Facebook’s stock on the Nasdaq exchange has dropped by more than 9 percent in trading Tuesday and is now floating around $29 a share, a steep drop from its original IPO price of $38.

The massive social network debuted 11 days ago and since then, the stock has sunk on news that Facebook botched the IPO process, misled mom-and-pop investors, and is fighting perceptions that the stock is overvalued in light of diminished growth prospects. Today, options trading began so investors can place different kinds of bets on the stock. The Wall Street Journal reports that some investors have placed options bets that Facebook would “jump to $65 a share by January 2014, while others betting on a slump to $16 a share by December.”

Facebook’s stock has dropped as low as $28.65 today, which amounts to about 10 percent. Take a look at the chart below to see Facebook’s big dip today. We will update this post at the end of trading with the final damage for the day.

Mark Zuckerberg photo: Jim Merithew/Wired

The Chinese equivalent of Twitter has just issued a “code of conduct” for its users in an attempt to put a stop to political criticism, rumors, and the spread of social unrest.

Weibo.com, an online property run by Sina Corp, is a microblogging platform not unlike Twitter. It allows information — well, some information — to spread rapidly through brief messages and images.

And like Twitter, it’s peppered with the same mundanity, the same inspirational cliches, the same celebrity-related chatter. But it also brings its fair share of political and social commentary, not unlike the Arab Spring and Occupy movements’ presence on Twitter.

Now, however, users will be expected to keep their missives squeaky clean by the government’s standards and to not post about politically sensitive topics, up to and including the very names of disgraced Party members or any criticism of the country’s constitution.

Weibo users’ conduct will be enforced with a points system (yep, they just gamified censorship) wherein you lose points for posting rumors or criticisms and earn points for, say, verifying your own identity. If you get down to zero points, your Weibo account gets terminated.

The timing of this decision is interesting. The Communist Party in China will be holding its 18th Congress in the fall; congresses are held about once every five years. The 18th Congress is set to bring about a huge leadership change, and so far, it’s going far from smoothly. The road to this fall’s political shift has been paved with oustings, rumors, infighting, political persecution, and all manner of drama. There have even been speculations that the Congress may be postponed this year.

Add a microblogging service to all that, and you have what some would consider to be a perfect storm for social media and social change. But not in the PRC, and not on Weibo or any other Sina property.

Unfortunately, this is just the continuation of a longstanding trend. Late last year, Sina execs pledged their support to government censorship programs.

And in early 2011, Weibo began blocking messages about the Arab Spring uprisings. A search for “Egypt” on the service would return a message stating, “According to relevant laws, regulations and policies, the search results are not shown.”

The new code of conduct was announced earlier this month and went into effect today.

Facebook’s rumored interest in purchasing facial recognition startup Face.com may become a reality thanks to some help from an unlikely source.

Russian-based search engine Yandex is said to be mulling the sale of its share in Face.com to the social giant, according to Russian newspaper Vedomosti (Google Translate). Yandex, along with investment firm Rhodium, invested $4.3 million in the startup for a 18.4 percent stake of Face.com and an arrangement to add Yandex’s CEO Arkady Volozh to its board of directors.

Yandex is interested in a combination of cash and Facebook stock for its stake in Face.com, according to Vedomosti’s report.

Earlier reports indicated that Facebook was willing to spend upwards of $100 million on the startup. Face.com is an Israeli-based company that specializes in facial recognition technology. VentureBeat speculated that the deal would make sense, considering how well it would fit into Facebook’s overall mobile strategy.

We’re reaching out to both Facebook and Yandex for further comment, and will update the post with any new information.

Via Gigaom; Image via Face.com

Derwent Capital Markets is using Twitter to figure out where the money is going. Just like this bird

A hedge fund that analyzed tweets to figure out where to invest closed its doors last year after just one month, the Financial Times reports.

That’s not because its analysis of Twitter wasn’t working. During the one month that the $40 million Derwent Capital Markets fund was operation, it reportedly returned 1.86 percent, beating the overall market as well as the average hedge fund. The fund’s founder says that its analysis worked so well that one of the fund’s principal investors suggested making a mass-market product out of it, so as to reach a larger market instead of the handful able to invest in a hedge fund.

“As a result we made the strategic decision to close the Derwent Absolute Return fund and invest directly in developing an online trading platform,” Derwent Capital Markets founder Paul Hawtin told the Financial Times (registration required).

Derwent Capital Markets now has a one-page website that promises it will soon offer … something. With the tagline “Trading Global Sentiment,” it seems clear that the product will give customers some kind of ability to analyze social media for signals as to the market’s direction.

It’s not quite as far-fetched as it might seem. DCM’s approach is based on research done at Indiana University, published in early 2011, that found a strong correlation between sentiments expressed on Twitter and the direction of the Dow Jones Industrial Average. According to the study, “Twitter mood predicts the stock market” (PDF), Twitter sentiment correlates with the ups and downs of the next few days on the DJIA with 87 percent accuracy (registration required).

A separate study at Pace University in 2011 found that social media could predict the ups and downs of stock prices for three global brands, Starbucks, Coca-Cola, and Nike. And sentiment analysis has become an indispensible part of marketers’ toolkits, thanks to companies like Radian6 and Webtrends.

Via TheNextWeb

Photo: striatic/Flickr

The world now has access to a list of words and phrases that the U.S. Department of Homeland Security uses to monitor social networks and news article comments for terrorism and general threats against the country.

The list was part of a 39-page “2011 Analyst’s Desktop Binder” document that was released due to a Freedom of Information Act request by privacy watchdog organization Electronic Privacy Information Center. The list contains references to all the related governmental agencies, obvious references to threats (attack, nuclear threat, etc.) and then some pretty generic words like pork, cloud, electric, port, dock, and many others.

The overall report is interesting because it sheds some light on how these security agencies are trained to track potential threats online, but it does raise more than a few questions. For instance, why is Homeland Security tracking many vague terms, and what do they do with this information once its been identified as a possible threat?

The department claims that the practice is simply to monitor activity and not to track anti-U.S. comments made by individuals — a practice currently employed by the governments of Iran and Syria.

The FBI is also getting into the business of crawling social media sites for possible threats against the country with a new tool, as VentureBeat reported back in January.

We’ve embedded the Homeland Security Department’s document below for further inspection. Let us know what you think in the comments.

Via Daily Mail; Image via Andrea Danti/ Shutterstock

Today, an Australian teenage girl’s indiscreet Facebook post led to a break-in and robbery at her mother’s home.

The girl, 17, had been helping her grandmother count the 72-year-old woman’s personal savings. Apparently wishing to impress her friends and the world at large, the teen snapped a picture of the cash and uploaded it to Facebook.

Within hours, masked robbers showed up at the girl’s own house with a knife and a club, breaking in and stealing cash and personal possessions from the teen’s 47-year-old mother.

Local police issued a general warning to Facebook and other social network users that they shouldn’t be total nimrods about what they post and who they make their posts visible to. The teen’s home address was listed publicly on her Facebook profile; fortunately, the robbers didn’t have the grandmother’s location.

Cops have asked citizens to “be cautious” when using social media. We would add to that subdued note: “Use the sense God gave a horse and don’t share your location, or anyone else’s, publicly on the Internet. Ever.”

We’ve already given our perspective on why public checkins are a pretty bad idea, especially for more vulnerable demographic groups such as young women flying solo. But location-sharing isn’t limited to checkins. The same provisos should apply to sharing your location publicly via location-tagging for images on Twitter or adding your address to your Facebook profile.

The teen in this cautionary tale didn’t only endanger herself and potentially her elderly grandmother; she also put her mother directly in harm’s way.

Facebook takes a lot of heat for its stance on privacy, but all thing considered, the network is a relatively neutral sharing platform that will let you expose as much or as little information as you want — up to and including residential addresses. Ultimately, our privacy is up to us, and if this one young lady’s behavior is any indicator, we still don’t have a clue about how to cover our own butts on the Internet.

