VentureBeat

Playfish, a social gaming company that has four of the top ten games on Facebook, has raised $17 million in funding.

The deal shows that the intersection of games and social networking remains a hot sector in spite of the weakening economy.

Playfish came out of nowhere to become a leader in one of the hottest categories of the video game industry. It was founded in October, 2007, and launched its first game in December, 2007.

To date, more than 25 million people have played the company’s five games, the company reports. The company says it has more than 10 million active monthly users.

Will it last? The company’s investors clearly think so. The new round was co-led by Accel Partners and Index Ventures. Playfish has now raised $21 million.

Its record compares favorably to the two leaders in Facebook games: Zynga, which raised $25 million, and Social Gaming Network, which raised $15 million. Zynga has two games in the top ten on Facebook, while SGN doesn’t have any. Interestingly, traditional game companies such as Electronic Arts or Activision don’t have any games in Facebook’s top 25.

The  company was started by Kristian Segerstrale, chief executive of Playfish, who previously ran a mobile games company, Macrospace, for six years. (It merged with Sorrent and became Glu Mobile). Segerstrale says that the brands owned by the big companies don’t matter as much on sites such as Facebook, where playing with your friends and trusting their recommendations for games matters the most.

“We think there is a tectonic shift away from games as a product to games as a service,” Segerstrale said.

London-based Playfish has launched both an in-game advertising platform using the AdSense for Games solution from Google, and it has launched a virtual goods transaction business as well. But Segerstrale said in an interview that it’s too early to predict when the company will become profitable. The company has created game development studios in Norway, Beijing and London, as well as a sales office in San Francisco.

Kevin Commoli, a partner at Accel in London, said that his company believes the game sector is still hot in spite of the economic turmoil.

“This is a part of the entertainment world where people are spending more and  more of their time,” Commoli said. “I don’t think the social gaming sector is going to suffer at all. I don’t view this category of social games for the mass market as a fad.”

He said that Playfish was an attractive investment because it owned its own game properties and its own game development studios.

Segerstrale said games on Facebook and other social networks are a return to the roots of games, when people enjoyed sharing fun experiences with friends via playing cards, board games or bowling nights. The company’s games, such as “Who has the biggest brain?“  have become popular through viral sharing, Segerstrale said. The game was the company’s first, debuting on Dec. 18, 2007. It offers brain-training puzzle games in logic, calculation, memory and visual processing. In the last three months, the play time for the company’s games has gone up from 1 billion monthly minutes to two billion.

A couple of weeks ago, Playfish debuted its first game, Bowling Buddies, on MySpace. Segerstrale said the company would use its money to expand its reach to new platforms, develop more titles, and expand its studios.

It’s a good start for Playfish. But it will likely take a lot more hits before the company becomes profitable and before its revenues become a source of concern for the traditional game industry.

Even though social networking companies serve tens of millions of users, there’s still bizarrely little advertising on the most popular sites. Many big agencies and brands have experimented, but they’re still looking for better ways to target the users they want.

The latest company hoping to serve these advertisers is Appssavvy, a startup that sells direct advertising space on social media applications like Flixster, MesmoTV, and Playfish — most of which have a presence on major sites like Facebook. The company announced today that it received $3.1 million in second round funding.

New York-based Appssavvy joins a field of peers hoping to score social media ad dollars. Companies like SocialMedia, Lookery and Social Cash have also been selling advertisers on new and innovative ways to add branding to social networking sites. But Appssavvy likes to distinguish itself as a consulting firm, working with its clients to devise a more custom, targeted end product.

Examples of Appssavvy campaigns include Sony’s sponsorship of Facebook’s Wedding Book application to promote its film “Made of Honor,” a custom Facebook application built for Kohl’s back-to-school season, and ads for the TBS show “My Boys” on the MesmoTV application… on Facebook. Okay yes, all of their examples are from Facebook, but Appssavvy says it can also hook brands up with apps for the iPhone, MySpace, Hi5, etc.

Despite the seemingly thin client base represented on the startup’s site, it did land a deal with NBC Universal at the start of the month that gave it exclusive ad-sale rights on NBC News’ iCue website. iCue is a social network targeted at students that lets members watch NBC archive footage, join related discussions, and play relevant learning games.

Even if Appssavvy can bag other big names, it still faces a tough market for social media campaigns, which have yet to gain major traction on Madison Avenue. In fact, one study suggests that half of these campaigns are already set up to fail.

Still, that didn’t dissuade Appssavvy’s recent investors. The round was led by True Ventures and also included About.com founder Scott Kumit.

CasualCafe has joined the ranks of game companies looking to make a fortune with games on Facebook. The Los Angeles company has launched its first two games, Spyde Solitaire and Burdaloo, for Facebook and is showing them off at Facebook’s F8 development conference.

Michael Scholz founded the company two years ago to create PC-based online games for the casual market. The games are based on Adobe’s Flash technology and run in a browser. As such, they don’t need a download and use relatively simple graphics. The games are also available on the company’s web site, where social elements include the ability the share your gaming profile with others, participate in forums, earn achievements and compete for top slots on a leaderboard.

CasualCafe isn’t early to dive into the Facebook gaming market by any means. Social Gaming Network and Zynga (which just raised a $29 million round) have a big part of the Facebook gaming market. Electronic Arts has launched a beta of its EA Scrabble game and has more titles on the way. But the market can change fast. Playfish, a London gaming company started in October, already has three games in the top ten on Facebook. Other competitors include the Agarwalla brothers, who created Scrabulous; Serious Business, creator of Friends For Sale!; and Bonehead Labs, creator of Pokey!

CasualCafe’s Spyde Solitaire resembles the classic game spider solitaire. But it has additional features such as power-ups, multiple levels, and socialization. Burdaloo is a mix-and-match game with funny animated characters and unlockable secrets.

The company is self-funded and plans to generate revenues from ads and micro-transactions, such as the purchase of items in games that make a player more powerful. The founding team members include veterans from WildTangent, SkillJam Technologies and THQ. It is unveiling its “social game arcade” technology for its game web site at the Casual Connect conference in Seattle.