birds on Facebook wouldn’t make a lot of sense. What’s the type of game you’re building? Fit it into a platform that makes sense.

AB: If you believe games are moving to persistent games that you can only play 2 or 3 at a time, then you want to allow users to stay in contact with the people they play with across devices. It is going to be more about a multi-channel aporach and less about one channel.

EE: TenCent and other Chinese developers have done experiments in the US, but when are they going to come to the U.S. and buy someone big?

SR: 2010 was first time growth has slowed, so people are looking for how to grow. The Chinese have some of the best expertise on running games. On Facebook we’ve created this huge army of users for free to play games.  There might be 10% with the gamer instinct, and they’ve greaduated and want to play something more hadcore than a simulation. The Chinese will be looking for designer talents. What works in the U.S. may or may not work in China. The only non-Chinese games that is successful is World of Warcraft. In the U.S. we’re not familiar with their stories, so they’ll be looking for content, for expertise.

EE: Do you see the Chinese focusing internally or buying small or mid-size developers.

AB: They are sitting on a big cash balance so I wouldn’t be surprised to see people making a big acquisition in the next 12 months. Take 2, Electronic Arts could be places they could look for designer talent.

EE: You see big gaming companies making moves>

RK: There are some making moves. The story that’s most interesting is Ubisoft. They tried a half-dozen games and a lot didn’t hit and they just kept trying. It’s symptomatic of any large indutry shift that old companies will have trouble adjusting to a new landscape, and this is a very new landscape. We’re talking about companies who’ve hardly gotten into digital distribution. They have a lot to learn about how to weave their DNA into a [social] company. That’s the ultimate goal of M&A, to reshape the DnA of your company to bring new expertise into every level.

EE:Any psecific advice for new developers?

RK: Ubisoft did the right thing buy trying, learning, trying again, and being willing to be patient. You either build or you buy. If you buy it, you need to leave it alone and learn as much as you can from it. There’s a history of acquiring and not using the acquisition very well. It takes patience , you can’t turn an organization of that size on a dime.

SR: When I was at NewsCorp we started a games unit, acquired Making Fun to get up to speed. Packaged game companies [could] buy a 20-peson company.

As DeNA did with NGMOCO, or Disney – they wanted to make a big play, take a big swing. I think the Chinese will tend to buy smll. We’ll see if they play something big and say  ”now you’re in charge” like DeNA dd with NGMOCO.

EE: You track a lot of markets. What would you do different?

AB: Success is open to definition. In a short-term view, acquisitions may not be successful. Disney acquiring Playfish wasn’t about driving the net year revenue, but a longer term view.

Just to step back, the console gaming market was up 35% during the dot come bust, up 30% when the whole economy was down 5%. Now it is down 10% a year. Businesses need to leapfrog the conslole and get into the next level. Social flows beyond games into monetizing media across your brand.

EE: Physical promotions opportunities are all over the place. Are you looking to long established intellectual property lines for how you’re going to build Zynga in the future?

TF: Zynga is firing on all cylinders, identifying brand sponsorships like Farmers Insurance, State Farm, and helping promote some movie releases, but I don’t see the need to make the next Tron game considering our ability to knock out successful new intellectual property.

Audience Question: Like everyone, we’re  looking for funding and support. Where in the game development cycle does an idea need to be to attract someone like Zynga or angel funding?

SR: Publishing is coming back into vogue. You need someone to fund it, someone with expertise. The developer itself needs the help of a larger partner, even if they’re a great studio. They should focus on making a great game, let someone else focus on things that detract from mking a great game. Numerous folks like Zynga and NewsCorp look at the game, see if a game fits into their portfolio. There’s options to own it , fund it, or publish it.

RK: Here’s the dev-centric answer, practical advice. If this is your first game , then don’t build your dream game. Take the first game as a learning opportunity. Start building something that will be fun. Launch as quickly as you can. Learning from that will help you go chase the deals. It iss easy starting out to try to build something ambitious when you don’t know what you don’t know yet. Might not be what you want to do, but launch something relatively simple.  Doesn’t meean it can’t be awesome.  Launch it, start building a following, learn the lessons, that gives you the leg up to start swinging for the fences, what you believe in. Companies will want to know,  ”do they know their stuff? Can they execute – that’s always what matters – and do you have something fun and playable for your second idea. Can you show it to someone who doesn’t know the difference beteween PHP and Perl, between bitmap and vector graphics.