Image courtesy of Couperfield, Shutterstock

Facebook is rumored to be in talks to purchase facial recognition tech startup Face.com, according to a report from Israeli business publication Calcalist (Google Translate).

Unlike the social giant’s rumored push into smartphone device making with a Facebook-branded phone, spending money on buying a facial recognition actually makes lots of sense. Facebook is one of the biggest photo sites on the planet, and the vast majority of those photos contain pictures of friends, family, and parties — all with lots of faces. Being able to easily identify those faces would easily translate into a higher traffic return, and hopefully higher advertising revenue. There’s also the fact that Facebook would be gaining a pretty wonderful domain name that encompasses half of the social network’s own name.

Face.com has continued to show itself innovative. It recently started guessing your age.

The deal could be worth an estimated $80 million to $100 million, according to Newsgeek. However, The Next Web’s Robin Wauters points out that at this point there is zero confirmation from either side, and Face.com chief executive Gil Hirsch said there is “nothing new to share.”

Yet, to add some credibility to the notion that this acquisition will go through, Facebook did recently just purchase ultra popular photo filter startup Instagram for a tidy sum of money. And with its investors worried that Facebook’s mobile strategy is lacking, the company is also rumored to be working on its own smartphone and buying mobile browser company Opera — both of which would be very useful when used in conjunction with facial recognition technology.

Founded in 2007, the Israeli-based startup has previously raised $5.3 million in funding to date.

Image via Face.com

With Facebook’s recent unveiling of a camera app for the iPhone, as well as a universal app store, it’s becoming clearer to me that even if the company is planning a phone of its own, it likely won’t be as big a deal as we think.

Instead, Facebook is continually proving that every phone is a Facebook phone — or at least, every phone that can run Facebook’s apps, which includes the iPhone, Android devices, and Windows Phones. That seems a far better strategy for the company too, as Facebook likely won’t have a chance in hell to pry consumers away from their existing smartphone platforms.

A rising popularity in Facebook mobile consumption led the company to list mobile as a major risk before it went public. The average Facebook user spent 441 minutes (7 hours and 21 minutes) accessing the site on mobile, but it still doesn’t have a good way to monetize mobile users, the company revealed in its updated S-1 filing earlier this month.

A Facebook phone likely won’t make a dent against all those users already using Facebook on their phones — and I don’t think that’s what the company wants anyway. Facebook wouldn’t spend $1 billion on Instagram, the wildly popular photo-sharing app on the iPhone and Android, if it aimed to actually kill other mobile platforms.

Now I won’t deny that a Facebook phone will happen at some point. We’ve been hearing about such a device for some time — most recently, it’s gone by the codename “Buffy” and is said to be developed by HTC — and it makes sense for Facebook to want a device entirely its own. But if anything, it’ll likely be a cheap mid-range Android phone that will appeal to teenagers and emerging markets, and not something that will compete with high-end smartphones. (I’d imagine it would be similar to Inq’s Facebook-focused phones, though that company ended up cancelling one of its upcoming models.)

Much like how Amazon offered a completely different spin on Android with the Kindle Fire, Facebook’s phone would be a cheap and easy way for its users to climb aboard mobile. (And the fact that it will lock those users into Facebook’s ecosystem is a nice plus.)

Business Insider’s Jay Yarow points out that with all of its recent apps, it looks like Facebook is putting together all of the core components of its phone right in front of us. The Facebook Camera app could easily be the primary camera app on the Facebook phone, and Facebook Messages could serve as main messaging app as well (just like iMessages, Facebook could use the app to handle both SMS and its own messages). Of course, those apps also serve as a perfect way to distract users from built-in apps on their smartphones.

Yarow also points to Facebook’s rumored interest in purchasing Opera, which would give it a powerful web browser of its own. While that’s one possibility, I view Facebook’s interest in Opera in another way: It’s the perfect way for Facebook to steal consumers away from mobile Safari on the iPhone and Android’s browsers (which includes the original Android browser and Chrome for Android).

If you own the browser, you own the web.

Opera could also serve as the perfect engine for a hyper-social web browser that’s intimately connected with all of Facebook’s services. It’s also a particularly interesting on the iPhone, as it’s the only third-party browser that isn’t forced to use Apple’s WebKit framework. Opera compresses web content on its servers before pushing it to your device, so it bypasses Apple’s restrictions on third-party browsers. That makes Opera on the iPhone faster than mobile Safari as well, and it could allow Facebook to build a truly interesting browser of its own with Opera’s tech.

Update: Well fancy that, now Nick Bilton at the New York Times is reporting more details on the potential Facebook phone. Facebook has hired more than half a dozen former Apple engineers who worked on software and hardware for the iPhone, as well someone who worked on the iPad, the paper reports.

Photo via Johan Larsson/Flickr

A billion dollars will buy you a lot of things, and, in the case of Instagram, one of those things happens to be exposure to millions.

In April, Instagram’s website saw a 78 percent uptick in unique visitors in the U.S., making the web property of the photo-sharing phenom the highest gaining site on the Internet for the month, according to analytics firm comScore.

Instagram.com, comScore found, had nearly 14.6 million unique U.S. visitors in April, up from 8.2 million in March. The unique figure and the massive gain are remarkable feats considering that Instagram’s bread and butter is its mobile applications for iPhone and Android.

click to enlarge

April was quite the month for the photo-sharing app. On April 3, Instagram released its long-awaited Android application. Just days later, Facebook announced that it was buying the young company for roughly $1 billion in cash and stock (we found out later the exact breakdown is $300 million in cash and 23 million shares). Both events likely contributed to an onslaught of Instagram activity that enhanced the service’s already powerful network effect — users post photos in the app and push them out to other social networks where folks click to view images on the web.

So there you have it: Facebook plus Android equals Instagram as top-gaining web property.

Of course, it’s not all sunshine and rainbows for Instagram. Sure, we suspect the company-within-a-company now has well over 50 million users, but founder Kevin Systrom and crew might not be tickled by the fact that the purchase price, which isn’t official until the deal closes later this year, is yoked to Facebook’s currently underwhelming share price. The Instagram deal, for instance, was valued as high as $1.27 billion when Facebook opened at $42 a share. Now, at $31.91 a share, the deal sits at $1.034 billion, a difference of $236 million.

Photo credit: Ashton Pal/Flickr

Leave it to Facebook to invent yet another way to keep us all glued to the site. The social network has made the status update stickier with the addition of embedded games that people can play as they skim the News Feed or a friend’s Timeline.

Friday, Facebook launched “feed gaming,” or the ability for users to anonymously play miniature versions of Facebook games in the News Feed or on Timeline with just a single click.

Feed gaming is both a feature for application developers and users of the social network. Application developers, with a few code tweaks, can now embed sample versions of their games into the story updates users already post to Facebook, and thus use the game-lets to hook new users.

So Joe Gamer plays Angry Birds as he normally would, but now when he gets a score he’s especially proud, he can post an update to Facebook challenging his friends to try to one-up him. The status update gets distributed, via News Feed and Timeline, to Joe’s friends who can then play the same level inside the update.

Game makers actually have a few choices here, so keep an eye out for mini-games, game replays, and level high-score challenges. Angry Birds, Idle Worship, Tetris Battle, and Bubble Witch Saga are a few games already employing feed gaming, Facebook engineer Gareth Morris said in a blog post on the new feature.

The addition of in-feed gaming is the logical next step for the social network, which has openly expressed interest in helping its games grow. Carl Sjogreen, director of product management for Facebook Platform, said at a conference in February that games are the reason millions of users keep coming back to the site.

“It’s critically important to us that games are successful,” Sjogreen said at the time. “We have a whole Platform team focused on just making sure games are going well. That includes building games-specific features … to create discovery for games.”

Of course, this all boils down to a new paradigm for game discovery on the social network. Facebook games find you and beg for just a second of your attention. A second turns into the promise of a few coins and soon you’re off installing the full version of the application to collect your rewards. Next you know, you’ve wasted away the workday trying to beat your buddies. Genius, right?

