The “whales” of the social-gaming world are a mystery to most of us. As the biggest spenders, they make up a tiny group (think about 2 percent of audiences) that drives most of the revenue for publishers of these games. But the word “whale” isn’t a flattering term, and neither are the numbers associated with it. These are people, not just customers.

It’s easy to think of whales anonymously because we’re not quite sure who they are or how they think — they’re often elusive due to the stigma that surrounds them. We know they play social games, but are they social? Are their habits casual or obsessive? What kind of people are they?

‘Whale’ has many meanings

Whales existed in online and mobile video games long before they started appearing in the West. Longtime game analyst Michael Pachter told GamesBeat that Asia has used free-to-play with microtransactions for 15 years, but it still feels like a relatively new phenomenon here as we wonder whether the business model holds a place in our future.

Today, the idea of a “whale” carries a different weight for each company. 5th Planet Games, a developer of social games for both casual and hardcore audiences, starts classifying its players as whales when they spend $100 or more a month. That’s a big jump from whales on Facebook, for instance, where social gamers could drop $25 per month to meet the same qualification.

5th Planet chief executive Robert Winkler revealed at the Game Developers Conference Online in 2012 that with its game Clash of the Dragons, 40 percent of revenue came from 2 percent of players who spent $1,000 or more. Ninety percent came from those who spent $100 or more, and the top whale had spent $6,700.

Other companies, like social casino developer Blitzoo, defines various categories of whales based on a combination of factors: total money spent, playtime, experience points earned in-game, and so on. Play sessions tend to be three or four times longer than what an average player’s would be.

But these are all still numbers, not faces or personalities. Winkler told us that a strong sense of community is important for encouraging whales to not only engage but also monetize, and that’s a clue to who they are as people.

“We’ve found that most players are more willing to spend money to help out their fellow gamers than to try to defeat them,” he said. “As an example, players who take part in our ‘guilds,’ or groups of players who come together to accomplish communal missions, are 8.5 times more likely to monetize than players who do not belong to a guild, and the ARPU [average revenue per user] of players in our guilds is 53 times higher than other players.”

For that reason, building community is a huge priority for 5th Planet. It’s a way to attract more whales and monetize more successfully.

“This could be by participating in your forums, by running contests and giveaways, by forming special guilds or councils, or simply by talking directly with your players and showing that you’re listening,” said Winkler. “When players feel like they’re part of community, they become more invested in the outcome of game. And when they’re more emotionally invested in the game, they’ll invest with their wallets as well.”

5th Planet declined to inform us whether their whales receive any special benefits, and as for whether these players subsidize the game for others, it only said, “As with any free-to-play game, there are a group of paying players, including whales, whose in-game [spending] allows game houses to bring new, fresh, and updated content to all players.” We were unable to acquire responses from the other companies we spoke with for this article.

Are whales different from ‘normal’ gamers?

Talking to whales isn’t easy; their habits and relationships with social-game publishers are touchy subjects. But as I found with one player, Greg Genega — who allowed us to identify him by name and also goes by the handle “Bludex” — all you have to do is disarm their defenses a little. Aside from the amount he spends every month ($100 on average and sometimes as much as $400), he shares many of the same interests and concerns of regular gamers.

Like many whales, Genega prefers to stick with one or two games — in his case, 5th Planet’s Clash of the Dragons (a free social massively multiplayer online role-playing card game) and Legacy of Heroes (a free collectible card game). He doesn’t stray much into other platforms.

“To me, a game is only as good as its following and associated community,” he said. “Without quick queue times for competitive events and a bustling forum, games tend to lose interest with me.”

He’s not exactly glued to his computer screen, though. Genega says he plays for roughly 20 minutes in the morning and one to three hours in the evening. Just because he spends a lot of money doesn’t mean this routine conflicts with everyday living.

“When I’m at work, I barely have any time to think about games,” he said. “However, most of my social time with friends involves lots of gaming. Board games, card games, going to a casino, playing Magic [the Gathering], etc. So gaming is very important to my social life.”

That’s social life outside of games, not necessarily in them. Genega supervises a network operations center for a large company and enjoys active pursuits like hiking and eating out at restaurants. That’s part of why he doesn’t prefer single-player experiences.

“I’m a social being at heart,” he said. “When there’s nobody to share my experience with — whether it be some friendly trash-talking or a virtual high-five of an accomplishment — the games just become less interesting.”

He doesn’t leave those friendships solely online, either. “I have friendships going on 10 years or more with people I game with online that I’ve almost all met in real life at some point or another,” he said. “I would definitely say gaming has been the main driver in my social life both online and offline.”

Like most dedicated gamers, Genega actively follows news announcements related to the titles he plays, but frequent content additions are what keeps him coming back. With each break he took from Clash of the Dragons, for instance, he returned to check out a new update. And when he played World of Warcraft, he would quit for as long as a year — until Blizzard released a new expansion.

The more we talked, the more Genega opened up about his passions and thoughts on current issues in the industry, but one question remained: How does it feel to be called a “whale”?

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The market loves buyouts and mergers. Hell, the market loves unlikely rumors of buyouts and mergers.

On Monday, Wunderlich Securities analyst Blake Harper suggested Yahoo might consider buying social-game developer Zynga. Harper’s report sent Zynga stock (ZNGA) to $3.97, its highest price in months, even though the analyst himself said the move is unlikely.

Zynga shares are slowly losing their altitude now that the market has taken the time to analyze the scenario and company board member Bing Gordon spoke skeptically of the move on Bloomberg.

“To some degree, there’s something magical about being independent in games,” Gordon told Bloomberg. “What entertainers want to do is play to a big audience — and what they really don’t want to do is play to a constrained audience. So as long as you have a big audience, a private owner can be better than a public owner, and give you a better chance to get your name in lights.”

Zynga is currently independent and can release games wherever it chooses. A buyout could lock Zynga games exclusively to Yahoo’s sites.

The acquisition rumor also ignores a potentially large stumbling block: Zynga chief executive Mark Pincus. Pincus has majority control and calls the shots at the company. If he wants to continue doing that, then he’d likely kill any proposals from Yahoo.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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I have three fears. The first is the cataclysmic end to all life on Earth. The second is public speaking. The third is that X-Men: The Last Stand director Brett Ratner might ever get his hands on another property that I love.

Thankfully, none of these happened this week.

Ratner announced today that he is working on an adaptation of Zynga’s Farmville for television, according to The Wall Street Journal. The creative force behind Tower Heist plans to make Farmville into a half-hour animated sitcom.

“Farmville is one of the most exciting brands out there today, and its cross-platform opportunities are endless,” Ratner said in a statement. “I am thrilled to be expanding the brand with existing fans and also engaging a whole new audience.”

Farmville is a social-gaming phenomenon. It has millions of players on Facebook and is one of developer Zynga’s flagship products.

Or to put it another way: It’s the opposite of Star Wars.

Perhaps this is the universe balancing itself out. J.J. Abrams keeps absorbing all of the amazing properties (Star Wars, Star Trek, Half-Life, Portal), which means someone else has to take on Farmville and a new Hercules movie starring The Rock … which Ratner is directing.

I’m just glad he’s busy with this and not something like The Legend of Zelda … hey, do you think we could get Michael Bay to adapt CityVille 2?

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Free-to-play games are all the rage these days. Many people while away their days playing Angry Birds or Words with Friends before going home to watch Monday Night Football. Nerds — and, increasingly, “normal people” — do the exact same thing, except instead of watching football, they play games like Super Monday Night Combat. This summer, the remarkable viability of the free-to-play business model gained extra attention when Forbes reported that the most-played PC game in the world is now the free-to-play League of Legends. For those of you struggling to understand the profitability part, just take a look at League of Legends character Teemo (pictured top). I mean, seriously, who can resist purchasing all the adorable “skins” for him?! (Clearly, not me.)

Nevertheless, the business world of free-to-play gaming is not without its dark, seedy underbelly, where even the cute and cuddly characters are forced to work in digital sweatshops and sell virtual drugs on simulated street corners just to make ends meet. Well, OK, maybe it’s not that extreme. But as a recent (and bitter) dispute between gamemakers Zynga and Kixeye demonstrates, the business can be just as ugly (and fascinating) as some of the game battles themselves.

You know the games, but who are the players?

