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Online gaming is of more interest to more people than ever. That’s because of casual games — small, low-budget, easy-to-learn entirely online creations that are increasingly becoming a part of online life.

The great thing about casual games is that they’re so casual. They don’t require big time commitments. Most players aren’t geeks. They fit nearly any context, from destination sites like Kongregate, to other places like Facebook, where they capture new audiences.

We spoke to the founders of four young startups who are breaking ground in casual gaming: Andrew Busey of Duels.com, Charles Forman of iminlikewithyou, Raph Koster of Metaplace, and Mark Pincus of Zynga.

The four startups are a diverse mix of the “right now” of gaming, and each has different aims for its games. Here’s a brief description for each:

• Duels.com is a game in which players have one-on-one battles between their characters
• iminlikewithyou is a social site that uses many gaming concepts, and has a game platform
• Metaplace is a forthcoming platform for independent game developers of any stripe
• Zynga lives exclusively on Facebook, where it has become one of the top app companies

I’ve organized my conversation with the founders of these games according to themes:

What’s the common thread here? Answer: Be social
When I asked Zynga’s Pincus what sort of casual game designs work best right now, he immediately replied that there is no perfect design. “I’d describe it as a free-for-all — you can find old classics like Scrabulous, but even more examples of original games,” he said.

That’s true for basic design, but there’s a different design factor driving casual gaming’s boom: Social interaction. Across the internet on sites like Digg, Facebook and even iminlikewithyou, subtle reward schemes encourage interaction. That’s mirrored in actual games, which are increasingly relying on interaction as their core principle, despite the success of single-player gaming sites like Kongregate.

Iminlikewithyou founder Forman developed a separate on his site, Blockles, an evolution of the popular Tetris, to convince users to have real-time interaction on iminlikewithyou. “It’s not about the site’s content, it’s about your interaction with other people around the content. The focus is on play, and play with others,” he says.

Likewise, Busey created Duels for one-on-one player battles and Pincus says he chose Texas Hold’em as Zynga’s first game because it gave a casino-like social feel, gathering groups of players. “The unifying principle is that we look to put out games that we think are inherently social,” he says.

Of course, on Facebook, playing with your friends is almost a requirement. But even outside social networks, the most successful games are becoming those that can find clever ways to throw players together.

How complicated should a casual game be?
This isn’t an easy question. Every successful casual game must be equally easy, at least in the learning stage. In the first moments on a casual game, fun is linked to simplicity for most players, and they’ll instantly walk away from what’s not fun. “It’s always been the rule of thumb that you have to hook people quickly,” notes Koster, a gaming industry veteran.

With the advent of Facebook, it’s reasonable to ask how much depth and complexity a casual game developer really needs to bake into his game to be successful. Vampires and Zombies, two games on Facebook, would have trouble becoming more shallow. Yet they quickly got hundreds of thousands of users and endless press attention.

Pincus says the simplicity of games on Facebook is tied to the audience, which consists of people typically following invites from friends. “There’s less depth on Facebook because people care less. If people care enough to go to your website, they care a lot,” he told me. Think of it like bumping into someone of the opposite sex (or whatever your preference) in a grocery store: A pretty face is what gets your attention, not their depth and complexity.

A website is a bit more like a date with a potential life partner; initial attraction is great, but depth is ultimately more important. Complexity is necessary to keep people coming back. Duels relies on a combination of advancement, competition and trading that becomes more intricate over time.

Of course, like many website-based developers, Busey did think of making a Facebook app to draw users. But even a simplified version of Duels hasn’t been a hit there. “There hasn’t been a massive uptake, I think because it’s more complicated than other Facebook games,” he said, also noting that the fantasy theme and general geekiness of Duels tend to turn off Facebookers.

Despite Facebook’s characteristics, we’re likely to see fewer Vampires and Zombies wandering its halls as time goes on. “People are getting sick of the shallow apps,” says Koster. “And if I were developing for Facebook, I’d try to do something richer, because I think Facebook is becoming a lot of people’s homepage.”

OK, so you’ve got players, now where’s the money?
Money is the icing on the cake for developers, of course — but also one of the more elusive parts. It’s easy to slap on some ads and make a few cents, and on the scale of a portal like Yahoo Games, that’ll bring in serious cash. But CPMs (the price paid per a thousand page views) for advertising around games are low, so startups have to be clever to make serious dough.