Photo credit: Matt Harnack/Facebook

YouTube is no stranger to live streaming popular events, such the  Coachella Music Festival back in April. But for its upcoming live stream of Australia’s annual Vivid Live music event held at Sydney Opera House, YouTube is showing off a new tool called Frontrow commissioned by the event organizers to help enhance the experience.

The Frontrow tool mixes elements of Instagram with the exclusivity of big-ticket concerts, and you engage in the experience without ever leaving home. You can zoom in and out using the Frontrow camera tool and snap pictures using filtered views. You can then share those images with friends, post them to social networks, etc. You can’t record clips of the concert and apply those filters in the same way you can with a service like Viddy, but it does give people an additional reason to check out the live stream.

I’ll be curious to see how many of these filtered Vivid Live concert photos end up on Google+, which is currently making a push to become a major competitor to pro photo site Flickr.

The Vivid Live live stream is free to access, and we’ve included a screenshot and short demo video showing off the new Frontrow tool below.

Update 5/25/2012 (2:00 p.m. PT): An earlier version of this post incorrectly stated that Frontrow was created by YouTube. The Frontrow tool was actually commissioned by the Vivid Live organizers for use on YouTube’s livestream.

Star Your Close Friends is simple and intuitive to use. A new area simply appears at the top of your news feed with the title “Don’t Miss the Good Stuff.” When you move your mouse over your friends’ images, you see a grey star. Click and the star turns yellow: you’ve starred that friend.

Now more of his or her status updates will appear on your Facebook wall.

A Facebook representative contacted by VentureBeat told us that Facebook is trying to help users customize what status message they receive: “Yesterday we started rolling this out for some users to help them easily group their close friends into a list.”

Facebook seems to be fairly intelligent about who it presents to users as potential “star-ees.” When I saw the feature last night, the friends I most often interact with were shown by default. But people can also search for specific friends to add ones that are not seen.

One important thing to note: Your friends will not know whether or not they’ve been starred, eliminating a potentially sticky privacy issue.

This new feature potentially solves two problems for Facebook: unseen status updates for close friends, and easy friend categorization.

A starred friend.

The first has been a problem for some time. As we know from Facebook itself, only 10 percent of your friends may actually see any given status update from you. The challenge is so severe that Facebook was actually testing a feature to allow you to pay to ensure that your status updates were noticed. But now, Star Your Close Friends will allow people to make sure they see important news from the friends they care about most, solving a large part of that problem, if only from the perspective of the person getting the status updates.

The second problem, friend categorization, is more of a competitive pressure from Google+. Circles, the way Google+ helps you categorize your connections, has widely been admired and praised. Facebook tried to address this with Smart Lists, but not with any great degree of success. Star Your Close Friends, however, is extremely simple and quick — in fact, it’s easier and more intuitive than Circles. Instead of multiple circles, overlapping circles, and circles with different levels of status update visibility, Star Your Friends is simple and binary: friends are either in or they’re out. And a single click is all it takes.

After starring friends, Facebook adds a new list in the Friends: Close Friends. A helpful pop-up tells you that “Now you can jump straight to your close friends’ photos and news. You’ll also get notifications whenever they post.”

Interestingly, Facebook seems to be trying to limit how many friends you star. Not by imposing a hard limit, but by visually indicating in the interface that the user is almost filling up a limited space. Here’s what you see as you add friends before hitting the recommended maximum, and what you see after continuing to add friends. The +2 seems to indicate that you are possibly adding more than Facebook recommends.

Star Your Close Friends is a very interesting new development. Would you welcome this change? I know I would.

Photo credit: UggBoy/Flickr

Facebook may be looking to buy browser maker Opera Software, according to a new report.

A source told Pocket-lint that the social network wants to expand into the browser space and is looking to acquire Opera to do so. VentureBeat cannot independently confirm Facebook’s interest in Opera, and Facebook declined to comment on this story.

Opera is a Norway-based public company traded on the Oslo Stock Exchange. The company reported revenue of $46.9 million in the first quarter of 2012, and has roughly 700 employees spread across eleven offices, including a satellite office in the U.S. Opera makes an extremely popular mobile browser, including Opera Mini for iPhone. Opera Mini had nearly 200 million users across Opera branded, co-branded, and operator-branded installs of the mobile browser in Q1 2012.

While details on Facebook’s Opera interest are slim, we are certain that Facebook wants a piece of the browser pie, especially on mobile. In fact, months ago we heard a whisper that the social network was actually building its own browser.

That rumor makes sense when you consider a few things. First, the company is expected to release a Facebook-branded phone this summer running some type of custom Facebook operating system, said to be a fork of the Android OS. It follows, then, that Facebook would want to control — read: profit from — how users browse and access its social network on mobile. A Facebook phone running a Google browser doesn’t sound quite right, now does it?

There’s also this key detail: Facebook’s director of product, Blake Ross, if you recall, co-founded Mozilla Firefox and helped build the Firefox browser. The browser guru came to Facebook after his startup Parakey was acquired by the then young social network back in 2007.

But back to Opera. Here’s the kicker: Opera makes money on mobile, the very place where Facebook desperately needs to monetize now that it’s a public company. The software maker said it made $3 million in first quarter revenue from its mobile consumers — up 253 percent year-over-year — and $1.8 million from mobile OEMs. The company also netted $6.9 million in Q1 2012 revenue, up 303 percent year-over-year, from mobile publishers and advertisers.

“Opera expects to monetize this user base and the billions of daily web page traffic generated by these users to a greater extent in 2012 compared to 2011 from advertising, applications and search,” the company said in its earnings report.

But the fat lady has yet to sing in this acquisition play, so stay tuned.

Social casino game startups are the cliché of 2012. Everybody is either starting a new company in this hot market — on the bet that the U.S. will allow online gambling sites again — or spending a lot of money acquiring casino game startups.

But Playstudios believes it is different because it is a blend of Silicon Valley and Las Vegas. The company was founded by Andrew Pascal (pictured right), a longtime Silicon Valley entrepreneur and former casino empire executive. He has rounded up some talent, such as ace casino game designer Nicholas Koenig (pictured left).

Together, they’ve played both sides in the intersection of a market where most new entrants come from either Silicon Valley or Vegas, and they’ve signed up MGM Resorts International, which owns 80 percent of the casino properties on the Las Vegas Strip, as their marketing partner.

“The idea is to capture the fun and excitement of a Las Vegas weekend,” said Pascal in an interview with GamesBeat. “Here’s an interesting fact: More people will play slot machines on Facebook this month than visit Las Vegas this year. The profile of the player is very similar — affluent, middle-aged women, with an above-average education.”

Today, the company is revealing the result of its work. The myVegas app on Facebook is a social gaming destination, where players can come to enjoy games such as Blackjack or slot machines. You can earn virtual currency by playing the games and earn real rewards such as trips to real-world casinos. Then you can build out your own fantasy version of the Las Vegas Strip in a kind of meta-game (pictured at top).

The best thing about the new games is that they’re authentic casino games with high production values. The app is in closed beta testing now and will be available in the summer. In one of the cool games, you can play Bet the Farm, a slot machine with an isometric 3D viewpoint. When you click on the slot machine play button, the wheels roll by in a pseudo 3D look.

In the meta-game, you design your own casinos and then populate the world with your friends. You can click on your friends as they walk down the street and you’ll see their stats or the games they’ve played recently.

Playstudios has raised $12 million in two rounds of funding since early 2011. The company has launched free-to-play casino games, where users play for free and pay real money for virtual currency, which they can trade in for rewards.

Many companies, such as Caesars Entertainment and IGT, are looking at creating gambling empires that stretch from the free-to-play Facebook games to the offshore online gambling sites to the real-world casinos. Caesars bought Playtika. IGT paid $500 million for Double Down Casino, a 70-person development studio that makes casino games for Facebook. Such hybrid companies will become the norm.

But Pascal, who has two decades of experience in games and gambling, believes that the social casino game market is a great business on its own. Roughly 65 million of Facebook’s 900 million users play casino games on the social network.