Zynga and Kixeye are both companies based in San Francisco that publish online social games for Facebook.

Most people know Zynga for their popular Facebook games like Words with Friends or Zynga Poker. Others know them for FarmVille, where players can engage in make-believe farming with their friends. (Others know them for their reputation for aggressive firings and generally employee-unfriendly conduct … more on that soon.) And before you laugh about who in their right mind would want to engage in virtual agriculture, you should know that Zynga currently has more than 280 million monthly active users and that FarmVille 2 currently boasts more than 8.5 million users per day.  That’s one heck of a lot of digital manure.

Kixeye, by comparison, is a much smaller company, with just under a million daily average users. According to Kixeye’s chief executive, Will Harbin:

“Our games have little in common with the ones that Zynga is known for. We make synchronous, combat strategy games. They make asynchronous cow-clicking games. We have two of the top seven highest grossing games on Facebook. Why on earth would we want to emulate a business that has seen a 75 percent decline in share price since their debut? According to their S1, their games average $.06 ARPDAU [editor's note: Average Revenue Per Daily Active User]. Our games generate up to 20 times that. You do the math.”

In terms of their markets, Zynga targets “casual gamers” whereas Kixeye targets “mid-core gamers,” i.e., gamer mini-geeks who are not quite geeky enough to be considered “hardcore.”

Or at least that used to be the case. Zynga now appears to be making inroads into the mid-core market space, as evidenced by a recent acquisition. At the same time, Kixeye recently poached one of Zynga’s employees, Alan Patmore, who ran one of Zynga’s more lucrative games, Cityville. (As a huge SimCity fan, I really can’t make any jokes about the joys of being a virtual mayor. When my virtual citizens are happy, I am happy too.)

The (inevitable) lawsuit

About a month after Patmore left Zynga for Kixeye, Zynga sued him, claiming that Patmore misappropriated company trade secrets and breached his company confidentiality agreement by transferring over 700 documents from his work computer and backing them up online. Zynga then obtained a protective order preventing Patmore from accessing or using the files in any way, and subsequently amended its complaint to include Kixeye as a defendant in the lawsuit. Kixeye then turned around and counterattacked Zynga with a scathing cross-complaint.

In the cross-complaint, Kixeye alleges that while Zynga is struggling mightily in the marketplace and that “important talent [is] leaving the company in a mass exodus,” Kixeye, by comparison, is doing quite well for itself. Kixeye further alleges that Mr. Patmore “responded to the lawsuit by cooperating fully with Zynga” and that “despite [his] cooperation and the fact that none of the forensic computer analysis done by Zynga show that he disclosed any documents containing trade secrets to Kixeye,” Zynga nevertheless added Kixeye as a defendant in the lawsuit.

According to Kixeye, “Zynga’s lawsuit has two aims … (1) to send a message to is employees about the consequences of leaving Zynga to work at Kixeye … and (2) to use the litigation as a Trojan Horse to gain access to Kixeye’s own confidential, valuable information and trade secrets and bog Kixeye down in the wasted time and expense of litigation while Zynga tries to enter the midcore market.”  (Yup, there’s that reputation for employee-unfriendly conduct.)

If that wasn’t enough, Kixeye goes on, in excruciating detail, to explain its theory that Zynga is engaging in unfair competition, including a recitation of how Zynga employees allegedly described how Zynga’s leadership openly admitted to copying its competitors internally. According to the cross-complaint, “One former Zynga senior employee recalled a meeting with Zynga CEO Mark Pincus, in which Pincus stated:  ‘I don’t fucking want innovation … . You’re not smarter than your competitor. Just copy what they do, and do it until you get their numbers.” The cross-complaint goes on to discuss other interviews “where ‘several former Zynga workers indicated that the practice of stealing other companies’ game ideas — and then using Zynga’s market clout to crowd out the games’ originators — was business as usual.”

To paraphrase a famous gaming meme, Kixeye essentially alleges that Zynga’s business strategy is to go around to its competitors saying: “All your trade secrets are belong to us.”

Can Zynga do that?

Because the bar for obtaining discovery with respect to trade secrets is high, a company pursuing a strategy of “find the other guy’s trade secrets by suing over your own” has a tough legal path to tread. In California, a party alleging the misappropriation of a trade secret has to “identify the trade secret with reasonable particularity” before it can obtain discovery from the other side. Even after identification of the trade secrets, a number of obstacles can get in the way based on the circumstances of the case.

But in most of these cases between big fish and little fish, the real issue is the cost of litigation for the little fish. For smaller companies, it can be hard to compete with competitors (or soon-to-be competitors) that have Scrooge McDuck-sized coffers, which are presumably used to host daily money swims. Even in this case, where Kixeye is going on the offensive and looks ready to fight tooth-and-nail, finances (or the lack thereof) will probably dictate exactly how long the bout will last.

This case is a good example of why it is particularly important to be careful when poaching valuable employees from competitors. As one might suspect, if there is even a hint of smoke, we lawyers are very, very good at making it look like there might be a fire. Even if Zynga’s claim is ultimately bogus, as Kixeye contends, Kixeye may find itself feeling a bit like Leonard Hofstadter chasing fellow physicist Sheldon Cooper around in the ball-pit — trying to be the mature party — while Sheldon keeps frustratingly dodging Leonard, all the while shouting: “BaZynga!”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Brian Reynolds recently left his post as chief game designer at Zynga. He wrote this exclusively for GamesBeat.

Just under four years ago, I took a flier on a very young company called Zynga. My old studio had just been sold out from under me – an epic tale in its own right, but anyway it happened – and the strategy genres that I’d worked in for most of my career had fallen on grim times. I thought perhaps I was all washed up as a game designer and started looking around for something “quiet” for what I figured would be the “fading away” down slope of my career.

But boy, was I fascinated by Facebook, which was still very new to us non-Millennials, and, among other things, I found myself playing a Zynga word game with Bing Gordon (the former chief creative officer at Electronic Arts and current partner at venture capital firm Kleiner Perkins Caufield & Byers), who a decade prior had produced so many great ideas for Sid Meier’s Alpha Centauri that we’d given him a design credit. “Hey, you should come on out. I know this guy. I’m on the board” goes my vague recollection of the conversations. And that’s how, in March 2009, I got introduced to Mark Pincus.

Serendipitously, Mark listed Rise of Nations (created by my studio Big Huge Games) as his favorite game. We hit it off. The prototype-and-iterate method of game design I’d learned from Sid Meier seemed like it might fit with the completely new watch-metrics-and-tune methods that Zynga had been perfecting (Mark told me Michael Lewis’s book, Moneyball, about the use of analytics in managing the Oakland A’s baseball team was required reading). It also dawned on me that a whole new area of the industry was taking off and there weren’t many experienced game designers doing it yet.  So I signed on, and what a wild and great ride it’s been!

In the early days I’d hear a lot of traditional developers saying things like Zynga games “weren’t even games,” but my own experiences playing them made it very clear they were. At Zynga we were making games for the true mass market, and it seemed pretty obvious to me that games for the mass market would be quite different than games for the hardcore gamer. Nobody would confuse a summer blockbuster with an art film or period piece, either, nor a best-selling novel with Moby Dick – and yet there are a lot of people out there who crave that kind of entertainment. And the challenge of creating game experiences with “perfectly rounded edges” – smooth and friendly for the masses – has been one of the most interesting challenges of my career.

I think my favorite part, throughout the whole Zynga experience, has been the sense that we were writing new rules for a new industry. It felt strange, but awesome, to make an arbitrary decision in April and then by August see the entire social games industry doing exactly that same thing. And the social games space was so young (and initially a bit primitive). It moved so fast that being a game designer in it felt like traveling back to the late ’80s “knowing everything you know now” and then recapitulating the ’90s and ’00s at hyperspeed.

Fortunately, the capability to absorb and adapt to change quickly is one of the great strengths of Zynga’s culture – the true meaning of the motto and occasional battle cry “Zynga Speed!” Time and time again, I’ve seen Zynga teams pull together and surprise everyone with their nimbleness and productivity.

