VentureBeat

Zynga, an emerging empire of third party gaming applications on Facebook, announced a new ad network for developers a couple of weeks ago — and crossed swords with rival gaming company Social Gaming Network (our coverage).

Tonight, Zynga is launching this ad network, with more details on how it can work for developers. The subtext here is: Zynga’s goal is to work better than SGN.

San Francisco-based Zynga has grown large and even profitable through developing Facebook games like poker tournament Texas Hold ‘Em. Similar to Slide, RockYou and other third-party app conglomerates, Zynga advertises its new gaming applications within its already-popular games. So an ad for Sea Battle (like the board game Battleship) might appear while you’re playing Texas Hold ‘Em.

But Zynga has specifically introduced its own feature for spurring growth. At the top of each of its games, it shows a bar that tells you what Facebook friends are playing other games on the Zynga network. This bar also shows you other Zynga games you might want to play. If you click on one of your friends as they appear in this toolbar (see screenshot), you can go see what game they’re playing and — if they’re willing — even play a game with them.

This toolbar will now be used for third-party developers that choose to partner with Zynga. Here’s how it works. If you have a game, you include the Zynga toolbar at the top of your game. People who play your game will be able to see which of their friends is also playing any game within the Zynga network of games (so Texas Hold ‘Em, etc.). It’s more of a link-sharing agreement or other cross-promotional agreement than an ad network, as no money changes hands.

Zynga measures how many visitors click on the toolbar and use it to start playing other games. If Zynga sees that your game is driving significant traffic to other games, then it will feature your game more prominently in this toolbar — across the entire Zynga network.

In other words, Zynga is using its network to help independent third party developers gain more users. The reality of Facebook, as Pincus told me today, is that most developers want more users on their site all the time.

There are many different types of Facebook ad networks, such as the ones offered by RockYou, Social Media and others. The most obvious competitor is, as mentioned, SGN.

SGN is developing its own sort of gaming network. It offers an application called Gaming Hub that shows the top scores of SGN gamers who install it. The application features games from third party developers. Problem is, the application itself has less than 200 daily active users as of today — not much of a place to advertise your application.

Update: SGN and the commenter below have adamantly pointed out to me that SGN is also beginning to introduce its own toolbar, similar to Zynga’s, that will lead users back to its Gaming Hub. It will be interesting to see how these two companies differentiate from each other as they experiment with their competing efforts. At this point, I think they’re officially the Slide and RockYou of gaming apps. Why: They’re large, willing to criticize each other — and meanwhile hoping that a third (or fourth or fifth) significant competitor doesn’t emerge to challenge both of them.

Zynga claims to reach 1.4 million people who use its own applications on Facebook every day — people who see its toolbar — as well as additional traffic from other independent developers. SGN, as others have covered, also claims to reach many Facebook users. SGN said last week that its games are getting 700 million page views a month. I’m not going to get into the two companies traffic debate here (instead, you can read more here and here).

We’ve heard other dominant Facebook application companies also discussing the potential of games on Facebook, so expect competition among game developers to heat up in the coming year. And, if investing in the freewheeling world of Facebook applications is for you, check out Lee Lorenzen’s rather bizarre plan to collect a large pool of small investors, and build a union of Facebook applications — that will eventually go public (Techcrunch covers the details here).

Zynga actually makes most of its money from other applications that pay it to feature ads for their applications, as Zynga founder Mark Pincus said recently at a gaming conference (Dean Takahashi has more, here). And a recent example of the company eating its own dog food — it launched a game called Scramble that has already grown more than 500 percent since January, to more than 100,000 daily active users, through advertising in Zynga’s games.

Want to play more games on Facebook? Well, some fast-moving start-ups are banking on it — and are enticing you to play new games by luring you with advertising. It’s the latest way entrepreneur are trying to make a buck on the tens of millions using Facebook and other social networks.

Zynga and the Social Gaming Network, competing creators of popular games in social networks, are behind two competing efforts. They’re placing ads within their own games to promote other developers’ games, and they’re taking a cut of the revenue they get for doing it. These are the first ad networks that specifically target games on social networks.

For example, Zynga’s Texas Hold ‘Em poker game (pictured above and below), or SGN’s Warbook medieval fantasy game could feature an ad for some small developer’s brand-new group Tic-Tac-Toe game.

Leading widgetmaker RockYou, among many others, already sells ad space to small applications to attract new users. Of course, RockYou’s ad network and others have ad inventories that include both games and other applications. Zynga and SGN, both of which claim to get hundreds of millions of monthly pageviews across their networks, hope that their existing game-focused users will be more inclined to try out new games than these larger ad networks. Game-focused features of each platform may help differentiate the concept.

For example, SGN’s platform, launching tonight, will try to figure out which types of games a user prefers to play, then recommend an advertising developer’s game within the game. The platform intends to be a full-fledged portal for users, where one can see the games their friends play and their friends’ high scores.

This platform will also move the feed activity about a game from a user’s profile page to the game platform page — notices like “You scored a billion points on Group Tic-Tac-Toe.” I haven’t seen this feature implemented, but it seems counterintuitive, as profile pages are key to advertising your activity to friends. The company’s hope may be to create a special portal for the more serious of gamers.

SGN is focusing on building out the platform first, and plans to incorporate the ad network later. (For more on the company’s network, see our article from yesterday.)