“We are focused on virtual currency-based social goods gambling,” Pascal said. “A lot of people are very excited about for-cash gambling as an opportunity. It is an enormous prize when it gets sorted out. Everyone will position themselves for it. But having been in that business, I fully appreciate its complexity.”

His team has put a lot of work into polishing the company’s games, such as the slot machine title Lost In Time: Jules Verne (pictured above). In that game, you play a slot machine. But once you hit a certain level, you can play a bonus round where you pick out objects hidden in a scene.

Once you win earnings, you can get loyalty prizes, including a weekend at MGM Grand, a chance to choose the song for the Fountains of Bellagio show, an intimate dinner at a Wolfgang Puck restaurant and tickets to the latest Cirque du Soleil show.

Pascal said that Las Vegas itself was the “very first social game.” It is a widely “shared experience that relies on alternate currencies.” He should know because he was the former president and chief operating officer of Wynn Las Vegas and Encore, two of the biggest properties in Vegas.

He worked for casino magnate Steve Wynn when he owned only the Golden Nugget in downtown Las Vegas. Pascal helped open the Mirage hotel in 1989 and watched as it reinvented Las Vegas. Then he left to do the startup thing again in Silicon Valley, where he grew up.

“I felt I was too insulated, wasn’t learning as much,” he said. “I connected with a couple of guys who were enamored with gambling. We felt the content of the industry wasn’t changing. So we reinvented the slot machine.”

The problem in the recent past was that many games in real-world casinos stagnated. The one-armed bandits were pretty boring, but Pascal started a previous company, Silicon Gaming, to attack that problem by using computer and game technology to make casino games more fun. He sold Silicon Gaming to the world slot machine leader, IGT, in 2005.

After he sold that business, Pascal returned to Wynn and opened the Wynn and Encore resorts in Las Vegas. At its peak, he ran a business that had 14,000 employees and $1.4 billion in revenues. But he got the startup bug again and incubated another company, WagerWorks, in Europe, where internet-based online gambling became legal.

He Left WagerWorks in 2010 and started exploring social casino games in the spring of 2011. At that time, he attended his first Game Developers Conference and was struck by how the social game makers talked about their customers as if they were chasing high rollers in Las Vegas.

“I couldn’t believe it,” Pascal said. “I was thinking, ‘Am I in Las Vegas or at the Social Gaming Summit?” He added, “There are just so many interesting parallels.”

At Playstudios, Pascal assembled a team that included Monty Kerr, a casino game veteran and former executive at Hi5. Rather than just build a game, they decided to build a full platform to launch a bunch of games. Playstudios previously operated under the stealth name incuBET. But now it goes by Playstudios and has 30 employees.

Under the marketing partnership with MGM Resorts International, Playstudios gets the exclusive social and mobile gaming rights for big Las Vegas properties, including  ARIA, Bellagio, MGM Grand, Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur, and Circus Circus.

Bill Hornbuckle, MGM Resorts International’s chief marketing officer, said, “We have actively watched the explosion of the social gaming landscape and evaluated the options for extending our brands through these increasingly important channels.  In partnership with Playstudios, we have created a platform that will engage and entertain existing MGM Resorts customers, attract new ones, and allow us to strengthen our brands in a new and relevant fashion.”

MGM Resorts International hopes to drive its tens of millions of customers to the social casino games. In turn, those games will feed customers to Las Vegas hotels. It’s a cycle, and Pascal says we are very early in it.

GamesBeat 2012 is VentureBeat’s fourth annual conference on disruption in the video game market. This year we’re calling on speakers from the hottest mobile, social, PC, and console companies to debate new ways to stay on pace with changing consumer tastes and platforms. Join 500+ execs, investors, analysts, entrepreneurs, and press as we explore the gaming industry’s latest trends and newest monetization opportunities. The event takes place July 10-11 in San Francisco, and you can get your early-bird tickets here.

Facebook CFO David Ebersman

The screw-up resulted in a major disappointment in Facebook’s stock debut: The stock’s 15 percent decline since the IPO last Friday may not in itself be tragic. But worse, lawsuits are flying saying that legal guidelines weren’t followed. And there’s the sad fact that regular mom-and-pop investors were apparently left with the more losses on average than large institutions who got privileged information. This all was aggravated by a separate annoyance: glitches in the Nasdaq stock market trading process, which caused delays in trade and cancel confirmations, among other things.

However, based on a number of interviews VentureBeat has had with observers and other sources close to the process, it’s apparent that Facebook itself may be most to blame for the fallout. Facebook chose to be more furtive in public announcements about its business than it was in private talks with large investors.

The “update”

The decisive action by Facebook came on May 9, three days into the “roadshow,” which is the time when Facebook and its bankers visit major investors in hopes of getting them to buy the IPO stock. On that day, Facebook’s executives, led by chief financial officer David Ebersman, signed off on new language in the company’s updated IPO prospectus.

In that May 9 update, Ebersman decided to use vague language when describing how the company’s second quarter was looking. It was extremely understated, considering what we would later find out. According to the filing, specifically on page 57, Facebook said that it was experiencing the same trend in the second quarter that it had seen in the first quarter, that growth in “daily active users” (DAUs) was increasing more rapidly than the growth in ad impressions, driven by many users’ shift to mobile devices.

The exact wording is here:

Based upon our experience in the second quarter of 2012 to date, the trend we saw in the first quarter of DAUs increasing more rapidly than the increase in number of ads delivered has continued. We believe this trend is driven in part by increased usage of Facebook on mobile devices where we have only recently begun showing an immaterial number of sponsored stories in News Feed, and in part due to certain pages having fewer ads per page as a result of product decisions.

Now Facebook is generally growing quickly — and its ads are growing, even if they are growing more slowly on mobile — and so this update itself didn’t send any alarm bells to most investors, and it shouldn’t have. After all, Facebook had long warned about this mobile problem, ever since the first IPO prospectus filing on Feb 1, that revenues could be negatively affected by its huge mobile growth, because monetizing mobile hadn’t been proven. (Indeed, VentureBeat was the first to report this on the day of the IPO filing.)

Facebook’s lawyers may, in the wake of the legal mess it has gotten into, try to argue that the new May 9 language about “DAU’s increasing more rapidly than the increase in number of ads delivered” pointed to something more significant than Facebook had released before. But the reality is that this wording was just too vague to be construed by normal people as meaning anything more than what had already been mentioned before. The sad thing is, if this was such an important update for Facebook, its team must have argued about it a hundred times before publishing. So why was it written as though it was purposefully trying to obfuscate? More on that in a sec.

First, there’s been sloppy reporting about the May 9 update, and it’s worth setting the record straight. The WSJ, the leading publication for many bankers, for example on Thursday implied that the May 9 update was the first time Facebook disclosed that the mobile risks “may negatively effect results.” But the WSJ is wrong. That wording had been in Facebook’s S-1s from the beginning. Take a look for yourself at the original February filing. (See pages 5 , 13, and 46.) The fact is, there is nothing within the S-1 update on May 9 that would give normal investors the sense that there had been a material change about Facebook’s revenue prospects.

The private guidance bombshell

The more significant point is, on the next day, May 10, Facebook made private statements to a select group of banking analysts, telling them the revenue prospects had changed. This was arguably material information at the time — a big no-no.

Here’s what happened on May 10: Facebook got on the phone with a select group of 21 analysts, including analysts of its IPO underwriters, and briefed them on what was really going on behind the S-1 update. Facebook executives guided those analysts through much more explicit material than the S-1 update contained, according to our sources, saying that Facebook now expected the second quarter to be on the “low end of the range” of the financial guidance Facebook had previously given them. VentureBeat has confirmed this wording with someone with direct knowledge of those talks.

Of course, this new information prompted the analysts to take a look at the guidance Facebook had previously given to them, then estimate where the “low end” was, and revise their own forecasts accordingly. They did this beginning on May 10, as disclosed by leaks to Reuters. The banks now forecasted 30.4 percent year-on-year 2012 revenue growth on average, instead of the 36.7 percent growth previously expected. (Compare that to 2011, when Facebook’s revenue grew 87.9 percent year-on-year to $3.71 billion.)

