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Funtactix wants to set itself apart in online games by addressing one of the most annoying problems: the inability for users to take their game characters and achievements from one game to another. With the Moondo cross-gaming universe being unveiled today, you can do just that.

So far, the universe is small with two games involving shooting and racing. But Sam Glassenberg, chief executive of the Menlo Park, Calif. company, says the company’s 3-D engine allows it to churn out new games every eight to 12 weeks. A new selection of sports games will debut in August. With each game, players can reuse their own avatars, or animated game characters, and their “power ups,” which give them special powers such as better speed or armor.

The games are a step up from simple Adobe Flash games and require a 90-megabyte download. That’s a barrier to some gamers, but it’s not a huge download burden. By October, Funtactix plans to introduce a browser-based version of the cross-gaming universe. Glassenberg says that most games build up barriers that keep you from going to another game. In online multiplayer games such as World of Warcraft, the last thing the company wants you to do is take your character and go to another game.

But the Funtactix games are more casual, with sessions typically lasting two to five minutes. Glassenberg says mainstream players who appreciate variety will like Moondo.

The games have been available in a limited beta since February. Funtactix was founded in 2006 by Yaron Leifenberg and Ilan Graicerand. The company received $6 million in a first round of funding in 2007 from Benchmark Capital and Jerusalem Venture Partners. Glassenberg, former lead program manager for DirectX graphics at Microsoft, joined five months ago. The company has 25 employees, with most of the development team in Tel Aviv, Israel.

The company’s idea of porting characters and achievements across games faces no direct competition today. IBM and Linden Lab announced earlier this year that they were exploring the idea of making avatars portable across virtual worlds, but retrofitting their games to support such capabilities would require a huge amount of standardization. With so many worlds, it would be tantamount to boiling the ocean.

Microsoft and Nintendo have endorsed the idea of cross-game play to some extent. Microsoft talked at its E3 press conference about letting players create their own avatars for Xbox Live. In casual games such as Uno, players can use their avatars inside the game. Likewise, Nintendo Wii players can create their own Mii avatars, which they can use in games such as Wii Sports or Wii Fit. However, those players can’t take their achievements in one game and apply them to another.

Funtactix has thousands of players already. When it put up its second game earlier this year, usage of both games shot up 80 percent. And the number of game sessions played by new users jumped 250 percent. The games include Slider Party, a fast-paced shooter game where players can play in groups in a light-hearted style; Boost, a high-speed racing game where players race customized vehicles head-to-head; and Crystal Run, a team-baesd “capture the flag” game with a top-down view.

The real hurdle for the company will be game quality. Games made in eight to 12 weeks just aren’t going to compare to some of the hardcore fare out there. On the other hand, the cross-game play will allow Funtactix to set itself apart from all of the other casual game companies, ranging from Gaia Online to PopCap Games. The games are free to play now and will be ad supported. Over time, Moondo will add virtual item transactions and other business models.

Gaia Online has raised $11 million in a third round of funding to complete its massively multiplayer online game as a supplement to its “hangout” site for teens and young adults.

Institutional Venture Partners led the round. In the past five years, the San Jose, Calif., company has built one of the largest worlds where teens can talk to each other via animated characters, or avatars, in a kind of virtual shopping mall. The company has more than 5.9 million active monthly users and Gaia Online is building a new massively multiplayer online PC game where those members can play starting late this summer.

The money will come  in handy as the company battles its newest competitor, Lively by Google, as well as its traditional “virtual room” rivals Habbo, IMVU and WeeWorld. Each of these rivals shares a common design. While Linden Labs’ has built a fully interconnected virtual world, these companies allow their members to create and decorate their own rooms and characters.

Gaia Online is in the midst of expanding its virtual hangout into a full-fledged online game, complete with an integrated continent, combat system, storyline and a campaign full of missions. WeeWorld, whose characters were used mainly to chat, also made the move to creating its own virtual world.

About 15 game developers have been working on that project for the past year. After that, the company plans to add virtual pets to the features that its users can enjoy, said Craig Sherman, chief executive of Gaia Online.

Gaia ranks as the second-largest virtual world, just behind Webkinz in terms of share of the U.S. audience, according to Hitwise data from May. Habbo is stronger in Euope. Sherman said that Gaia Online will invest the money to keep adding new features that will keep its users engaged. Previously, Gaia raised a second round of funding from Time Warner in January. The amount wasn’t disclosed.

Google is going into the virtual world business today as it unveiled “Lively by Google,” a product that lets users create highly personalized 3-D virtual rooms on the web. Users can create their own custom characters, or avatars, and interact with friends through text chats or animations.