Mark also has a talent for surrounding himself with the best and the brightest, and the chance to work with so many industry luminaries – so many of whom used to be my direct competitors – really took my game up a notch or two. I especially looked forward to our annual game design summits, which featured an incredible collection of talent the likes of which I’d never seen pulling the same oar before. It was fun to watch the transformation as the Command & Conquer Generals guy (Mark Skaggs) became the FarmVille guy, the Age of Empires guys become the Words With Friends and CastleVille guys, the guy I remembered from Infocom games helping plan FrontierVille’s story, and so on. The same thing goes on in the engineering group, the analytics group, and so many other places – Zynga is very good at hiring the best, and one of my greatest regrets at leaving Zynga is missing out on all that talent and creativity.

But after almost four years (and longer than I was ever at Firaxis, if you can believe it!), I’m ready to shift into a different gear. I miss getting to write code personally and make fun “with my own hands.” And suddenly, the tablet and mobile world look like they might be on the verge of a strategy games renaissance – hey, I used to be good at making those! – and free-to-play is leading the way. Not that Zynga isn’t willing and even eager to have me do that, but I even miss, in a funny way, the day to day panics of being somewhere small and new and vulnerable, and the excitement of owning a small company. I want to experiment more than might be appropriate for a publicly traded company, and I might want to do something that would be “off strategy” for Zynga or otherwise too risky.

So I’m getting that itch, and though I need some time to think about exactly what I want to do next. I suspect that “starting a little studio with a few wingmen” — for the fourth time in my career — is likely to be on the menu.

So thank you, Zynga, for taking me on when my genre was disappearing. Thank you for showing me that there’s still a lot for game designers to do and we still need to be training the next Sid Meier, Will Wright, Gabe Newell, etc. Thank you for pretty much inventing game analytics and giving us an amazing new tool to apply real data and statistics to answer questions for which we could previously rely only on our gut. Thank you for the chance to work in social media and really master the free-to-play model. Thank you for unlocking a true mass market audience to game designers for the very first time ever – for letting me make games that more people played in a single day than had played all the games I’d made in the last 20 years combined. Thank you for Zynga Speed and the amazing teams I got to work with. Can’t wait to see what you do next – see you round the industry.

Brian Reynolds was until very recently the chief game designer at Zynga, where he headed the Zynga East studio in Baltimore and worked on titles like FrontierVille and CityVille 2 and advised all of the game teams. He also founded Big Huge Games and created titles such as Rise of Nations. He cofounded Firaxis Games with Sid Meier and worked with him both there and at MicroProse, creating games such as Sid Meier’s Alpha Centauri and Civilization II.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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In the workplace, most employees have been exposed at one point or another to various personality profile tools like Myers-Briggs or DISC assessments to help determine which roles best suit their strengths. People tend to be more engaged and perform better in jobs that are aligned with their interests and personalities. For example, outgoing people might gravitate towards sales, while introverts might focus on more analytical roles.

Interestingly enough, in the world of games, research has been done to analyze the link between a person’s personality and interests and the types of games to which they tend to be drawn. Intuitively, we understand that different personalities are attracted to different types of games. For example, World of Warcraft players tend not to play Farmville and vice versa.

Let’s look at each of Bartle’s gamer types in more detail:

So what does this have to do with work? There has been a lot of buzz lately about how companies can increase employee engagement and performance when processes and systems are gamified. When thinking about applying game mechanics to work, managers must keep their audience in mind in order to develop an effective system. Bartle’s gamer profiles might not apply to every employee, but can provide a general framework for the types of game mechanics that will best motivate workers.

For example, the vast majority of players tend to be socializers and explorers, while fewer are achievers and killers. Salespeople, however, tend to be more achievement- and killer-oriented than most. They like friendly (and not so friendly) competition. They’re more independent and are motivated by rewards, awards, and trophies. So if their job was turned into a game, it would have to look very different from one designed for an accountant.

When designing any product or system, one size does not fit all — There are obviously a number of factors involved in the effective application of game mechanics, but keeping the audience in mind is one of the most important keys to success.

Mike Smalls is the CEO and Founder of Hoopla.net. Hoopla’s platform leverages enterprise data, advanced game mechanics, and sophisticated communication tools to cultivate a high performance culture and drive results.

[Top image credit: Webgrrls]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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For the past few years, Sydney Finkelstein, a professor at Dartmouth College’s Tuck School of  Business and the author of Why Smart Executives Fail and Think Again: Why Good Leaders Make Bad Decisions, has ranked the worst chief executive officers.

This year’s list (which comes by way of Bloomberg’s Businessweek) prominently features social-game developer Zynga’s chief executive officer Mark Pincus at No. 4.

Finkelstein points to the company’s falling stock price, the exodus of top employees, and its overreliance on Facebook.

The responsibility for Zynga’s success and failures lies with Pincus. The stock price has fallen and a lot of executives have left the developer. But Finkelstein also claims that Pincus’s decision to “hitch his company’s wagon” to Facebook was a “rookie mistake,” and that just seems like something that is easy to say with the benefit of 20-20 hindsight.

We’ve contacted Zynga to provide Pincus the chance to comment, but the company has not responded at the time of this posting.

Zynga likely only achieved any level of success due to how intertwined it is with Facebook. Zynga generates nearly 80 percent of its revenue through the social network. Obviously, there was gold in those hills, and Pincus exploited the opportunity faster and more efficiently than anyone. Maybe his mistake was not creating a strategy for Zynga to disassociate from Facebook earlier, but Zynga does have a plan to diversify — Zynga.com and mobile games — even if it isn’t generating revenue like in the early days of FarmVille.

But diversifying, which everyone agrees Zynga must do, has caused some issues for the developer. In late November, Facebook amended an agreement with Zynga that ended an arrangement that previously gave the studio extra exposure on the social network.

“We have streamlined our terms with Zynga so that Zynga.com’s use of Facebook platform is governed by the same policies as the rest of the ecosystem,” a Facebook spokesperson revealed in a statement.

But that is just another problem that occurred on Pincus’s watch.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga’s stock has been in a freefall since its initial public offering, with tech pundits and press watching with gleeful schadenfreude as it continues to drop. Zynga is now worth essentially nothing: Its market capitalization of $1.82 billion is roughly equal to the value of its cash and real estate holdings, even with yesterday’s announcements of real money gambling and a $200 million stock buyback.

How can a company that brings in $1.2 billion a year, and recently cut costs in order to achieve profitability, be worth nothing?

It doesn’t make sense. Here’s why Zynga is undervalued — provided it does the right thing next.

Zynga is actually sitting on three widely-known and popular potential gaming franchises: Farmville, Poker, and With Friends. Each of these titles is well known, has broad distribution, and an audience at least willing to check out a new iteration on the franchise. For instance, Farmville 2 just garnered 50 million users shortly after its launch. And each of Zynga’s potential franchises targets a different audience: Farmville for middle-aged women, Poker for middle-aged men, and With Friends for the lucrative under-30 market.

What Zynga needs to do is expand its franchise strategy.

The gaming industry, much like Hollywood, is all about franchises. It is easy to churn out another Spiderman movie or Call of Duty title, because there is already an audience for the content, which is a huge part of the hurdle in terms of success. Once you have a guaranteed audience, you can focus on the content.

Rovio, the makers of the Angry Birds franchise, is worth a reported $9 billion. Angry Birds is a great, fun, casual game that has successfully implemented distribution onto emerging smartphone mobile platforms, but in many ways Angry Birds is simply the Tetris of this generation of computing. In effect, Angry Birds is a single-player, traditional game that doesn’t leverage the social graph, multiuser gaming, and advanced graphics. It barely even takes advantage of touch screens.

Still, it’s hugely profitable because Rovio has truly turned Angry Birds into a game franchise. Rovio has leveraged every possible gaming channel from iPhone to Android to even the Google Chrome App Store, added Star Wars editions, and signed cross-industry deals for everything from stuffed toys and lunch boxes to theme parks. Previous to Angry Birds, Rovio had 51 failed titles. It is now promoting Bad Piggies, a new title that is actually a spinoff of its Angry Birds franchise.

Franchises are not necessarily a guaranteed result, as titles can run over budget and fail at the box office. However, from a business perspective, it is a lot better to get a 50 percent headstart than starting fresh and rolling the dice with new content.

It is easy to see Zynga as a pure-play social gaming company that is struggling to shift into mobile, while social gaming becomes increasingly difficult to monetize. Yes, social channels have dried up after Facebook’s shift to Timeline stymied potentially viral newsfeed user acquisition (aka spam). And indeed the Zynga game playbook has gotten tired now that Facebook is no longer a new platform and expectations of game mechanics have matured.