I would grab a free edition of UNITY or flash – I did it perosnally – I built the first the first iteration of my game with Blitz Basic (audience applause). While looking for funding, I was able to show blue spots log into an MMO space. Then said, “I think I might just launch this”, and then I got funding.

Audience question: Should people go work at Zygna, or get some experience first before they go try build their own game?

TF: Were not going to take a leap of faith on someone with no experience building games. There are some strong game designers who haven’t stepped into the social game world. I think they have great potential at Zynga

EE: What do you think about buying a smaller traditional game studio?

TF: It’s hard because of how fast we iterate. We have real time strategy game people. There are obviously traditonal game developers dabbling in social and mobile.

Audience question: If you’re thinking about about getting into social, would you build your own thing or look to get hired?

RK: I’ve been bitten buy the entrepreneur bug now.  If you think you can get the learning on your own – and you can if you have the will and the discipline -there’s no reason not to try it your self unless you want to work with a specific great designer in the space. Coming at it as a traditional game designer, at GDC, social game designers were booed. They were called a soulless exercise based on metrics. There is a lot to learn from metrics, but metrics are just a fast way to do play testing.

It may be harder to dive into an organization that knows it already because there may be a lot of culture clash. If they understand what you bring as a traditional designer, it can be a great marriage.

Audience question: The game that are successful right now are more of the same. What about games that are really agaisnt the grain, out of left field . What do you look for?  -

SR: Wer’re looking for as diverse a platform [as possible]. PVP, arcade, etc so that all types of gamers will find something that really interests them. Sports games are doing well on Facebook, they’re montetizing really well. Focus on the top 5 DAUs is a soulles excerise. The better games that we’ve seen come from small developers who are really passionate about the core, or things we don’t normally associate with the platform.

Audience question: As a young developer studio, what are the gotchas that we should look out for?

TF: Teams that hav been slamming their heads against the wall for two years on a new product, who haven’t shown abiliy to learn from their mistakes is the #1.

SR: It is very specific to what the company is looking for in an acquisition. Building another city game right now is not going to work well. If you’re a PVP game and saying “this is why it works, here’s the data”. It might not get you to 100 million users, but will help you get acquired or funding.

TF: Zynga isn’t looking for specific game types, we’re looking for intelligence we can integrate into the company. New IP out of the box is great if it can be transferred to other IPs. We have a network of users and we want to get the fun to them.

What are stock option pitfalls companies being acquired should look out for?

RK: Get a good lawyer

SR: There’s this movie called The Social Network…

RK: There’s a lot of blogs. I tried to read as much as I could. My best advice, find people who’ve been through it before who you trust who can guide you. Trying to learn it on your own can be incredibly difficult. You can’t overestimate the value of advisors.

SR: Having a good lawyer who has been through this many times who can tell you what’s typical.

ISA 2011: Small Developers Don’t Need to Sell Out Yet

For many small developers on Facebook or the iOS, the future likely looks like an intimidating place. The largest social platform, Facebook, failed to produce any major new companies in 2010 that weren’t already heavily capitalized; smartphones look like an attractive market, but growth points like in-app payments for Android or better distribution on the iPhone are unpredictable. Our last panel of the day at Inside Social Apps considered whether these small players should consider selling.

The first and most important realization should be that an acquisition can’t be the reason for being a game developer. “I hope you get into this business because you have a passion for entertaining people, because no matter what this business was a year or two ago, it’s now about entertaining,” says Raph Koster, whose company Metaplace was acquired by Playdom last year. “Hopefully you’re not here to merge or acquire or sell, because in the long run what will make you successful will be having been good at being an entertainer.”

That said, there’s also no imperative to sell right now if you’re a Facebook developer. “Making any recommendation now is silly, it’s far too dependent on circumstances,” says Koster. In his case, “Playdom came to us, and said, you know, you could touch even more people. In the end, it was that more than anything – the opportunity to touch a lot of people, and be engaging in a really exciting time.”