The long-awaited move has been expected by rivals such as IMVU, Habbo, WeeWorld, and Gaia Online – all of whom offer virtual rooms and avatars targeted at young people. Lively by Google users will be able to embed videos or photos in the walls of their rooms. And the Lively rooms themselves can be embedded on a blog or web site with just a snippet of code. It will also be a Facebook application.

When Google moves into a new market, it’s a blessing and a curse. The small start-ups in the market can welcome the validation of their space. But then they have to watch out for some serious competition. In this case, Google signaled its interest early.

In 2005, the company made a secret bid to buy IMVU. The company turned Google down. The search giant did manage to hire one of IMVU’s five founders, Mel Guymon. Rivals such as IMVU and Gaia Online — which we wrote about here and here — have head starts with millions of members, but Google has a lot of marketing power to ease its entry into the market.

Niniane Wang, an engineering manager at Google, wrote in a blog post that she started working on the idea as a “20 percent project,” or one that Google employees are allowed to do even though it has nothing to do with their direct jobs. In contrast to worlds like Linden Lab’s Second Life, Lively by Google is available on places people already visit on the web, Wang wrote.

Update: Cary Rosenzweig, CEO of IMVU in Palo Alto, Calif., said that Lively by Google is much more squarely positioned against IMVU, no doubt due in no small part to the fact that one of IMVU’s founders is leading the Google effort. He said Google’s move does indeed validate the virtual world space and that the metaphor of the room makes Google’s effort much more akin to IMVU than Second Life. He thinks the category will be big enough for more than just one company; meanwhile, he notes that IMVU has 20 million registered members and 1.7 million virtual items for sale.

Google could have created its own world like Second Life, but that represents a huge artistic undertaking and requires a lot of server infrastructure. Virtual rooms, on the other hand, don’t have to be linked in a world and are therefore much more contained in terms of required art work and computing power. In this case, the users themselves will be creating all of the art work.

The ecosystem around this promises to be big. San Francisco-based Rivers Run Red announced today that it is going to help with some of the art for the 3-D spaces. And San Francisco virtual world marketing agency Millions of Us has also just launched a project in which it is taking the National Geographic Channel’s “L.A. Hardhats” TV program into Lively by Google.

Prior to the release of Lively by Google, the company was working closely on the virtual world project with Arizona State University. My guess is this is one way that Google is going to expand its advertising business.  A year ago, it bought Adscape, which makes it possible to insert ads into game worlds.

Gaia Online has built one of the biggest online hangouts for teens over the past five years. Think of it as an online shopping mall full of kids who express themselves through cartoon-like avatars. Today, it is taking the hangout one step further by revealing the details of a more elaborate, connected virtual world with its own storyline and missions.

The company’s Gaia Online site already generates 3 billion monthly page views and has more than 5.9 million unique users a month. While there are a dozen different things you can do when you log into Gaia Online (like meet other teens and play casual games), the place is currently not a single, continuous world.

That’s going to change in the late summer as the company rolls out its “massively multiplayer online” (MMO) game, said Craig Sherman, chief executive of the San Jose, Calif.-based company. Users have been demanding this game as the top thing they want for a couple of years.

The pattern with Gaia Online’s evolution is similar to what happened with the evolution of competitor WeeWorld. At first, WeeWorld enabled teens to create their own characters, or avatars, which were called WeeMees. Last month, the company went a step further in unveiling a WeeWorld virtual world. Gaia Online’s other competitors, Sulake’s Habbo and IMVU, also operate a series of user-customized rooms where users can chat, but not continuous worlds. (See our IMVU coverage).

The evolution of these communities makes them difficult to classify. You can play games or you can watch a movie in a virtual theater. Hitwise said that Gaia Online was the No. 2 virtual world in May, next to Webkinz. But Sherman said that Gaia Online is more a cross of a social network and a game.

It’s more expensive to maintain such games. But it’s not as hard for Gaia Online to make the leap to an MMO because it has simple two-dimensional avatars and background environments, not high-resolution 3-D graphics as with IMVU or Second Life. Gaia Online’s software runs in a browser and is based on simple Adobe Flash animations.

“We think we did this the right way by starting it as a social experience first,” Sherman said. “Now we’re adding the world that goes with it.”

David Georgeson, senior producer at the company, heads a team of about 15 developers in San Jose who have been working for the past year on the PC-based MMO. Gaians, as members are called, can use their existing avatars as their characters in the virtual world

Characters can put on rings that they find in the world in order to gain special powers. The characters can then explore the world or engage in combat against creatures in the world, which is populated with inanimate objects such as mushrooms or lawn-ornament gnomes that have come to life.