But in reality, Zynga sits on three potential franchises, each of which could be huge.

Right now, Zynga’s most popular titles are stuck in their existing channels. Farmville and Poker are only available for Facebook users. With Friends games are only available on mobile. Each of these titles could easily go cross-channel, to Wii, Xbox and Playstation. Why not play Zynga Poker on Xbox Live?

Building deep, franchise-driven titles for multiple platforms takes time and investment. However, it is a proven monetization model.

In addition, Zynga’s announcement yesterday of real-money gambling is also potentially lucrative, especially in context of its ability to deliver the gambling audience of its Zynga Poker gaming franchise.

The technology industry, particularly its intersection with Wall Street, can be very herdlike, and it is hard to shift the herd perspective on companies like Zynga that are in flux. Still, a herd mentality can be an opportunity for clever investors to make a bet against the crowd.

In the midst of writing this article, I was having dinner with a hedge fund manager in London, who usually invests in things like mines. He had just bought Zynga for his personal portfolio, despite the fact that Piper Jaffray, Credit Suisse, and BMO Capital all downgraded the stock. The pure hedge fund perspective is to bet against the market, especially when the market is not acting on fundamentals.

And while this hedge fund guy usually invests in physical mines, even he has noticed that Zynga is sitting on a potential gold mine — one that is definitely worth a whole lot more than nothing.

Peter Yared is the CTO of CBS Interactive and has founded four e-commerce and marketing infrastructure companies that were acquired by Sun, VMware, Webtrends and TigerLogic. You can follow him at @peteryared. 

This story originally appeared on CNet.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Turning traditional game branding on its head, Hasbro and Zynga are teaming up to launch popular Zynga social games as Hasbro-produced board games for U.S. retailers.

The four games will hit store shelves this month and include Words With Friends, FarmVille, CityVille, and Draw Something. Together, these games have been played by hundreds of millions of users on Facebook and mobile platforms. Zynga currently has 306 million monthly active users for its mobile and social network games.

Because these social online games have reached deep in the zeitgeist of mass culture, the companies have decided to take the digital game brands and introduce them to the real world of family board games. Usually, board games are adapted to become online games.

The Hungry Hungry Herd (pictured right) game draws inspiration from the characters of FarmVille. In that game, players try to gobble up the most apples. This game and the CityVille and Words With Friends titles include special digital values that help enhance a player’s online or mobile game play. Parents can redeem 50 Farm Cash digital currency to keep their farms going online. You can choose from among a Gobbling Horse, Munching Pig, Snacking Sheep, or Chomping Cow. You let loose marbles into the middle and try to eat at many as you can. The game will sell for $22.99 and is for players ages four and up.

In CityVille Monopoly (pictured left), players race to build their dream cities. You can buy locations such as the train station, the toy shop and the bakery. You can use stackable houses to build businesses, apartments and homes. And you can give and receive Mystery Gifts to improve the value of your neighborhood. It sells for $24.99 and is targeted at kids eight and up. It also gives players 85 City Cash to use in the online version of CityVille.

In Words With Friends, which closely resembles the Scrabble board game, players can play word combinations in the hope of scoring the most points. But there are probably more people playing Words With Friends on the planet than there are playing Scrabble. Players get access to a bundle of digital features, including Word-O-Meter, The Count, and Tile Pile to boost their scores in the mobile or online versions. You get letter tiles and arrange them in a rack.

As with the online version, the game gets more interesting if you can land a word in the Double Word or Triple Letter squares. The game has four tile racks and 104 tiles. The game is available at most major retailers this month for $19.99. It is targeted at ages 13 and up and can accommodate two to four players. It is also available at HasbroToyShop.com.

In Draw Something (pictured below right), a title that takes on Pictionary, players will be able to show off their artistic capabilities. You choose a card and pick one of three items to draw, ranging in difficulty from easy to hard. The more difficult the item you’ve chosen to draw, the more coins received if another player guesses correctly. The game will sell for $19.99 and is for kids eight and up.

“We are thrilled to be working with Zynga to give their millions of fans an exciting experience with the Zynga games they love,” said Eric Nyman, senior vice president and global brand leader of Hasbro Gaming in Pawtucket, R.I. “We love how gaming brings people together, especially during the holidays, and we can’t wait to offer friends and families even more great options to play.”

“We are proud to team up with Hasbro and excited for our players to experience their favorite Zynga games in a new way,” said Barry Cottle, executive vice president of corporate and business development at Zynga. “Our hope is to enhance relationships through play through our web and mobile social games and now, with the new Hasbro games, we can make those connections even stronger for our players.”

“Hasbro’s new games bring popular Zynga brands to life, offering fans a unique new gaming experience,” said Laurie Schacht from Toy Insider.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Three years after its launch, Zynga‘s FarmVille social game has 3.2 million daily active users. That’s just a tenth of its peak. But Zynga is still betting that there’s a farmer in all of us, and it’s launching FarmVille 2 today to get us back behind the plow. As Zynga’s earnings take a dip and its industry-changing “Ville” series of social games lose their novelty, the company has a lot at stake with FarmVille 2. As FarmVille grew its audience to as 83 million monthly active players, it introduced social games to the mainstream and became one of the most broad-reaching titles in history, even as critics said it wasn’t really a real game. So the remake is akin to Zynga’s best shot at launching social gaming 2.0.

From the start, Zynga wants players to see that the game is visually richer and has a more personalized feel for what it is like to run a farm, according to Tim LeTourneau, the vice president of games at San Francisco-based Zynga, in an interview with GamesBeat. You now run a farm as an ecosystem, where your actions and help from your friends lead to real causes and effects. In short, FarmVille 2 appears much more like a living simulation of how to run a real farm — it’s a real game instead of just a mindless clickfest.

LeTourneau and FarmVille 2′s director of design, Wright Bagwell, both joined Zynga around 18 months ago after they left Electronic Arts. Their team had both social and traditional gaming experts.

“We asked ourselves, ‘What does the next generation of FarmVille look like?’” said LeTourneau. “We are reimagining and reinventing FarmVille, taking advantage of Zynga’s learning in the social space and what we bring from traditional gaming. For those who aren’t playing FarmVille anymore, we tried to reimagine virtual farming and bring those people back. It was our goal to make this a more intimate farming experience.”

Like the original, FarmVille 2 is geared toward people who want to play for five minutes a day and interact with their friends. The farm is a means of self-expression. Each day, players harvest over a billion virtual crops. To date, “farmers” have planted 50.4 billion white grapes. The original was so novel at the time that it soared to 10 million players in just six weeks when it debuted in June 2009. It set Zynga on the road to becoming a billion-dollar-revenue company by 2011.

The original FarmVille will continue to operate, and Zynga will continue to support it. But the new FarmVille 2 has better graphics based on the Flash 11 format (and Stage 3D) that Adobe has created to improve animations in web-based games. The characters and animals are created using 3D graphics though they are displayed in the familiar isometric, two-dimensional perspective. The animations look more fluid, and the landscape is more interactive as you move your mouse cursor over the screen. FarmVille 2 is an attempt to capitalize on how web-gaming technology has moved forward in just three years.

FarmVille 2 invites players to return to their old family farm with the hope of making it thrive again. You can do so by planting and harvesting crops, raising cute animals, and crafting fresh goods to sell in a roadside stand or to the local grocer. Friends can sit alongside your farm on hay bales until you assign them a task to perform in your fields. Each action performed by a “farm helper” is meaningful as it accelerates progress in your daily farm chores. You can also visit friends’ farms to harvest crops, feed animals, and collect the resources you need to finish crafting goods on your own farm.

At the heart of the ecosystem is water. Players gather it from wells that they dig and at their friends’ wells. They use it to grow crops, which can be turned into feed for animals. Those animals can produce ingredients like milk and cheese. Animals produce fertilizer that can double your crop output. Players craft ingredients into items they can sell at the roadside stand. You can, for instance, make apple scones that you can sell for a higher price. It’s all a virtuous circle, says LeTourneau. Sometimes, when the conditions are right, players can grow giant-sized crops that win prizes.

“You have to water seeds once you plant them,” said Bagwell in an interview. “Things don’t just fall from the sky in this game.”