Let’s back up for a second. When Facebook gave its original guidance to analysts in March and April, at the start of the IPO process, it was on firm legal ground in doing so. Indeed, this guidance is a normal part of the process, described in good detail by Henry Blodget, himself a former Wall Street analyst, in his good post about the IPO process Tuesday. He covers a lot of ground that I won’t go over again here.

However, Facebook’s subsequent guidance to analysts, made on May 10, “to the low end” of the earlier guidance, was not on firm legal ground, because this was clearly new information not already in the S-1. It was also clearly different than the general guidance made originally to analysts.

The bankers’ downgrades beginning May 10 were significant, as we previously reported, and were shared with a limited circle of investors. The bank analysts also released lower earnings-per-share estimates, as well as lower revenue forecasts for the second quarter. The estimates ranged between 5.4 percent to 7.3 percent lower revenue for the second quarter than previously — very significant adjustments.

Here are the second quarter revenue estimates, as leaked to Reuters:

• Morgan Stanley — $1.111 bln (new) from $1.175 bln (old)
• Bank of America — $1.100 bln (new) from $1.166 bln (old)
• JPMorgan — $1.096 bln (new) from $1.182 bln (old)
• Goldman Sachs — $1.125 bln (new) from $ 1.207 bln (old)

This obviously was material information for investors. Following the changes, Facebook and its bankers, led by Morgan Stanley, were forced to respond to questions from key clients. We see that these key investors, once informed by these roadshows and reports, started to slash the number of shares they intended to buy. One example was Los Angeles-based Capital Research & Management which cut the number of shares it wanted after talking with the company and underwriters, according to the WSJ.

But not every potential investor was privy to these revised reports.

The mood of investors in IPO stock

Unprecedented territory

So lets summarize why this was so problematic. SEC guidelines prohibit a company from issing information that is materially different from that already in its S-1 prospectus. So what constitutes “material” information? The definition of material information is that “which would be likely to affect a stock’s price once it becomes known to the public.”

Now we’re hearing from sources that Facebook is arguing that guidelines around what constitutes materiality is disputed when it comes to the issue of financial guidance. Facebook could arguably say it didn’t know if its new guidance on May 10 was going to end up being material or not. Indeed, the Facebook IPO is unprecedented because this sort of change in guidance has never happened before, at least it has never happened this late in the IPO process. But precisely since that is the case, because Facebook was on shaky unknown ground, because SEC guidelines haven’t been tested specific around this particular area, Facebook should have made doubly sure to err on the side of caution.

Indeed, a source at one of the underwriting banks we talked with could not give us a clear reason why Facebook should not have updated the S-1 with firmer trend data.

(For more on this topic of materiality, see Bloomberg’s reporting on this. It’s good as far as it goes, but misses clear reference to the fact that Facebook chose a weaker statement in its S-1 update than what it gave to analysts afterward.)

Why did Facebook do it?

We’re seeing all kinds of reporting about how the IPO legal process is a mess, and it’s true that IPO guidelines are frustrating. SEC guidelines do not allow analysts to print anything between when an IPO prospectus is filed until 40 days after the IPO. Yet they’re allowed to speak verbally to a select few of their clients. The bizarre rules are a result of previous regulation, created a decade ago, after abuses made by investment bankers in written reports during the dot com era. These rules may need to be reformed, but Facebook needs to play by them for the time being.

So what Facebook should have done on May 9 is either update the S-1 with clearly stated quantitative data (and go forward with the IPO, and deal with the lower stock price), or else pull the IPO filing altogether and wait for a better quarter.

So why didn’t Facebook do either of those two things? Well, that’s the $100 billion question. One can only imagine the huge amount of pressure that the company was feeling. Facebook, a web site that prides itself on being able to see real-time data about users, traffic and advertising, clearly knew how the quarter was progressing. The roadshow came halfway through the quarter, and Facebook’s update on May 9 was clearly a sign that it realized it needed to say something about its deteriorating revenue situation.

Now the following is just speculation, but it’s possible Facebook felt that if the May 9 update were made more forcefully, the wording could torpedo the healthy IPO it had put so much work into (indeed, the CFO had been preparing for the IPO for at least a year).

Facebook bear Sam Hamadeh

This is interpretation taken by Sam Hamadeh, chief executive of PrivCo, a company that issues research about private companies. He says Facebook should have been clearer about the shift to mobile users, and tried to quantify the potential revenue in some way. Instead, he says, Facebook executives — led by Sheryl Sandberg and David Ebersman — initially appeared during the roadshow to blame the first quarter drop mostly on seasonal trends, and he bases this on sources he’s talked with who were present during the roadshow. He takes the skeptical view, which is that Facebook executives buckled under the pressure, and decided to try to sweep the seriousness of the mobile ad revenue situation under the rug, at least when it came to the S-1. It’s true that Hamadeh has been consistently bearish on Facebook, almost predictably so, and so it’s important to keep in mind he presents just one view.

Whether or not this is true — that Facebook decided to say the bare minimum because it feared the consequences of doing otherwise — it’s the events that followed that made Facebook’s fumble on May 9 look so devastating.

The subsequent analyst downgrades — and the realization that mobile problems were bigger than expected — suddenly shed a new light on a series of previous Facebook actions on the mobile front. And this light doesn’t make Facebook look so good.

Huh, Facebook was really obsessed with mobile

Instagram, for example. Back on April 9, already in the second quarter, Facebook announced a deal to acquire mobile photo-sharing site Instagram for $1 billion. Reports emerged afterward documenting that Zuckerberg had moved to seal the deal in a matter of days — almost unprecedented speed. Could this have been driven by panic reaction to internal metrics? The motivation driving the Instagram purchase is relevant because the site is so important in mobile. Facebook clearly had seen its own mobile usage growing quickly, and in particular had noticed Instagram’s mobile photo-sharing usage becoming a bigger and bigger portion of all stories posted on Facebook. This tied directly into the negative mobile trend in revenues, since photos are so hard to monetize with ads.

And then there’s the Facebook acquisition of AOL mobile patents that came on April 23 for $550 million. Was this another panicked move, driven by a growing mobile problem, the seriousness of which only Facebook was aware of?

That’s just the beginning. There are more questions than answers raised by the timeline released by PrivCo’s Hamadeh Tuesday evening on this site (scroll down).

So why did Facebook become so bullish?

Now forward-wind to Wednesday, May 16, two days before the IPO. Facebook chose to increase the IPO share offering by 25 percent. These 83.8 million extra shares came from insiders, including folks like Peter Thiel and Jim Breyer, who are on Facebook’s board, and who are almost definitely privy to the company’s true financial position. The two more than doubled the number of shares they intended to sell. The private equity arm of Goldman Sachs, one of the lead underwriters, doubled the number of shares it offered for sale. Of course, no intent can be drawn from these actions alone. There may be other reasons they chose to release the extra shares. But it looks really bad given that Facebook executives now knew that most U.S. investors weren’t fully privy to Facebook’s real, downgraded revenue outlook.

“This stinks to high heaven,” says Hamadeh, of the extra share allotment.

Facebook also set the number of shares it planned to offer to normal mom-and-pop investors — known as retail investors — to about 25 percent, much higher than is normal for IPOs. The cap was also raised for individual investors, so that they could now own 5,000 shares, up from 500 shares.

Finally, Facebook CFO Ebersman decided to set the price of the IPO at $38, at the very top of the price range, which itself had already been increased from an earlier range. This, even though Morgan Stanley has since made statements that the $38 price took into account the lower revenue guidance data.

Confused? You should be. The underwriting banks and Facebook have stayed mum on further commentary.

The big fall

The rest of the story is known: Since trading started Friday, Facebook’s shares have fallen hard. They opened at $42, and then fell and have languished in the low $30’s. Facebook shares closed at $33 yesterday, and they’re down again today, at around $31.50. Facebook had misjudged demand, and it now has a lot of angry investors. Facebook faces multiple investigations and lawsuits. Investors filed suit Wednesday in Manhattan federal court and in San Mateo county superior court in California, alleging that the company and underwriters failed to properly disclose changes to analysts forecasts made at the underwriting banks. Facebook faces claims that could be at least $1 billion or more.