The world has a number of towns where players can peacefully explore and interact. They can, for instance, gather around a fountain and listen to a melody and then try to replay it as a group, as in the old “Simon” game. The further they get away from the towns, the more they engage in combat. Players can take the items they win after successful combat and then sell them in the towns or use them to build virtual goods. (Virtual goods sales are one way that the company makes money on the free online hangout).

The characters can engage in deeper adventures and follow a storyline from beginning to end with groups of friends. But Georgeson views it as a “light MMO,” or one that is casual enough in its game play for people to play a little bit at a time and not all-consuming like fantasy role-playing games such as Blizzard’s “World of Warcraft.” Over time, Georgeson’s team will release more and more environments, goods and other content for the world.

Gaia Online started in 2003 as a place where kids could go to enjoy comics. The community has blossomed into a virtual community, with a dozen stores, 37 Adobe Flash-based games, and an eBay-like market for virtual goods. There are a half million new posts daily in the site’s community forums. And Sherman said Gaia Online is the No. 2 art community on the web with 100,000 virtual goods auctioned daily. On a dollar basis, about $1 million in virtual goods transactions take place each month. Sherman said those stats show that it is a more active place than many of the biggest social networks.

After the MMO launches this summer, Sherman said the company will move on to the next thing that its users want: virtual pets.

Chat room site IMVU has been quiet for four years. But the company is announcing today that it has more than 20 million members in its online community where people can use 3-D avatars, or virtual characters, to meet in rooms and trade virtual goods.

The Palo Alto, Calif.-based company also says it has the world’s largest catalog of virtual goods for sale, with over 1.5 million 3-D items. Chief executive Cary Rosenzweig (pictured below) says the company has built the equivalent of the eBay of virtual goods. Sales of such goods are generating $1 million in revenue a month for IMVU, which thrives on a so-called “micro-payment economy.”

IMVU is now the No. 6 largest virtual world, according to Hitwise’s May data (see chart below). That’s up from No. 8 last year.

“We have quietly built IMVU into a major online economy,” said Rosenzweig, chief executive of IMVU. “We’re making money by introducing buyers and sellers of virtual goods.”

The company is the brainchild of IMVU chairman Will Harvey, a veteran game developer whose last creation was the virtual world There.com. Rozensweig says Harvey’s new effort is succeeding because it focuses on the creation of a great avatar and then builds an experience around that avatar. By contrast, There.com and other virtual worlds create an environment and then work their way down to the avatar.

The difference between IMVU and worlds such as Linden Labs’ Second Life is that there is no world in IMVU. There are countless individualized rooms created by the members. (Or they can choose from among 50,000 pre-fabricated rooms). And members interact by visiting the rooms, but there is no virtual world that is physically represented in 3-D graphics. The rooms can grow to become vast forums, although, according to Rozensweig, the company focuses on “one-to-one communication, or small groups.”  One of the big benefits of rooms over a full virtual world is that server costs are much lower for IMVU. Roughly half of the users are female, compared to typical online games that are mostly male.

Members of the world create their own 3-D animated characters and equip their rooms with virtual goods. The animations are stylistic, not realistic, but they look much better than rival 2-D experiences such as Sulake’s Habbo. People can chat instantaneously, shop through a virtual goods catalog, play games, talk on forums, and use developer tools.

The world is still in its public beta and only emerged from stealth mode last Friday during a panel that I moderated on user-generated games at the Social Gaming Summit in San Francisco. The company’s investors include Menlo Ventures, Allegis Capital, and Bridgescale Partners. The company has raised more than $20 million in three different rounds. The most recent was an $11 million round in April 2007.

In the next week or two, the company will launch prepaid cards to enable members to buy credits that they can use to buy virtual goods in IMVU. The cards will be available in major retailers such as Target, 7-Eleven, Blockbuster and Speedway. That will help younger people who don’t have credit cards to participate in the world more easily.

More than two million virtual goods have been created — about 3,000 each day. About 500,000 of those are 2-D stickers that people can use to customize their personal home pages. Other goods include clothes, accessories, pets, and scenes for rooms. People are creating the goods to express their own personalities, Rosenzweig said. (See sample room pictured left).

IMVU has 60 employees. The sweet spot for IMVU is adults ages 18 to 24.

The Nintendo Wii may be getting a lot of attention. But the have you heard of WeeWorld and its WeeMee’s? They’re the kind of things that make you smile. Especially for teens and young adults.