Animals also come to life as players care for them from babies to adults. They use the resources the animals produce to sustain or grow the farm. Planting seeds no longer takes a mouse click for each patch. Now you can hold your mouse down and wave the cursor over a section of crops, “painting” seeds into the ground using broad brush strokes. Players can also right-click in the game (for the first time in a Zynga game), allowing them to pick up and rotate objects more easily. Your corn and wheat stalks sway in the breeze. Wind chimes move and make sounds. When you expand your map into grassy fields, goats eat away at the grass until you can plant there.

“It is tactile and alive,” said Bagwell. “The world reacts to your touch.”

Once you generate some income, you can buy things at the general store to spruce up your farm. You can purchase machinery that automates production. And it’s much easier to decorate a farm with items like garden gnomes or even sprawling mansions.

Zynga has added some narrative, as well, introducing characters such as Marie, a country girl who shows players the basics. Walther Thorncroft, a retired engineer turned farmer, teaches players how to take their farms up a notch.

Cornelius is the local village grocer. He gives the player daily challenges to perform by placing orders for goods that can be crafted from what the player actually has on his or her farm. Cornelius is an interesting game mechanic that prods you to outdo the production that you accomplished the day before. The game adapts to the way you like to play.

“He’s actually looking at my farm — the things I am growing and the recipes in my kitchen,” said Bagwell. “He places orders for things that I can actually produce. In return for doing what he wants, I can get cool prizes from him.”

While the virtual characters can prompt you to take action, your real friends are the most powerful force in the game. Your farm helpers come over every day and help you instantly grow or harvest crops. You can see that work happen as the animated characters move across your farm in real time.

The net result is a simple and intuitive version of what it is like to run a farm, said LeTourneau. And that farm is not just a “game board.” You can see that it’s part of a larger landscape that includes a village community off in the distance. Your goal is to eventually get to the village (the place where the village grocer Cornelius comes from), where you can interact with neighbors even more.

“I love to play Zynga games because of the social interaction more than anything,” said Denise Lambert from Toronto, Canada. “When life gets busy and things get stressful, you can step away for a little bit to relax and socialize with people who have the same interests as you, which brings you to a happy place. I’m excited for FarmVille 2. I can’t wait to play!”

Both FarmVille and FarmVille 2 will continue to evolve over time, as both have dedicated teams. FarmVille 2 is available in 16 languages, including English, Danish, Arabic, Dutch, German, Japanese, Korean, Norwegian, Swedish, Thai, Turkish, French, Italian, Portuguese, Spanish, and traditional Chinese. Zynga says it has more than 306 million monthly active users on Facebook, Zynga.com, and other platforms. The game will go live with 30 levels. If you want to progress faster in the game, you can pay real money to purchase faster progress in growing crops, and you can also pay for decorations.

On the surface, FarmVille 2 uses the first game as its inspiration, said LeTourneau. FarmVille may have brought virtual farming to all of us, but FarmVille 2 is the real game.

“Our goal was to create an ecosystem where all these things were interconnected,” said LeTourneau. “We want it to feel like it’s next generation, and it’s always very alive.”

Here’s our image gallery of FarmVille 2:

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Everyone knows Superman and Wonder Woman, but what about the unsung heroes of the world’s many superteams? What about the guy who keeps the lights on and the tights clean? Where’s his iOS game? Thankfully, Double Fine has just announced Middle Manager of Justice, which is about exactly that.

The game puts you in the role of an office manager at the newest branch of Justice Corp, which is apparently some kind of superhero corporation, and tasks you with keeping your staff of costumed crime fighters in shape and on task. To do this, it looks like you’ll have to tap into your own powers of time management and poking stuff, since the gameplay appears to function in a similar fashion as something like FarmVille or Game Dev Story, but with supervillain battling thrown in.

Obviously, as evidenced by that description, the game features a grim and brooding tone similar to Christopher Nolan’s Batman movies. Oh wait, Double Fine developed this game, and it’s the master of the wacky and cartoonish (and the makers of Psychonauts and Costume Quest), so it’s probably going to end up being wacky and cartoonish…which is a much better idea anyway.

The game will be free-to-play, with two forms of in-game currency: coins and Superium. Users will earn both simply by playing, but they will be able to pay real money for Superium if they want to experience things and strengthen their heroes quicker. Fortunately for cheapskate gamers, Double Fine is being very quick to assure everyone that it is possible to experience everything in the game without having to pay for anything. Real money is simply used to make things go faster.

Middle Manager of Justice will be available soon for iOS in Canada and, according to project lead Kee Chi, everywhere else “soonishly soon” after that.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The traditional gift for a one-year anniversary is “paper.” Preferring something a little more space colony management-themed, Gameloft will instead celebrate a year with their New Orleans studio (their second in North America) by releasing a new iOS and Android game called Cosmic Colony.

Cosmic Colony is the first title to come out of Gameloft New Orleans, and it’s the latest in the ever-expanding genre of FarmVille-style games where you build and manage real estate of some sort and then wait for things to happen/pay real money to make things happen sooner. Unlike those other FarmVille-style games, this one was made by people who live in Louisiana and features a minigame where you have to fight off space pirates.

Also, fans of Louisiana’s government will be thrilled to hear that the state’s governor, Republican Bobby Jindal, has released a statement congratulating Gameloft on this new release and the studio’s anniversary: “Gameloft’s work in our state shows that Louisiana is becoming a beacon for the digital media industry, and, most importantly, it shows we are diversifying our economy in order to create more opportunities for our people to pursue their dreams here at home.”

That’s the sort of attitude you don’t normally see out of the usual jaded and cynical governors in this country (who probably wouldn’t care about mobile games under developement in their state), so congratulations Gameloft and Louisiana.

Cosmic Colony is available now on the iTunes App Store and on Google Play for free.

If you follow VentureBeat but don’t regularly check our GamesBeat site, here’s a list of the best games stories we ran over the last seven days that you may have missed.

This week, Konami cancels a patch for the Xbox 360 version of the Silent Hill HD collection (but totally updates it on PlayStation 3), Zynga’s chief operating officer steps down, and Amazon launches its own online studio and Facebook game.

You’ll also find a review for New Super Mario Bros. 2 and previews for Marvel: War of Heroes, FIFA 13, and PlayStation All-Star Battle Royale.

News

• TheDeanBeat: Kickstarter isn’t indie gamemaker Double Fine’s only funding route
• Blizzard’s authenticators breached in hack
• Calm down: Sony assures us that The Last Guardian is still in development
• Infinity Blade developers hire former Kingdoms of Amalur creators for new studio
• Ouya surpasses its funding goal on Kickstarter by $7.6M
• Konami cancels patch for Xbox 360 edition of Silent Hill HD Collection
• Game developers hate Windows 8, Microsoft responds
• Nancy Drew gamemaker turns to Kickstarter for mobile versions
• Facebook launches real-money gambling game in U.K.
• Wargaming acquires BigWorld middleware firm for $45M (exclusive)
• Amazon launches its own online game studio and first Facebook game
• The golden age returns? Seamus Blackley’s Innovative Leisure mobile game startup raises seed round (exclusive)

Second quarter earnings reports and NPD numbers

• Overall video game sales dive 20 percent in July, 3DS and NCAA Football 13 take top spots
• Nvidia earnings on the rise thanks to the Tegra 3 mobile processor
• Japan’s big console gamemaker, Square Enix, slips into a loss
• THQ losses beat expectations in fiscal first-quarter 2013

Interviews

• Guild Wars 2: Console ports, subscription models, and making sure it works on launch day (interview)
• Now just how many tanks can you fit in a battle map? Find out in the Armored Kill expansion for Battlefield 3 (interview)
• DoubleDown Interactive succeeds by not sucking at social casino games (interview)
• Game designer crosses over from making Halo games to Zynga’s social games — he’s never going back (interview)

Mobile News

• The Walking Dead shambles over to Facebook in new social game
• Activision’s The Blast Furnace resurrects Pitfall! for mobile devices
• Introducing The Blast Furnace, Activision’s first mobile-only development studio

Previews

• PlayStation All-Stars Battle Royale will kick your ass in ways you could never imagine (preview)
• EA shows off smart Wii U GamePad tricks for FIFA 13 and Mass Effect 3 (preview)
• Mass Effect 3: Leviathan boldly goes where no Shepard has gone before (preview)
• Marvel: War of Heroes distills superhero combat into card-based digestible chunks (preview)

Reviews

• New Super Mario Bros. 2 is too obsessed with reliving the good old days (review)

Oh, Zynga….