“I heard these horror stories of 10 cent CPMS, but I figured since people are playing games in a window, you should be able to incentivize them to click away,” says Pincus. That fledgling strategy developed into an in-house ad network for Zynga. When people click on an ad beside the game they’re playing, Zynga whisks them away to another app that has paid for the ad. If the user signs up for, that advertiser pays Zynga a more reasonable amount — 50 cents, say.

The trick is giving players a benefit of some sort for clicking away to another application or website — luckily, that’s fairly easy with games, which often involve points of some sort anyway. However, Zynga’s advertising scheme has also helped it build up its own network of games. Now, says Pincus, “Our business plan is basically the network effect.”

Duels is in a different situation. Ads might annoy its dedicated users, and there’s not a network to promote (yet; Busey is planning two more games). So there’s no advertising to be seen. Instead, players have the option of spending a little money here and there to buy items that may make their duelist more powerful. And some have racked up over $1,000 in purchases. Now ask yourself: Can you imagine someone paying $1,000 up-front for any game, no matter how good?

That’s the high potential of micro-transactions, and Busey has been especially clever in instituting them on Duels. His trick is selling items in packages with randomized contents, much like your old Topps playing cards. Big spenders have a much better chance of getting good items, and get more stuff in general. “But buying doesn’t make you the best. At the top, people who are clever win,” says Busey.

Zynga and Duels are both making money directly from their games, but that’s not true for iminlikewithyou. Instead, it’s drawing the same sort of fringe benefit from having a game on the site that Facebook does. Forman says his development of an entirely Flash-based, real-time game have paid off: It has created addicted, returning users (of which I count myself one). “Since releasing Blockles, it’s been amazing. Growth is excellent at this point,” he told us.

Koster, for his part, isn’t saying much specific about Metaplace yet, but an offhand comment he made probably says a lot about his long-term ambitions: “You really clean up when it’s on Xbox Live or Nintendo DS,” he said.

Conclusion
I’ve only managed to scratch the surface. Casual gaming is growing, bigtime. As I reported in October, the industry recently hit $2.25 billion in yearly revenues, and it’s expanding 20 percent every year, according to the Casual Gaming Association.

A lot of that is from the portals, some of which are still growing — King.com, for example, reports that its games were played 190 million times in January, more than double the same time last year.

Still more growth will be enjoyed by the small startups, whether on Facebook or their own sites — which are sucking in growing numbers of players. My guess? Future revenues for the industry may beat expectations. We’re only at the beginning of trying to monetize these sites, and observations of interaction and behavior — tied with ways to let advertisers target these passionate users — will pay off for developers.

Want to talk about your own gaming startup? Contact me.

Here’s the latest (updated) action:
1) Kyte.tv raises $15 million
2) Electric Sheep Company lays off 22
3) FCC receives 700MHz auction applications
4) Microsoft signs $500M ad deal
5) GPS devices fly off the shelves
6) Netsuite sets high price for planned IPO
7) Eric Eldon, celebrity at large?

Kyte.tv raises $15M second round — An online startup that offers a video player allowing near-live communications by video, photo and chat, Kyte has picked up some steam online, attracting a decent-sized audience and celebrities like 50 Cent to its service. The $15 million second round was provided by Telefonica, Nokia, DoCoMo, Swisscom, Holtzbrinck and Draper Fisher Jurvetson, according to Robert Scoble. Quite a hefty amount, in comparison to the $2 million investment into live streaming video company, Ustream that we reported in yesterday’s roundup. However, Kyte still has some work to do in competing against newer, sharper-looking rivals like Qik, which says it can stream live video straight from your phone, something Kyte doesn’t quite do (though is working on).

Electric Sheep Company lays off 22 employees — It’s time to cull some lambs from the fold for the Electric Sheep Company, which builds software that third-party companies can add to virtual worlds Second Life. It had planned to build an ad network within these worlds. Instead, it has cut almost a third of its workforce, and is giving up on the ad plans for now. It plans to branch out beyond Second Life to worlds like Metaplace (our coverage). More details are at ClickZ News.

FCC receives applications for 700MHz auctions — More than two hundred applications were filed to bid on the upcoming Federal Communications Commission auction for the 700 Megahertz wireless spectrum, planned to begin January 24th. Although some applicants must correct and finalize their applications, the list contains some notable names — Google, of course, but also Microsoft co-founder Paul Allen’s venture firm Vulcan Capital, and startups like Frontline Wireless (expected). Check out the lists of finished and unfinished applicants yourself for more.