A WeeMee is a virtual avatar that you can use as your identity in the WeeWorld virtual world (unrelated to Nintendo) or while you’re chatting with someone on an instant-messenger platform. More than 21 million WeeMees have been created in the past three years and about 600,000 a month are being created, says Lauren Bieglow, general manager of the London-based company’s North American division.

That has the company looking around for funding to expand its business, she said. Today, the company is announcing that RCA is doing a repeat promotional campaign with a musical artist, Alicia Keyes. Earlier, the music company tested a WeeMee-based ad campaign for singer Avril Lavigne. Keyes will release a new video which can be used as a background in the WeeWorld virtual world, where players can create their own rooms.

Beyond the WeeWorld site, users can use WeeMees as cutesy avatars on AIM, Skype, and Windows Live Messenger. They can use them on email signatures, blogs, or as their Facebook avatars as well. The company has been funded in the past by Accel in a $15.5 million round in 2006 and Benchmark Capital in a $5.5 million round in 2005.

The company started with avatars on the message systems and then created its own social network about a year ago. The service competes with other cute avatar virtual worlds such as Habbo Hotel or Gaia Online. The average age is 19 and the largest age group of users is 16. The company makes its money through advertising deals with companies such as Procter & Gamble. You can, for instance, use Cover Girl make-up on your avatars.

The company also makes money through virtual object sales. That will shortly include the purchase of Alicia Keyes pianos, T-shirts, or CDs. In the past two months, more than 400,000 items were downloaded in the Avril Lavigne promotion. The company has 55 employees. If the company raises money, Bigelow says that it will be used for a number of different avenues of expansion.

Update

Gaia Online, the virtual world for teens, siad media conglomerate Time Warner has invested an undisclosed amount in the company. Update: The amount was for a couple million, I’ve heard, and it was part of the previous round the company raised.

San Jose, Calif.’s Gaia says it has nearly three million monthly users. It also has a growing population of users on Bebo, who sign into the Gaia OMG application and play a miniature version of the virtual world (see our article from earlier today).

Time Warner movie studio Warner Bros. has previously shown movies within Gaia, via a virtual theatre.

Gaia has more than $1 million in virtual goods sold per month, and it sees around 100,000 completed transactions per day, it said.

The company has previously raised more than $20 million in previous rounds from DAG Ventures, which led the last round, as well as earlier investors Benchmark Capital and Redpoint Ventures. Update: It also raised a round last year from Sony.

Social networks like Facebook and Bebo currently limit users and third-party developers from fully exporting most user data to other sites. However, there are a number of applications that are using these company’s social networking platforms to share data across sites, grow and even make money.

Virtual world Gaia Online, for example, recently introduced an application for Bebo that is now one of the social network’s most popular.

The trend of cross-site applications will pick up steam as social networks and other companies, including Facebook and Google, work to figure out more complete ways of sharing data.

The Gaia application, called Gaia OMG, lets Bebo users, mostly teenagers, sign in to their Gaia accounts while on Bebo, then interact with other Gaia users within the Gaia Bebo application — it’s a miniature, limited version of what you can do on the Gaia home site (see screenshot).

It launched alongside Bebo’s third-party developer platform last month. Now, the company says Bebo has gone from being the 430th largest traffic referrer to Gaia, to within the top ten.

This is easily monetizable traffic for the virtual world. Gaia users on Bebo must go to the Gaia home site in order to buy virtual goods, such as clothing for your Gaia avatar. Gaia currently has three million monthly users, and Bebo claims more than 40 million total users — and the two companies share a teenage audience — so the app is a clearly great market fit.

Other applications are also taking advantage of the Bebo developer platform, which closely mirrors Facebook’s. Bunchball, for example, offers Flash-based games that lets Facebook and Bebo users play each other from within either site. It tells us it averages more than 20,000 games played per day on Facebook, with around 10,000 daily active users. On Bebo, the company averages around 12,000 games played per day, with around 6,000 daily active users. See screenshot, below:

More than 150,000 games between Facebook and Bebo users have been played since the company launched its application on Bebo. Bunchball also integrates with other sites, such as Piczo and other sites, and says more than one million games have been played on it in the last thirty days. For more, see Mark Hendrickson’s write-up.

There are other interesting examples of cross-site applications emerging, such as Facebook application OutSync, which I first saw mentioned on Dare Obajanjo’s blog. It’s actually a combination Facebook-Windows application that shows you the pictures of Facebook friends who email you, within Outlook. More interestingly, it syncs with Windows mobile through your Exchange server or ActiveSync, so you can see photos of your friends during calls or mobile emails. It is compatible with Windows XP and Server 2003, and requires Outlook 2003 and 2007.