Meanwhile, San Francisco-based Zynga is more of a straightforward ad network. It will feature ads for other games within the top toolbar or other parts of its game canvas pages on Facebook. If you’re a small developer and you join Zynga, you’ll also get the option to have Zynga sell ads for you, and share revenue.

Of course, these ad networks are for small applications that aren’t able to grow big within Facebook on their own merits. In fact, many game applications can grow just fine by themselves, by using distribution mechanisms within Facebook, like profile pages and news feeds.

Nevertheless, SGN and Zynga see themselves as mano-a-mano competitors, as this coverage from other blogs suggests. In fact, SGN was planning on launching its platform at a game developers’ conference next week, but rushed to launch it tonight when the company found out about Zynga’s platform launch.

Here’s the latest action:

1) Apple releases the Air, Twitter left gasping
2) Facebook-based gaming site Zynga launches
3) CNET defies Spark / Jana alliance with poison pill
4) Grayboxx rolls out local search nationally
5) Overlay.tv gets $4.5M for in-video ad links
6) Portfolio magazine cozies up to Open Social
7) Oversee draws $150M for domain auctions
8) A video primer on data portability
9) Notes on the upcoming 700mhz auctions

Apple releases the Air, Twitter left gasping — As usual, Steve Jobs used his keynote speech at the Macworld conference to introduce a new Apple product. This time it was the ultra-thin Air laptop, which will probably help continue the Mac’s trend of stealing market share away from Microsoft. Coming in at just three pounds and three quarters of an inch thick, it will also be the thinnest laptop on the market, at least according to Jobs. More tech specs here. The keynote also helped point out the limits of Twitter. The messaging service was on fire, with Mac fans firing off one-liners about developments — too many, apparently, because the service went down because of the load, confounding several live-bloggers, including Valleywag.

Facebook-based gaming site Zynga launches — Casual gaming startups like Kongregate and King.com are amassing large userbases, but can a gaming startup survive on Facebook and other social networks alone? Investors including Peter Thiel and Fred Wilson at Union Square Ventures think so, having just sunk $10 million into a company called Zynga that offers versions of popular games like Texas Hold’em and Battleship on Facebook. The company’s founder, Mark Zingus, told the New York Times that Zynga is already doing well enough to support its staff of 27 people with revenue from its games — despite the fact that the their sole source of revenue is other developers who run ads for their applications on Zynga’s games.

CNET pops the poison pill — CNET showed its willingness to fight Spark Capital and Jana Partners, the leaders of a group of investors trying to take it over. CNET has adopted a “poison pill” plan, in this case a shareholder’s rights plan that attempts to discourage the two from buying more than 15 percent of the company (they currently hold just over 10 percent). The company also instituted new severance packages for its (allegedly underperforming) senior execs, just in case. Expect lengthy negotiations between the independent board that instituted the new rules and Spark/Jana, which want to fire the aforementioned execs and run the company according to its own ideas.

Grayboxx rolls out local search engine nationally — Grayboxx, a local search engine and reviews site that launched last October for 100 towns and cities, has expanded its service to cover the entire United States. The company is almost entirely automated, although it just added a feature to allow user reviews. We also covered it before its launch.

Overlay.tv raises $4.5M, readies release of video advertising service — A first round of $4.53 million has gone to Overlay.tv, which will launch its service on Valentine’s Day. In a nutshell, Overlay can add hyperlinks or images into videos leading back to other websites. For example, a video of M.C. Hammer dancing might include a video link on top of his legs, leading to a site where you could buy balloon pants. Regular users will also be able to put overlays on videos leading back to links of their own choosing. Overlay is based in Ottawa, Canada. Update: Backers are Celtic House Venture Partners, EdgeStone Capital Partners and Tech Capital Partners.

Portfolio cozying up to Open Social — A day or so ago we reported that famously stodgy media giant Conde Nast is moving its teen destination, Flip.com, to live entirely on Facebook and other social networks. Now Portfolio magazine, another Conde property, is planning on joining up with Google’s Open Social (coverage of OpenSocial here), as well as spreading its content to sites like LinkedIn. Although left behind for several years, “old media” is slowly learning to play the internet game (witness as well the growing online success of standbys like Time Magazine and the New York Times).

Domain name company Oversee draws $150M — Private equity firms have continued to take an interest in the domain name business, most recently with Oak Hill Capital pouring $150 million into Oversee.net, a monetization platform for domain owners and the new owner of domain auctioneers Moniker and SnapNames. Oversee will likely use the money to consolidate its growing hold on the domain name auction business.

Data portability 101: The video tutorial — A picture is a thousand words, but a video might help you keep from falling asleep, when learning about topics like data portability. Helpfully, ReadWriteWeb has a brief update post containing a video explaining the basics. We’ve also written on the portability group Facebook and Google recently joined, here.

FCC’s 700mhz auctions approaching fast — January 24th marks the date of the 700mhz spectrum auction, and AT&T, Verizon and Google are getting ready to square off in the competition for the most desirable blocks. Unfortunately for the FCC, the main bidder for one of the other blocks, Frontline Wireless, recently shut down, and it’s possible that nobody else is interested. For more info on the spectrum and auction rules, check out Ars Technica, while GigaOm has a helpful table of the different spectrum blocks.