• Meet Gems With Friends, Zynga’s newest (and familiar-looking) iOS game
• Zynga COO John Schappert steps down
• Zynga sees FarmVille and CityVille user spikes [UPDATE: Maybe not]
• Will Zynga’s ChefVille revive the company’s fortunes?

Pieces of flair

• Decorate your iPhone the retro way with these gaming-themed wallpapers
• The first 5 games you should get for your Nexus 7
• Check out the Ghostbusters, Sonic, and Minecraft references hidden away in these Team Fortress 2 maps (gallery)
• Annoy your friends and impress no one: Cheats for casual games

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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[Update: Facebook has confirmed that the spikes are due to reporting errors, according to AppData's pages for both FarmVille and CityVille.]

[Update 2: Zynga has also confirmed a technical snafu. "Facebook discovered an insights bug in the reporting of some games as they were testing the new 'Start Now' feature. They began working on a fix as soon as the issue came to their attention, and we expect insights to reflect the correct numbers shortly," a Zynga spokesperson told GamesBeat via e-mail.]

Social game developer Zynga has been in the news a lot recently, and most of it has been of the insider trading and copyright infringement variety. But that streak has paused (at least temporarily) with a report from brokerage firm Sterne Agee analyst Arvind Bhatia, which reveals that the numbers of daily active users (DAU) of two of Zynga’s games, FarmVille and CityVille, saw massive peaks over the past week.

Sterne Agee’s data (see below) show that at the beginning of the month, FarmVille’s number of DAUs rose from about 3.4 million to just under 12 million over a couple of days. CityVille’s numbers went from 3.2 million to 7.8 million over about the same period.

“We suspect it may be related to a special cross promotion within the recently launched game in the Ville franchise, called The Ville,” Bhatia’s report says. After the rise, the DAUs went back down almost as quickly, but they’re still higher than where they started. As of this writing, FarmVille’s numbers were holding steady yesterday at 5.7 million DAUs, and CityVille’s were at 6.2 million, according to metrics site AppData.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga’s investors are eagerly awaiting the company’s Zynga Unleashed press event today at the social-game giant’s San Francisco headquarters. As the darling of Facebook gaming, Zynga raised $1 billion at $9 billion valuation in December with its initial public offering. Since that time, the company’s stock rose from $10 a share to $14.69, only to plummet to around $6 a share yesterday.

That’s a volatile trading record for such a young company, whose five-year history we chronicled back in December. Today, all eyes will be on Mark Pincus, chief executive of Zynga (pictured above at last fall’s Unleashed event), to see whether he can keep his developers churning out games that can continue to capture the hearts of hundreds of millions of social gamers. If Pincus puts on a good show, you can expect Zynga’s stock price to recover. But if he doesn’t deliver, it could be a tough road back to the company’s IPO valuation.

It isn’t clear why Zynga’s stock has seen such wild swings. It rose to its peak in March on rumors that the legalization of online gambling — should it ever happen across the U.S. — could benefit Zynga, which has the world’s largest online poker game (Zynga Poker) and has been investing in social casino games this year. But the stock dropped since the company’s last quarterly report on April 26; the drop was due in large part to the lackluster reception of Facebook’s IPO and a stall in the social network’s growth. Zynga is still dependent on Facebook for more than 90 percent of its revenues.

But the stock drop hasn’t been all bad. Ten analysts now have buy ratings on the stock, and 10 have neutral ratings, according to Thomson Reuters. Zynga’s fundamentals, reflected in its 253 million monthly active users, have been pretty consistent in the past six months. It still has five times more users than its next closest competitor on Facebook. Zynga’s games still account for eight of the top 10 games in terms of monetization on the social network.

Colin Sebastian, an analyst at Baird Equity Research, said in a report this week that Zynga Unleashed should add “clarity to potential growth drivers for Zynga,” since the company will likely announce new games, talk about its growth beyond Facebook, and offer evidence of how Zynga will constantly try to gain new gamers even as players get tired of its older products.

Zynga has nearly 3,000 employees, with more than 150 seasoned game designers. So Sebastian expects a broader and more diverse software slate than it has had before. In the past, Zynga has had a narrow focus on casual simulation games such as CityVille and FarmVille. But it has launched a couple of new titles in different categories in recent weeks.

Atul Bagga, analyst at Lazard Capital Markets, noted that Zynga’s new Bubble Safari puzzle game has become the largest social game in daily active users. Bagga also thinks Zynga’s “match three” puzzle game Ruby Blast will score a large audience as well, based on strong results for rival games from PopCap and Wooga. Sebastian believes it will add more “mid-core” games for serious gamers and mobile as well. And Bagga said that Zynga’s new slots game is now one of the top-grossing games on iOS (Apple’s iPod, iPad, and iPhone platforms). The success of these games could allay concerns about a declining user base that drove down the stock.

Zynga has also begun recruiting a number of game developers for its Zynga.com platform, which exists on the web outside of Facebook. Sebastian believes that Zynga.com provides a better interface and experience for gamers, and third parties will likely be drawn to Zynga’s big user base and data analytics. Zynga’s growth opportunity lies in advertising revenue, which is well under 10 percent of the company’s business. Mostly, Zynga makes money through virtual goods sales, but new advertising initiatives may change that.

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. Our top speakers include Mark Pincus, CEO of Zynga. The event takes place July 10-11 in San Francisco, and you can get your tickets here.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Musical artists Enrique Iglesias and Jennifer Lopez will team up with Zynga as the company promotes 12 new languages coming to the hit mobile game Draw Something.

The effort shows that the social game company is willing to bring out the big stars to support the growth of Draw Something, which Zynga acquired when it bought OMGPOP in March for $210 million.

Users can now play in French, Italian, German, Spanish, Brazilian Portuguese, Norwegian, Swedish, Dutch, Danish, Simplified and Traditional Chinese, Korean, and Japanese. During the seven-day promotion, Iglesias and Lopez will choose a new word of the day under the newly added Special Words feature in Draw Something. Players can access their choices under the “JLo Enrique” option.

“Draw Something has only been available to players in English since its launch and became a cultural phenomenon around the globe,” David Ko, chief mobile officer for Zynga said in a statement. “We are excited to be able to give back to our players around the world by offering an experience that is more locally relevant to them.”

This isn’t the first time Iglesias has partnered with Zynga. Last September he offered his likeness for an interactive avatar in CityVille. Zynga has a history with partnering with celebrities, and previously worked with Lady Gaga and Martha Stewart.

“With native pop culture references and our partnership with global superstars such as Enrique Iglesias and Jennifer Lopez, the game will be even more fun for players. How do you draw ‘caliente?’ We’ll soon find out,” Said Ko.

Beyond expanding the number of supported languages in Draw Something, Zynga also revealed that Chinese gamers can use Sina Weibo, or a Chinese microblogging service, to play the game.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga chief executive Mark Pincus insists his company is innovative. They hold hackathons, have reinvented the company several times, and are always trying to invent news ways to keep you amused.

But the company is often accused of being a copycat, “borrowing” hot ideas from other companies shamelessly. So it didn’t help much when, pressed for an example of his company’s innovative ways, the best he could come up with was this:

An Instagram feature for FarmVille.

That’s right, FarmVille fans, you’ll soon be able to take hipster-ish photos of fantasy farms and share them with your friends, just like the massively popular Instagram app.

To be fair, his company has done more than any other single company to transform social gaming over the past several years, so a single copycat feature isn’t necessarily representative of the company’s innovation strategy. But it wasn’t a good choice of examples for a company that attracts a large share of haters.

“We’ve had to be innovative at every step,” Pincus said. “We’ve had to reinvent gaming, we’ve had to reinvent our market, we’ve had to reinvent our company several times over the past five years.”

Pincus was speaking onstage at All Things Digital 2012, also known as D10, a high-powered tech conference hosted by AllThingsD’s Walt Mossberg and Kara Swisher. Swisher, who has known Pincus for years, didn’t hesitate to press Pincus on a range of uncomfortable topics, including the company’s disappointing post-IPO performance and its massive dependence on Facebook, whose recent IPO has also been disappointing.