To add insult to injury, as less-privileged investors complained about their investments going south, it emerged Wednesday that the main underwriting banks made $100 million in trades from the IPO, over and above the $176 million fee they charged for the process.

Facebook declined to comment for this story.

Yes, the legal process around IPOs is incredibly frustrating, and urgently needs to be looked at closely for ways to be reformed. But it’s also clear Facebook should have been more forthcoming about its real financial fundamentals. If it had, it could have avoided this mess.

[Chart image credit: Yahoo; Mood image: Kevin Dooley, Flickr]

A few years ago I stopped for six hours in Amsterdam en route to a conference in Cairo. I took the train from Schipol airport into the city, picked up a ride on a canal boat, dawdled through the ancient streets by the Oude Kerk, and toured the Anne Frank house. But did I see the best of Amsterdam? Hard to say.

Yahoo, which seems to be on a bit of a roll in the past few weeks, releasing “killer” mobile browsers and reinvigorating Flickr groups, released TimeTraveler for iPhone and iPod Touch today. With TimeTraveler, I’d have had a much better chance of seeing the best of Amsterdam that fit in my 6-hour slice.

Using TimeTraveler is easy: input your destination, your starting point, and the time you have available. TimeTraveler will do the rest, finding points of interest, tourist destinations, and historic monuments. It will then map them into an itinerary tailored to your available time and desired route, which can be shared with friends via email, Facebook, or Twitter. Yahoo calls it “timed travel” … hence the app’s name.

Part of the technology behind TimeTraveler is, interestingly, Flickr. Apparently, photos uploaded to Flickr with date, time, and geographical metadata are used in the calculation of what destinations you can expect to visit within a set period of time. As Shouvick Mukherjee, a vice-president for Yahoo India told The Business Standard, Time Traveler “computes through Flickr images which people have uploaded in the past and tells him the destinations he would visit, say in an hour.”

Another clever feature is the ability to save your trips in the cloud. Once you publish your trips to Yahoo, they are accessible online as a permanent record of your adventure.

Available cities include London, New York, San Francisco, Bangkok, Rome, Paris, and 23 more. More are undoubtedly on the way. Actual time travel, alas, is not.

Image credit: Dave Highbury/Flickr

Facebook’s Timeline is here to stay. And although not everyone loves this new layout, we can agree that the option to display a big image at the top of your profile is pretty cool — especially if it lets you show off your favorite video games.

We’re releasing seven days’ worth of artwork, each with a different theme, that you can use to decorate your Facebook profile:

• Sunday: The Modern Era
• Monday: Modern-Retro
  
• Tuesday: The Indies
  
• Wednesday: The 8/16-bit Era
  
• Thursday: Social and Mobile
  
• Friday: Arcade
• Saturday: Future Games

Today’s batch of covers features 10 addicting games from mobile devices and social networks. Click on the thumbnails to enlarge the pictures, then right-click (or ctrl-click for Macs) them and hit “save image as” to save to your computer.

Angry Birds Space

Bejeweled Blitz

Plants vs. Zombies

CityVille

The Sims Social

Fruit Ninja

Hidden Chronicles

Words With Friends

FarmVille

Doodle Jump

Could Facebook improve the experience of its web and mobile applications? Most certainly, and now they’ll have the usability, user experience, and interaction design expertise of Bolt Peters to do just that.

The social network picked up some of the six-person team behind the ten year-old research and design firm in an acqui-hire deal, Bolt Peters announced and Facebook confirmed.

“For more than ten years, Bolt Peters has worked with our clients (plus a robot and clay dinosaurs) to improve the design of their sites, apps, devices, video games, and cars,” head honcho Nate Bolt said in a blog post. “But the time has come for our next adventure — at Facebook.”

Bolt Peters was founded in 2002 and has completed 238 projects, a book, and a real-time research recruiting application called Ethnio, according to its website. The firm’s client list spans automotive, finance, gaming, healthcare, music, and — ding, ding, ding, ding — mobile categories, and includes everyone from Twitter and Zynga to name brands such as Levis, Sony, and Volkswagon.

The Bolt Peters team will be joining Facebook’s design team, headed by director of design Kate Aronowitz. The company has spun out Ethnio into a separately held entity, but will be shutting down all other operations on June 22.

“We’re absolutely thrilled the Bolt Peters team is joining Facebook,” a Facebook spokesperson told VentureBeat.

Facebook’s talent get underscores the newly public company’s commitment to making its products better — especially its mobile apps, which could use a little work and a whole lot of creative ad placements. One of Bolt Peters expressed strengths is in mobile research; the company takes an ethnographic research approach to “uncover how people use mobile interfaces, the ways they adapt to the logistic and technological limitations of those interactions, and how the interfaces perform.”

The social network also recently acquired mobile, social-gifting startup Karma. Expect more strategic buys in the weeks and months ahead. With IPO money lining Facebook’s now deep pockets, we certainly expect the company to pick up the pace on its already aggressive acquisition and talent plays.

Hot social media service Pinterest has hired Facebook Corporate Communications Director Barry Schnitt to lead communications and public policy, VentureBeat has confirmed. He will start in mid-June.

“Barry brings incredible relevant experience to Pinterest and will be pivotal as we grow our community,” a Pinterest spokesperson told us. “Pinterest has tremendous respect for Facebook and is grateful that Barry can apply his invaluable experience here at Pinterest.”

Pinterest recently raised $100 million in new funding at a $1.2 billion valuation. That money appears to be going toward hiring people like Schnitt, and we’re sure many other folks are being looked at as the company expands internationally.

According to his LinkedIn profile, Schnitt has been the director of corporate communications and public policy at Facebook for the past four years. Before that, he worked a senior manager of communications and public affairs at Google for eight years.

Earlier in his career, Schnitt worked as a legislative aide to California State Senator Byron D. Sher, working on transportation, healthcare and education issues. Schnitt has a Bachelor’s degree from the University of California at Davis.

Hat tip to AllThingsD

Trying to prove that its not dead yet, Yahoo owned-Flickr is releasing yet another batch of updates, but this time with the emphasis on improving its Groups.

Thursday, Groups on Flickr, the site’s community-shared photo pools, have been gifted with the acclaimed “Justified View” (pictured above) for a richer, more impactful photo-browsing experience. The Groups experience also now features a right-hand sidebar for additional photo context, and allows for direct photo uploads. Flickr has even released new Group APIs for third-party app developers.

Just how popular are Flickr Groups? There are more than 1.5 million groups on Flickr with a total of 1.2 billion photos spread across them, and 850,000 photos are added to groups each day, a Flickr spokesperson said.

The most arresting update to Groups is the introduction of the Justified layout, which features group photos in an image-centric, collage-like grid. The view reveals high-resolution images on scroll-over and includes a light-box option for a full-screen view of a selected image. Flickr members were first introduced to the Justified view three months ago when Flickr rolled out a revamped Contacts page.

The new Group sidebar is an interesting addition to the Groups experience and should stimulate conversation for the photo-sharers still active in their Groups. The sidebar, a part of the Justified view, surfaces the most recent discussions happening in a group, and highlights the top group contributors and tags.

Flickr members may also appreciate that they can now finally upload photos simultaneously and directly to their groups when using the new Flickr Uploadr tool. Why Flickr is just now introducing a direct-to-Group photo upload feature, however, boggles the mind.

The past three months have been jammed packed with Flickr feature updates, with development and vision spearheaded by head of product Markus Spiering who continues to promise significant changes to the product and user experience.

So far, Flickr’s feature-by-feature facelift has been as rejuvenating as an eyebrow lift or a chemical peel. Sure, there are some noticeable cosmetic improvements here and there, but the procedures, just as in real life, aren’t fooling anyone. A little nip and tick doesn’t appear to be the solution to bringing the photo sharing community back to the heyday of its youth.