Microsoft signs $500M ad deal with Viacom – Taking a first step toward becoming a viable competitor to Google in the online ad market, Microsoft signed a deal with Viacom that it says is worth about $500 million, over a contract period of five years. Google, in turn, immediately claimed that the deal is proof that Federal anti-trust watchdogs should allow its merger with DoubleClick to go through. Microsoft may well be kicking itself, because as Bloomberg reports, the Federal Trade Commission will likely approve the Google-DoubleClick merger this month (although it must also find approval with European regulators).

NetSuite sets high price for planned IPO — First the expected range for NetSuite’s initial public offering was $13 to $16, then underwriters boosted it to $19 to $22. Now the final price has been set at $26, almost double the original range. That means that Larry Ellison, the billionaire CEO of Oracle whose family owns over 70 percent of the company, will make out like a bandit. NetSuite, of course, is a competitor to Salesforce, whose own stellar performance on the markets likely helped improve NetSuite’s outlook. Ellison was also at one time an early investor in Salesforce, which is now run by a former employee of his, Marc Benioff.

GPS devices becoming cheaper, more ubiquitous — Many GPS devices have dropped below $100, and even the better units often retail for little more than $200. Sales of the devices at local malls are through the roof, according to Dean Takahashi. Cell phones, likewise, are providing an ever-cheaper way to find your way around. Excellent news for the dozens of startups that have sprung up offering to show you the way to the nearest store, friend or event — now the question is, which will come out on top?

VentureBeat’s own Eric Eldon becomes a celebrity — Admittedly, those are the words of Speedddate.com, a dating startup that ran a session with eight “celebrity bloggers.” We (or he) will take the compliment. Way to end those lonely nights of blogging, Eric.

OpenSocial, Google’s ambitious project to set standards for developers across Web sites, won accolades all round.

Except for its funky URL: http://code.google.com/apis/opensocial/. You’ll never remember it.

Guess who owns www.OpenSocial.com.

Answer: An Australian company called VastPark which, it turns out, has an open vision that is very similar to Google’s. The difference is, VastPark wants to let people port virtual products across virtual worlds. Just as Google wants to be break the vise-lock Facebook has on social networking, VastPark company wants to blow up the closed worlds of Second Life and There.com, says chief executive Bruce Joy. That’s why it bought the OpenSocial URL. It also had a logo (see below) for OpenSocial before Google’s project was announced. Google never approached him about the site, he says.

Joy was elated with the bump in traffic his site got when Google’s project was announced – some 170,000 people hit his site on the first day. He’s not a cybersquatter. He’s got serious plans.

Several other companies compete against VastPark, in trying to make virtual worlds more open. But Joy, who started the company years ago, claims to have a grander vision. Several competitors, including Multiverse and Metaplace, offer software tools to build virtual worlds, but both have shortcomings, he says. Multverse offers tools for developers to build their own World of Warcraft-like virtual games, but doesn’t serve the regular Joe user like you and me.

Metaplace, like VastPark, does target regular users.

Also like VastPark, Metaplace, run by Raph Koster, seeks to let you join up virtual worlds between any place. We’ve covered Metaplace here and here. If you create a virtual world of your own, you can hook it up with mine by creating a virtual door. Open the door, and you enter my world. Kind of cool. There’s the potential for an endless universe.

But Metaplace is limited so far to two dimensions. VastPark, notably, is focused on 3D, which is better than 2D. While everything still fits on your 2D screen, the 3D environment offered by VastPark is like SecondLife. You can turn your character to talk with people and have a private conversation, using space and sound in ways that approach real life. That allows for say, a cocktail event where 80 people show up, something that wouldn’t be possible in 2D, which would force people to be speaking over each other.

However, there are huge trade-offs in using 3D. Koster says he chose to focus on 2D to make his offering easier for users. Anyone can write software to his system, using Metaplace’s markup language, in any format that a browser can support. Making 2D programs is more efficient, because users can embed their worlds in widgets on profile pages of social networks, and use them on mobile phones. Koster says his architecture supports 3D – via a server on his back-end – so that there’s nothing stopping users building 3D clients. He expects to develop an internal 3D client early next year. Koster launched his platform for closed testing last month, and now has 10,000 builders. [Bizarre anecdote: When Koster announced the testing launch, the requests crashed his co-founder's mobile phone. The requests were for forwarded to the phone, but the phone fell behind at about 5,000 requests, crashing Windows Mobile, and frying the phone.]