But Pincus wasn’t particularly forthcoming with news. The only real nugget of interest was his acknowledgement that, yes, Zynga did talk with Rovio about a possible acquisition.

“We’ve talked to them in the past,” Pincus said about the maker of the mega-successful Angry Birds.

Needless to say, it didn’t go anywhere.

“We’re always in the market, in discussion, with any successful team. We’re always learning by meeting with these teams, and sometimes there’s a fit and sometimes there isn’t.”

Pincus didn’t seem ruffled by his company’s stock market performance or the burdens of being a public company CEO. “We knew for a long time we were going to go public,” he said.  “When you get to a certain size, you really start being more and more similar to a public company. So it wasn’t a huge transition for us.”

And he’s not concerned about the day-to-day movements stock market, Pincus said, either for his own stock or for other companies.

“I think that the crop of companies that have recently gone public are awesome companies that have real products, and revenues, and products and services that fit into our lives.”

As for Facebook, he said it was one of several important “accelerators” of Zynga’s gaming business early on, “and Facebook was by far the best.” But he wouldn’t get into specifics about how much, exactly, of Zynga’s business is dependent on Facebook. Instead, he preferred to talk about the mobile market, where he says Facebook is important — but not as singularly important as it was in the web and desktop world.

“Mobile is this huge opportunity, but right now it’s really fragmented,” he said.

Photo: Dylan Tweney/VentureBeat

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.

If you follow VentureBeat but don’t regularly check our GamesBeat site, here’s a list of the best games stories we ran over the last seven days that you may have missed.

This week, game developer 38 Studios laid off its entire staff after ongoing financial troubles, BioWare laid off a number of people working on Star Wars the Old Republic, Take-Two faces a larger than expected financial loss, and Blizzard announces its first patch for Diablo III.

You’ll also find previews for Defiance, Kingdom Hearts 3D, and When Viking’s Attack.

The DeanBeat: Playstudios launches myVegas social casino games with MGM as a partner

Blizzard announces first Diablo III patches and delays the real-money auction house

Kingdom Hearts 3D welcomes casual fans back into the series (hands-on preview)

Bringing back Tomb Raider: Our need to fill the old archeologist’s shoes

38 Studios lays off its entire staff

Sony’s When Vikings Attack offers goofy street combat (hands-on preview)

Konami kicks off pre-E3 character battle (gallery)

GameFly buzzes into mobile publishing

GREE mobile gaming platform enters open beta, plans two new Moshi Monsters games

Diablo III sets launch-day record

ShootMania Storm is geared for mass, competitive gaming

Take-Two CEO says product delays signal an “unwavering commitment to quality”

Marvel Heroes’ online game world will let you smash evil for free

SOE announces free-to-play shooter, Bullet Run…which sounds a lot like Super Monday Night Combat

What does a game “producer” do, exactly? (exclusive)

Plant a money tree in Farmville as Zynga and American Express launch new rewards program

ArenaNet president discusses careful monetization of Guild Wars 2, the least greedy Western MMO

Twilight Zone table to rise again in Pinball Arcade with the help of crowdfunding

Origin offers 90 days of free distribution to successful Kickstarter games

VentureBeat:

Video game series contract will be tough for Bungie, easy for Activision

Square Enix’s Mike Fischer says Activision was “crazy” to abandon True Crime: Hong Kong (interview)

Gaming art for your Facebook Timeline (Part 5: Social and Mobile)

Nvidia expects a “breakout year” for mobile chips

Nvidia CEO describes strategic importance of cloud graphics

THQ releases Metro Last Light cinematic story video

Seagate agrees to acquire LaCie for at least $186M

Take-Two disappoints Wall Street with larger-than-expected loss

Activision reacts to fan response to Call of Duty: Black Ops II (video interview)

BioWare lays off staff on Star Wars: The Old Republic, EA to shift employees [updated]

Trion’s Defiance is one story told in an online game and SyFy TV show (hands-on preview)

YoYo Games unveils GameMaker: Studio for cross-platform development

RocketFrog wants to revolutionize online gambling with real-world prizes

How Ghost Recon is gunning to take over the hardcore and social markets (interview)

Are You a Human replaces annoying CAPTCHAs with games

Game of Thrones Ascent aims to please fans with a Facebook game (exclusive)

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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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

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga announced today the launch of Zynga Serve Rewards, a new virtual game cash rewards program with a prepaid card that is co-branded with American Express and connected to the Serve digital wallet from the credit card company.

Customers will need to register for the Zynga Serve Rewards program to get a prepaid card in the mail, which they will need to fund via bank account, debit card, or cash. Once the Serve card is activated online or by phone, it can be used anywhere American Express cards are accepted for purchases.

Once registered with the rewards program, Farmville players will be able to plant a special “Money Tree” in their online farms, which will start to produce virtual awards, according to Jeff Karp, chief marketing and revenue officer at Zynga. The money tree will evolve or level up as players progress in the game with virtual items like colors, glow effects, butterflies and toucans. The virtual tree will also serve as a dashboard for the prepaid card service, said Karp, allowing players to check their rewards status in-game. The plan over the next year is to extend the virtual rewards for real life spending to other Zynga games as well, like CastleVille and CityVille.

At launch, only the first five purchases of $25 or more on the Zynga Serve Rewards card will earn Farm Cash rewards. The program is set to eventually provide rewards above the initial first five purchases of $25 or more.

“We’re excited to partner with American Express to invent new ways for people to experience Zynga play in more parts of their day,” said Mark Pincus, chief executive and founder of Zynga. “Together we can add surprise and delight to every day shopping.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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FarmVille took Facebook by storm in 2009 and gave rise to a sea of rival farm simulations. But those games have begun to decline, and they are giving way to social casino games according to research collected by analytics firm Kontagent.

In 2012, social casino game players now account for 13 percent of all of the players on Facebook, compared to just 8 percent in 2011 and 6 percent in 2010. Many of those play Zynga Poker, which launched in 2007 and is still the second most-popular game on Facebook. But that title has been joined by a more diverse group of casino games such as Double Down Casino, which launched in 2010 and was the No. 4 game on Facebook in 2011.

Social casino games are a highly attractive genre right now due to fast growth and higher-than-average revenue per user, which is estimated as at least 40 percent higher than a typical social game, according to Jeff Tseng, chief executive of Kontagent, speaking at the Global iGaming Summit & Expo in San Francisco. Among the 780 million social game participants, 98 million are active players for social casino games.

As we reported this week, land-based and online casino operators are rushing into Zynga’s territory on Facebook. Of the top ten grossing iPhone apps in the U.S., three are currently casino games: Slotomania, Poker by Zynga, and Texas Poker. In the last six months, social casino gaming has exploded and has become a significant percentage of Kontagent’s analytics business. Customers include Blitzoo (Slotspot), Buzz All Stars, Playtika, Mytopia (Bingo Island and Governor of Poker), Pacific Interactive (House of Fun), Peak Games (101 Okey, Okey, and Okey Plus), Plumbee, PopCap, and Viaden. Kontagent tracks more than 1,000 apps, 150 million monthly active users, and 50 billion events a month.

David Gutierrez, an expert on casino games at Kontagent, said that the image below shows the relative change in the growth rates of farm games (in green) and casino games (in red). The farm game growth in monthly active users is visibly slowing. He said that social casino games generate seven times higher revenues than the casual game category.

The farm apps measured by Kontangent include Farmtown, Farmville, Farmandia, CountryLife, Cityville, and Fishville. The casino games represented below are Zynga Poker (Texas Hold’em), Okey Plus, Grand Poker, Slotomania, Slotspot, Casino City, and Lucky Casino.

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.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Zynga’s stock price has been falling in recent days in advance of the company’s first quarter earnings report today. The shares are trading at $9.15 each right now — up slightly but down significantly from a recent high of $15.91 a share. Do investors know something?

Analysts expect the company to report earnings of 5 cents a share on revenue of $316.8 million for the first quarter ended March 31. On AppData, Zynga has 281.6 million monthly active users and all five of the top five games. Here’s what some of the analysts who follow Zynga closely think.

Colin Sebastian of Baird Equity Research said that he expects results to be in line or slightly below estimates of a profit of 6 cents a share for the quarter.