Facebook has launched a stand-alone camera application for the iPhone to help people share photos faster and easier on the massive social network, the company announced today.

Although Facebook paid $1 billion to acquire photo-sharing service Instagram, the Facebook Camera app seems focused on bulk uploading your photos from your iPhone to Facebook rather than helping you re-touch and add effects to photos. The new app does let you edit, crop, rotate, and add filters if you so choose. (We think i is a little weird to include filters when that’s Instagram’s big focus.) Besides uploading photos, you can also use the app to browse your friends’ Facebook images.

The app appears to be a response to Google+, which recently released beautiful new photo-centric apps for iPhone and Android. Google+ hasn’t caught on with users for status updates, so it hopes it get people to come for photo-sharing. Facebook isn’t going to just sit back, apparently.

However, the app also has clear ties to Instagram. Facebook Camera was likely in development before Facebook decided to buy Instagram, and it even looks a fair amount like Instagram. Since the Instagram deal has not closed yet, that team did not work on this app, but Facebook was clearly influenced by it. Once the Instagram deal does close, we expect the lines to blur even more.

You can download the new app here.

And you can watch a video outlining the Facebook Camera app below:

Photo credit: Facebook

Senator Chuck Schumer (D-N.Y.) hijacked the senate floor today to address critics of his recently proposed Ex-PATRIOT act legislation, which would impose new taxes on people who give up their U.S. citizenship to avoid taxes and bar them from re-entering the country.

Schumer, along with Sen. Bob Casey (D-Pa.), introduced the Ex-PATRIOT act (Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act) last week after the public had caught wind of Facebook co-founder Eduardo Saverin’s decision to renounce his citizenship. The move ended up saving Saverin an estimated $100 million.

“When you renounce your citizenship to swell your bank account, you’re un-American,” Schumer said. “What Saverin is doing is free-riding on America, and dodging taxes from an IPO.”

The Senator also called out the Wall Street Journal for labeling him a vocal spokesperson in the “age of envy”, and scalded republican opponents of his legislation, saying “they make Eduardo Saverin into their patron saint.”

Honestly, I don’t think Saverin would argue with being called “un-American,” considering that he didn’t feel compelled to continue being a citizen. And while I agree that having the ultra rich dodge taxes is a bad thing for the country, Schumer’s plan for handling this situation is utterly awful.

Under the proposed bill, expatriates with either a net worth of $2 million or an average income tax liability of at least $148,000 (over the last five years) will be presumed to have renounced their citizenship for tax avoidance purposes. Any person who fits this description does have a chance to appeal to the IRS to prove they aren’t just dodging taxes. Anyone who the IRS determines was indeed dodging taxes by renouncing citizenship will be slapped with a new tax on all future investment gains — no matter where he or she resides. The senators said this stipulation would eliminate any tax benefit/financial incentive associated with renouncing one’s citizenship. Also, the rate of the new capital gains tax will be 30 percent, which is consistent with the current rate applied on non-resident aliens for dividends and interest earnings.

So to summarize, Schumer wants to tax people who give up their citizenship as if they were still citizens. And if they refuse to pay these taxes, they can’t come back into the country.

I highly doubt this is going to prevent people from giving up their citizenship. I do, however, think the Ex-PATRIOT act (if passed into law) would end up driving investment into Europe and Asia in the long run.

Please feel free to sound off with your own thoughts in the comment section.

Photo via Sen. Schumer/ Flickr

Google has updated its Google+ app for Android with beautiful new flourishes and the ability to start a video chat Hangout on the go, the company announced today.

The app update makes a lot of sense in light of Google+’s new photo-centric iPhone app and the service’s focus on wanting to be the next Flickr. Google clearly knows it can’t win directly competing against Facebook on status updates so it will try to get people to use Google+ for other things, namely video chat Hangouts and photo-sharing.

My favorite feature of the bunch is Hangouts and that feature has been nicely updated today by letting you start hangouts directly from your phone. Before, you could attend Hangouts in progress but could not create new ones from your phone. To try it out, tap “Hangout” in the navigation ribbon, add a few folks, and tap “Start.”

As for the layout, there is now full-screen media in your river, conversations that fade in, and the ability to +1 content instantly.

The app also adds the following items:

• A navigation ribbon that slides in and out, providing quick access to everything
• The ability to download photos directly from Google+, and turn them into wallpaper
• The chance to edit posts inline, in case you make any mistakes while on the go

The new app can be downloaded now from the Google Play store.

Photos: Google

Add the House and the Senate to the growing list of parties with serious questions and concerns about how Facebook, its underwriters, and the NASDAQ handled the most anticipated initial public offering in recent history.

Both the Senate Banking Committee and the House Committee on Financial Services are now officially looking into issues surrounding the Facebook IPO. The committees will be conducting briefings with all involved parties, spokespeople confirmed in statements to Reuters.

The committees have yet to schedule hearings or publicly state what specific issues are under review, but we suspect they’re especially curious about whether Facebook and its underwriters violated securities law in the run-up to its offering, as has been alleged in a shareholder class action lawsuit.

“Effective capital markets require transparency and accountability, not one set of rules for insiders and another for the rest of us,” Senate Banking Committee member Sherrod Brown said in a statement. “There’s a lot that we don’t know about this IPO, but a lot that we do. We know that the SEC must fully investigate and take appropriate action if it discovers any violations.”

The Financial Industry Regulatory Authority and the Securities and Exchange Commission said Tuesday that they will review allegations of impropriety around Facebook’s IPO.

The congressional inquiries follow a tumultuous week for Facebook, which saw its share price plummet on Monday and Tuesday and only rebound slightly on Wednesday to close at $32. To make matters worse, as Wall Street shows signs of uncertainty about the company’s future, Facebook shareholders are more than a little disgruntled about being left out of the revised earnings estimate loop. They’ve filed a class action lawsuit against the social network and its underwriters for allegedly disclosing material information to select investors.

Facebook declined to comment on this story.

Photo credit: f-l-e-x/Flickr

The bungled handling of Facebook’s initial public offering by NASDAQ may have left the door open for a rival suitor to win over the newest technology company on the market.

The New York Stock Exchange (NYSE) is using Facebook’s NASDAQ opening day debacle — trading was delayed by 30 minutes as the NASDAQ’s electronic system faltered under demand — as a potential in with the Menlo Park-based company, according to various reports.

The NYSE has made “soft overtures” behind the scenes in an attempt to get Facebook to change its listing, Fox Business News reporter Charles Gasparino reported Wednesday.

“NYSE makes ‘soft’ pitch to Facebook to switch listing venue,” Gasparino first tweeted. “NYSE confirms FBN report that NYSE has made soft pitch to Fb regarding listing,” he tweeted later.

Several other media outlets, including CNBC, Reuters, and Bloomberg are running similar stories and are suggesting that Facebook may be looking to transfer its listing, though CNBC backpedaled a bit on its original story. “BREAKING NEWS: @BobPisani reports the NYSE has had ‘no discussions with Facebook’ on potential listing switch,” the CNBC Twitter account tweeted.

A jump from one exchange to the other is not wholly unusual on Wall Street, though most companies tend to stay put. The NYSE recently won over TD Ameritrade, which had been listed on the NASDAQ since its 1997 IPO. The dueling exchanges have been known to compete aggressively for significant listings, especially in the technology sector.

In a Fox Business News broadcast Wednesday, Gasparino said that the NYSE knows that its chances of convincing Facebook to move its listing are slim. Gasparino added that the NYSE is more aggressively going after social gaming company Zynga.

After a market thrashing on Monday and Tuesday, Facebook rebounded a smidgen Wednesday to close at $32 a share. The social network opened on the NASDAQ at $42 a share. The company and its underwriters are being sued by shareholders for allegedly passing along severe revised earnings estimates to select investors.

Facebook declined to comment. When reached for comment, a NASDAQ spokesperson did not provide a statement for this story.