Other players include Trevor Smith’s open source project, Ogoglio, and OpenCroquet. Qwaq, a Silicon Valley company has built an application on top of OpenCroquet, which lets companies operate 3D collaborative environments.

VastPark users peer to peer technology for allowing communications between communities.

Both Metaplace and VastPark are letting people test their products, but they aren’t available to the public yet.

VastPark’s Joy says he envisions endless virtual communities, created by anyone, all of which can be connected. A virtual concierge – powered by VastPark — can handle communications with each world.

He’s building VastPark to be compatible with OpenSocial, so anyone on any social network – from Bebo to Orkut – can build a virtual world that connects with all others. He’s also building an application that works on Facebook. Meanwhile, he’s continuing development independent of those two platforms.

Going forward, Joy says, media companies like MTV are going to want to have virtual worlds where users can interact and transit to other worlds. MTV is an early player in virtual worlds, owning eight of them. However, it doesn’t let people leave one of its worlds, say Virtual Laguna Beach, to enter its other worlds.

VastPark’s technology will allow that, and also lets users port content from one world to another, and give owners control over what can be ported. It doesn’t offer a DRM or encryption technology yet, but will focus on allowing portability if a user wants it. So for example, you could build a virtual sports car, and have it perform certain stunts. You could let others port the car, and allow the car to do the same stunts, in their worlds. You can see where this is going. The car could carry a sponsored ad painted on its exterior, for example. On Thanksgiving, the ad might carry an offer for discount turkeys at your local grocery story.

VastPark is bootstrapped. However, Joy says he realizes he needs to seize the day, and is planning to travel to Silicon Valley to visit venture capitalists in short order. He may seek to raise as much as $15 million.

He plans to deliver an open beta later this year, with a first official release early next year.

You can see a YouTube demo of VastPark’s tools below (if you’re on RSS, you’ll have to visit the page to see it).

This just in: The winner of the Techcrunch40 event is Mint, the personal finance company (see our coverage here).

Meanwhile, below is the last batch of Techcrunch companies, from Tuesday’s afternoon session. After hitting VentureBeat readers with 40 start-ups over the past two days, we’re going to try our best fast on Web 2.0 for at least a day. Frankly, this latest batch wasn’t that impressive. Here’s the ranking: WooMe, Zivity, mEgo, Wixi, Xtr3D, Metaplace, Flowplay, Broadclip and Kaltura.

WooMe, speedating through live video online — We reviewed the company here. Lots of dating sites exist, but its pushing the envelope somewhat, and making dating extremely cheap. However, other big brands are likely to enter the market if it proves successful.

Zivity , adult network for model photography – This is the adult company VentureBeat first wrote about last month. It’s promise is to let models and photographers of the models get paid for their work, by making members pay a dollar for each vote they make on best models. Eight cents gets split between the model and photographer, and 20 cents goes to Zivity. You get five free votes, and then have to pay if you want more.

mEgo, a character-based user interface — Simply put, a mEgo is a cutesy avatar that can be posted on a social network and used as a content aggregator. Users build a unique character on the mEgo site, connect in other accounts that they want access through it — Flickr or Facebook, for instance — and then post it on their profiles around the internet. Anyone who clicks on the mEgo can then access content from all the sites it’s linked through to. The problem is that there’s a hundred other cross-platform aggregators already present or in the works, bringing the noise level in the space to a dull roar. And the question always remains the same: Why use one over another? With mEgo, at least, there’s an answer: It’s cute, and kitschy. The combination may be enough to win some hearts and minds, if only from the teenaged set.

Wixi — Simple concept: If you’ve got content on your computer that you want to share with someone, but you don’t want to go to the trouble of file transfers, you can drag and drop the files from your desktop to your Wixi site. Whether it’s music, movies or some other sort of content, your friends can then go and enjoy it through the Wixi Universal Flash Player. This brings up some questions on copyright: How long will it be until people use their sites to share their copy of, say, the newest Disney movie? And will it be different enough from competitors like Pando, Docstoc and others, for it to get above the noise? The company is based in France.