Facebook itself thinks that small developers face an open field. “We’re still in early days,” says Sean Ryan, Facebook’s recently hired director of game partnerships. “We’re going to grow the games business, and Apple and Google will grow their own game businesses. What we saw last year was that it slowed down a bit, as we saw a couple very large outcomes with Playdom and Playfish, and people were looking to see what would happen next. Now there’s a lot of growth in the midpoint of the market, as we saw from the article on Inside Social Games the other day. We made some changes last year, and we’re seeing growth back in the system.”

That seems like a fairly self-interested view, but the rest of the panel participants agreed. “I think there are a whole lot of genres of games that need to be explored. On Facebook has done well, now we need to look at off Facebook, as well as at mobile. Monetization has been one or two percent, that will change. There’s a lot of room to grow in social gaming,” said Atul Bagga, a vice president and game researcher at ThinkEquity.

If you do want to consider selling, Koster’s reason, increased exposure, is a good one, according to Terence Fung, Zynga’s head of corporate development. “You can accelerate those [game development] dreams at Zynga, because we have netops, analytics, we take care of recruiting. As a manager of a company, I could be figuring out payroll, but that’s not what my heart is in, I want to hit 10 million DAUs or 50 million DAUs. That’s something we have learning in,” he says.

Kabam Pulls In a Giant $30 Million Funding for Massively Multiplayer Social Games

The day of mega-fundings in the social game space is not yet done. Kabam, formerly known as Watercooler, is announcing a big $30 million funding today led by Redpoint Ventures and Intel Capital, with previous investor Canaan Partners also returning.

Kabam is a bit of an odd man out among the well-funded social game companies. With 7.7 million monthly active and 1.1 million daily active users, it’s several times smaller than a competitor like Playdom, which raised $33 million last June on about 42 million MAU and 6 million DAU.

CEO Kevin Chou considers his company part of a different breed. “Our games don’t really aggressively push the Facebook viral channels, it’s about creating great content,” he says. “We’re much more focused on serving an existing userbase than pushing our DAU numbers higher. Everyone in the industry knows that there is a relatively small percentage of players that actually pay, so you can have a much higher MAU / DAU and not make as much as another company.”

Venture capitalists aren’t great judges of potential quality or creativity, of course. What they can evaluate is technology, which is the other side of Kabam’s story. Right now, Kabam’s only big hit is the strategy game Kingdoms of Camelot, while its next two largest games, Dragons of Atlantis and Glory of Rome, follow in a very similar mold.

These titles all emulate a genre whose rules and typical gameplay were defined much earlier by games like Travian. But Chou envisions a technological evolution toward ever-larger worlds. “We’re really interested in this idea of real time, synchronous gameplay experiences where hundreds of thousands of people are interacting in real time with each other,” he says.

In the typical online strategy setup, players split onto different “shards”, or worlds run on separate servers. Thus multiplayer games can scale from a handful to a few thousand players, but not over that number. Chou thinks Kabam can figure out how to create a single, persistent world containing all its players, though.

“Those are things that are pushing the envelope in terms of massively multiplayer games,” he says. “It’s not something we have in the market today, but it’s something that crazy smart technologists out there are talking about. And consumers are saying they want experiences where they interact with even more people.” The scaling challenges and high server costs incurred by this model are the reason for Intel’s investment, according to Chou.

Besides continuing to add new creative elements to its games and working on the tech, Kabam also plans to continue growing — it’s currently over 250 employees — and potentially make more acquisitions, as with its October acquisition of WonderHill, which netted it Dragons of Atlantis. It’s also looking at continuing its experimentation on Facebook (as with Hero Force) and branching out to mobile.

And while all this is going on, Kingdoms of Camelot, which has been around for well over a year, is not suffering the same decline other social games have experienced. After reaching of 6.5 million MAU peak last September, it has settled down to the six million MAU range and, for the most part, stayed there. Quite a few users have more than a year under their belt, according to Chou, and seem happy to stick around.

Kabam had previously raised $9.5 million between its first and second rounds of funding.

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