Photo credit: Larimdame/Flickr

In the convoluted case of the botched Facebook IPO, the story goes that the social network’s underwriters, with guidance from a Facebook executive, reduced their 2012 earnings estimates, shared that material information with a few, preferred investors, and let institutional and retail investors take the hit as Facebook’s stock value tanked.

So about those revisions to Facebook’s earnings estimates — just how bad are they? Pretty disconcerting, if you ask financial data company PrivCo CEO Sam Hamadeh. “These are enormously material changes in financial forecasts.”

According to the projected numbers of four banks, as shared with Reuters by an anonymous investor, Facebook could report 5.45 to 7.28 percent less revenue in the second quarter of 2012 and 3.61 to 6.13 percent less revenue for the full year than originally anticipated. The underwriters also reportedly reduced Facebook’s 2013 earnings per share estimates by has much as 7.35 percent.

The reduced figures, as shown in the table below, dramatically change the valuation of the company, Hamadeh said.

“The reduction to Facebook’s forecasts of this magnitude — reducing the revenue growth rate by over 6 percentage points — is so material that it should absolutely have been disclosed in a revised S-1 filing before the IPO pricing,” he said. “The combined net effect for Facebook in this case of both the reduction in the financials and the valuation multiple would have lowered Facebook’s valuation by at least one third.”

Facebook did file a revised S-1 on May 9, which spelled out that mobile was an even greater risk than originally stated. However, that warning, which stated that Facebook’s daily active users (DAUs) on mobile are increasing more rapidly than the number of ads it delivers, did not come with Q2 2012 or full year 2012 earnings estimates.

Morgan Stanley’s original full year 2012 revenue projection for Facebook was $5.036 billion, according to the Reuters report, or 35.74 percent year-over-year growth. By changing its forecast to $4.854 billion, the underwriter is predicting that Facebook will only grow revenue by 30.84 percent this year, which changes the perceived value of the company and the share price at which investors would be comfortable buying Facebook stock.

For comparison, Facebook’s revenue grew 88 percent year-over-year to $3.71 billion in 2011.

Bottom line? The accusation is that Morgan Stanley, Bank of America, JPMorgan, and Goldman Sachs shared their revenue revisions with their top investors, but regular institutional investors and retail investors weren’t provided with the additional guidance. Instead, these folks were left with Facebook’s May 9 S-1 amendment, which was woefully short on hard data.

Now, the legal question at hand is whether Facebook hid “a severe and pronounced reduction” in revenue from investors. For its part, Morgan Stanley is standing by its actions. A spokesperson said the following in a statement shared with VentureBeat:

Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations.

After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS’s institutional and retail investors and the amendment was widely publicized in the press at the time.

In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO.

Facebook publicly reported that it made $205 million in net income on $1.06 billion in the first quarter of 2012. The social network’s pre-IPO earnings report was a disappointment considering that it brought in 6 percent less revenue than it did in the previous quarter.

Facebook closed at $32 a share on the NASDAQ Wednesday, which is up from Tuesday’s close but down almost 16 percent from its $38 starting price and nearly 24 percent off its $42 opening.

Facebook declined to comment on this story.

Facebook shareholders have filed a class action lawsuit against the social network, as well as underwriting banks including Morgan Stanley, over its first-day trading slide, the law firm Robbins Geller Rudman & Dowd announced this morning.

The suit alleges that Facebook hid “a severe and pronounced  reduction” in revenue forecasts from its investors, due to a more widespread use of Facebook via mobile devices. Yesterday, Reuters reported that some investors were shocked when lead underwriter Morgan Stanley reduced its revenue forecasts of the company shortly before Facebook’s IPO, supposedly following an amendment to its S-1 filing on May 9 over increased mobile risk.

Even more scandalous, Business Insider’s Henry Blodget reported last night that a Facebook executive actually told the underwriting banks to cut their estimates, but didn’t share that information with smaller investors. If true, Facebook could be on the hook for violating securities laws.

The situation is admittedly confusing, because Facebook’s amended S-1 was quite pessimistic about revenues from mobile devices, as we reported at the time. Since the S-1 is a public document, it’s hard to argue that Facebook was hiding anything, unless it was privately giving different information to the underwriters.

That’s exactly what the complaint alleges: That Facebook was giving even more pessimistic revenue guidance to its underwriters.

“The true facts at the time of the IPO were that Facebook was then experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices … such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012,” the complaint reads.

The underwriters then subsequently lowered their estimates for 2012, “which revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors.” That’s exactly how an IPO process is not supposed to work.

Meanwhile, those same underwriters earned a bonus $100 million last week by selling their extra allotment of shares in order to stabilize the price on the IPO day, an option known as the “greenshoe.” How does that work? Essentially by shorting the stock, as Reuters writer Felix Salmon explains in a lucid post on the Facebook greenshoe.

Separately, the NASDAQ has admitted that it had trouble processing all the orders for Facebook shares, delaying the opening of trading by about half an hour. That glitch has bankers hopping mad, and at least one has even sued NASDAQ over the delays.

The suit was filed in in a Manhattan U.S. District Court this morning, and it comes on the heels of a suit filed yesterday in California as well as a subpoena filed in Massachusetts yesterday. We’ve asked Facebook for further comment and will report if we hear back. Find the full complaint below.

Via Reuters; Photo via Facebook

Technology giant Oracle has acquired social media marketing software startup Vitrue, the company announced today.

Financial terms of the deal were not disclosed, however TechCrunch is reporting that Vitrue sold for $300 million.

Vitrue offers big (as in global) brands a service that helps them manage all the social media activity on Twitter, Facebook, Google+, and several others. Using these tracking tools, Vitrue’s clients can build campaigns to drive revenue all the way down to the local level. Some of Vitrue’s big-name clients include Kellogg’s, McDonald’s, and Disney. The company recently started providing tools to manage YouTube, Pinterest, and Instagram.

As part of the acquisition deal, Oracle will work with Vitrue to further develop a comprehensive social relationship platform that can both track social media behavior as well as provide analytics to show a return on investment.

Founded in 2006, the Atlanta, Ga.-based company had recently raise a $17 million round of funding from Scale Venture Partners and Advent Venture Partners to open new domestic offices around the country as well as expand into international markets. Vitrue has raise a total of $33 million to date.

Last week, U.S. District Court Judge Jeffrey S. White ruled against Facebook in a case first filed in 2010 against Norway-based adult social network Faceporn. Facebook requested full ownership of the domain name along with “an award of attorney’s fees and costs.”

Judge White felt Facebook was left without a leg to stand on, stating the social network “has failed to show that defendants, both residents of Norway, purposefully directed their conduct at California.” The judge recommended the motion be denied and the action dismissed for “lack of personal jurisdiction.”

This is not the first time Facebook has gotten in other companies’ faces. It has come after other sites with “face” or “book” in their names, including Shagbook, Teachbook, and Lamebook. So far, all of the lawsuits have been dead ends except for Lamebook, which ended with a settlement with Lamebook that left the parody site standing.

According to the report, Facebook currently owns ten trademarks with another seventeen pending approval. The social network even owns a trademark for the word “wall.” The company plans to continue its lawsuit against Faceporn in Norway, which could lead to a “likelihood of confusion” test.

Thumbnail image of blank face via ShutterStock

Facebook has settled a lawsuit concerned “Sponsored Stories” that could have cost the company billions if the plaintiffs had won, according to a Reuters report.

In light of Facebook’s team taking the company public last Friday, it will have to start making more careful decisions on financial matters. Facebook’s shares on the Nasdaq exchange disappointingly closed at $31 on Tuesday.

The proposed class-action lawsuit was brought to federal court in San Jose, Calif. by five users who were upset at Facebook’s “Sponsored Stories.” That type of ad showed a product and noted which of your friends “liked” that advertiser. Reuters said the users alleged that the “Sponsored Stories” feature violated their right to publicity under California law.

The terms of the settlement were not listed, but it will almost certainly be less expensive to settle than to drag the case through court. If it had become a class-action suit, it could have included the nearly one-third of the U.S. that is on Facebook.

Mark Zuckerberg photo: Jim Merithew/Wired