Xtr3D, a lot of hand-waving — No, really, it is. Xtr3D is a 3D human-machine interface, which is a fancy way of saying that you can move things on your screen by making specific gestures with your hands. The Nintendo Wii does this with a long motion-sensitive paddle that you move around. Xtr3D, instead, tracks your movements through a camera mounted on the computer screen. During the presentation, the company’s founder used the program to manipulate a Google Earth map, rotating and zooming in and out. While the demonstration was interesting, the program didn’t seem to be as fast at responding to the gestures as it would be to mouse clicks. Additionally, his gestures obviously had to be very clear and slow enough for the computer to recognize. Without taking away from the accomplishment of the company, it seems obvious that the software isn’t mature; we’ll have to wait a bit longer, it seems for a Minority Report-style computer. In fact, it reminds us of a near-identical company, Softkinetic, which we wrote about a year ago, and which we haven’t heard much about since. Xtr3D couldn’t tell us clearly how it was different from Softkinetic (Update: This appears to be our misunderstanding. The company has since explained that Xtr3D uses only software and a single camera, while Softkinetic requires infrared as well. Xtr3D argues this makes it less expensive.) The company is positioning the software as a platform for developers, with an emphasis on gaming.

Metaplace, an open standards virtual world, that lets users mashup games and other activities — It’s a small download, 30k. We reviewed it separately here. Again, it enters a very crowded field, and questions remain about business model.

Flowplay , yet another avatar virtual world – This site lets you build a 3D avatar, and do familiar things such as play games and win points so that you can build out your wardrobe. It renders in Flash. It wants to build a large number of settings for avatars (apartments, lounges), like Doppelganger’s vSide (our coverage), except no downloading. You can connect and chat with friends. The site looks clean, however, we’ve been there, done that. There are way too many avatar-game sites now, and this one doesn’t break the “originality” threshold. We don’t see much here to stop people going to MSN or Miniclip to play games. Flowplay has raised $500K on a bridge note from Ambient Sound Investments.

Broadclip, a system for sharing music online — The presentation consisted of someone coming on stage, saying hello, and turning on a video for everyone to watch. All of which might have been fine, had the presentation been good, or particularly informative. Broadclip’s “MediaCatcher” software aggregates music for its users through a recommendation engine. Once found, the music can be played anytime. MediaCatcher works independently, on a mobile device or through platforms like Facebook. Despite some attractive features, the company didn’t seem unique or impressive; perhaps it was the grandiose claim of being the “Web 3.0″ solution for music. Napoleon complex, anyone?

Kaltura, letting you collaborate with video – This is an also-ran. This company’s slogan is “YouTube meets the Wiki.” Instead of sharing text, you’re sharing video. Take an example of a music band. The band can go to Kaltura, create a Web site, record an introduction video, and then others can upload their own content, and then mix it all up in a big video mashup. We’ve seen scores of iterations of this, and the only thing surprising about Kaltura is that it has 20 employees working for it, and has $2 million in venture backing from Avalon Partners. It is based in Tel Aviv and Manhattan.

(This post was co-written with Chris Morrison.)

When Raph Koster spoke to us in December about his startup Areae, he implied that independent games had a greater earning potential than traditional studio-produced games.

Now he’s putting his money where his mouth is, launching the website Metaplace and launching today at the TechCrunch40 conference.

Metaplace, launched by San Diego-based Areae, is a site on which amateur designers can create their own games. The concept may sound familar; similar ideas are in operation at Kongregate and the Casual Collective.

The difference is that both of those sites rely on flash coders who, although they are called amateurs, have a level of specialized knowledge an ordinary person does not. Metaplace aims to enable anyone to create their own game.

The other difference is the amount of detail. When Koster showed me one of the virtual worlds his site can create, I immediately thought of the Sims; the appearance was quite similar. Games on Kongregate, by contrast, rely on extremely simplistic graphics.

Metaplace has a two-pronged strategy: Coders and designers develop gaming platforms, and users build atop the platforms to invent their own environments. They can pull in games, images and videos from other places.
Metaplace’s approach, helping star developers show off and sell their wares independently, is similar to another private venture that was just bought by IAC, Garagegames.

Although quite a few individual games have allowed users to build atop their worlds, Koster hopes that his startup will be able to grow into something exponentially larger. However, big questions remain for this company. Do people really want to mashup their worlds? Other, bigger virtual worlds like Second Life have APIs that give developers and users more options.

As of its launch today, Metaplace only has about four different templates for game creation, created by the Metaplace team. The number could someday grow to thousands. With that many designs available, users would have a nearly infinite array of tools at their disposal to create their own games.

Metaplace will open today, following the end of the TechCrunch40 conference.

Areae is backed by Charles River Ventures (previous coverage) and Crescendo Ventures.