He noted recently that Facebook said that Zynga accounted for 11 percent of its revenues in the first quarter — down from 12 percent in the fourth quarter. Zynga pays about 30 percent of revenues to Facebook as a fee for Facebook Credits transactions — not counting advertising. That suggests Zynga’s net bookings were around $230 million in the quarter. The company also probably generated $65 million in ad bookings. He noted that Zynga games continue to dominate the charts on Facebook, accounting for eight of the top 10 games in daily average users. On iOS, Zynga has six of the top 100 grossing apps and eight of the top 100 on Android.

“While Zynga continues to dominate Facebook games and is making solid progress on mobile platforms, we believe that slower growth on Facebook limits upside to estimates near term,” Sebastian said.

Michael Pachter, analyst at Wedbush Securities, also said he expects results to be in-line with expectations. Pachter increased estimates for the fiscal year to reflect the acquisition of OMGPOP, which has a hit game in Draw Something on iOS. For the full year, he expects bookings of $1.35 billion to $1.45 billion and non-GAAP earnings per share of 24 cents to 28 cents.

He expects Zynga shares to hit $17 each in the coming year.

Atul Bagga, an analyst at Lazard Capital Markets, said in a note that he expects a profit of 4 cents on revenue of $315.6 million. He thinks Zynga has had a strong reception for its Hidden Chronicles and Slingo games and improved the monetization of CastleVille. Mafia Wars may be underperforming as a franchise while Zynga Poker, CityVille, and FarmVille are stable.

He expects guidance for the full year to be raised from the $1.35 billion to $1.45 billion range to something higher. Bagga believes the stock has been falling based on fears that Zynga will make more (seemingly unwise) acquisitions, but he thinks those fears are overblown. His long-term target for the stock is $16 a share.

Is Zynga evil?

When Zynga paid $180 million for OMGPOP, the maker of the wonderfully creative Draw Something app, it was a great moment. Zynga was able to land a 30-person creative team that could help lift the company from an also-ran in mobile games to one of its clear leaders. OMGPOP was richly rewarded for its perseverance, having tried dozens of times to make a hit game before Draw Something finally took off and drew Zynga’s attention.

But one OMGPOP employee, Shay Pierce, decided to turn down the offer to be absorbed by Zynga as if it were the Borg from Star Trek. He wrote an editorial in Gamasutra, the online publication for game developers, saying Zynga’s “values are completely opposed to my own values, professionally and creatively.” He didn’t trust Zynga because of a recurring image problem — the widely held impression that the company was “evil.” It fit that definition because it acted in a way that was “destructive to the healthy functioning” of the gaming ecosystem, Pierce said.

“An evil company is trying to get rich quick, and has no regard for the harm they’re doing along the way,” wrote Pierce (pictured above) in a piece that drew more than 100 comments.

“Clearly the industry desperately wanted or needed this voice — someone to publicly reject the idea that Zynga is obviously a good place to land whether by application or through acquisition,” said Ian Bogost, professor of digital media at the Georgia Institute of Technology and a frequent critic of Zynga’s games. “Overall though, any “good vs evil” claim is always oversimplified, caricatured. But it does seem to me that more and more of the games industry — and the world — are pure financial instruments, rather than creators of products and services.”

And just like that, the reputation Zynga has tried hard to craft was back in the doghouse. It seemed like Zynga had outgrown such criticism as it became more of a pioneer in social games and a publisher of original titles. Pierce’s commentary revived allegations hurled at Zynga in the past about cloning games of competitors, spamming users with notifications until Facebook had to shut the messaging down, viewing users as “weak-minded cash cows,” and “chasing the gold rush” rather than making great games. It was a pretty stinging and well-crafted argument.

Much of the negative view of Zynga comes from early articles such as “FarmVillains” and the fact that Zynga founder Mark Pincus was a game industry outsider who saw the value of analytics. He was not a game designer, and now he has become the game industry’s only multibillionaire through Zynga’s initial public offering. The thinking goes that many Zynga employees, including Pincus, are there just to get rich and will sell their stock and leave after their post-IPO lock-up ends.

Colleen McCreary (pictured), chief people officer at Zynga, says that internal surveys show that Zynga employees are happy. More than 80 percent of them agree with the overall mission of the company, according to McCreary’s surveys. She noted that the San Francisco Business Times named Zynga as a finalist as one of the best places to work in the region. Unfavorable attrition is under 4 percent, and the percentage of job offers accepted has been increasing, she said.

A few of Zynga’s best game designers have also come to the company’s defense. Zynga made them available to me to interview, and a number have commented on Pierce’s post. In the past, Zynga employees were frustrated, McCreary said, because the company was in its quiet period before the initial public offering and it had to muzzle everyone in the past. That enabled the company’s critics to define it in the press.

But now the company can talk back. Zynga has hired many seasoned game designers among its 3,000 or so employees. Those developers are hard at work not only doing derivative work but also creating some of the most original and popular games in the world, including such titles as FrontierVille, Empires & Allies, and CastleVille, the Zynga people say.

Mark Skaggs (pictured right) — whose credits include games such as FarmVille, CityVille, and Command & Conquer: Red Alert 2 — is one of the oldest Zynga game design veterans. In an interview with VentureBeat, Skaggs said that Zynga has become a big target for everyone, much like Electronic Arts was when he worked there. When it began to disrupt the traditional game business, Zynga had lots of detractors. But in the end, rather than ruin the game business, Zynga has elevated its reach toward a billion users, many of whom would never have played traditional console games, Skaggs said.

Skaggs said the anti-Zynga attitude has hurt the company’s ability to recruit some of the best and brightest in the past. That was particularly true when Zynga was a younger company and it wasn’t so easy to show off its contributions to gaming.

“When we were 100 employees, it was much harder to convince game veterans to join us,” he said. “Trying to convince people to work for us when our best product was Mafia Wars — that was tough. Now we have more applications than we can deal with. The crux of it is that if you are in the industry being disrupted, it will be uncomfortable. Many companies have been disrupted. But the better measure of success is what do the players want? I love delivering games to as many people as possible, making the world a better place.”

He said that Zynga is improving its game quality and is constantly changing. As for cloning, Skaggs says that he has worked at places where he was a “craftsman,” as he is at Zynga, working to make fun games within constraints, and he has worked on his own as an “artiste.” He likes being a craftsman better because nobody played his artiste games. Creating the best version of a game within a genre is sometimes exactly what the market needs to bust open that genre to vast new audiences.

“You want to make games that people want to play, and you should not have preconceived notions of what people want to play,” he said.

Skaggs said it is thrilling for game developers to move fast on a concept and take it into production and into the hands of millions of players and then see the feedback in real-time through highly instrumented analytics. By contrast, console game developers work for two years or more before they get consumer feedback.

Bob Bates (pictured left), chief creative officer for Zynga’s external studios, said in an interview that he is familiar with the “Zynga is evil” attitude. He had his own conflict about it when he left the indie life and joined Zynga in 2010. He was so concerned that he consulted for six months before he joined full-time.

“I understand it,” he said. “I agree it can be a barrier to people joining Zynga. But if you peel back and see people working at Zynga, we have one of the deepest designer bench strengths of any company I have seen. There are external perceptions of Zynga and it didn’t match internal reality.”

On a day-to-day basis, he said, Zynga’s people are not just sitting back waiting for the dollars to roll in. They’re among the hardest-working in the industry, he said. He noted that Zynga’s games consistently beat others that are in the same genre. There can be many reasons for that, such as cross-promotion. But making a better game is one reason that happens, Bates said.

And while a designer may not feel especially creative making some of these social games, the games can unleash creativity in the player.

“You create ways for people to have meaningful interactions,” he said.

The creative contributions of the game veterans do make differences in Zynga games, he added. Bates said he was happy to contribute a more refined storyline — where there’s a love triangle between three characters — in the FrontierVille game. He went on to help with Empires & Allies, a combat game that move beyond its natural hardcore gamer audience to tens of millions of mainstream users.

“We made that game more accessible to more people, starting from a hardcore combat game,” said Bates, who worked on games such as Unreal 2 and Spider-Man 3 and has been designing games since 1986.

Among the other lifelong game designers working at Zynga are Paul Neurath (who worked on titles such as Thief), Mark Turmell (Mortal Kombat), Henry Stern (Magic: The Gathering), Mike Verdu (Command & Conquer), Doug Kaufman (Alpha Centauri), Cara Ely (Dream Day), Brian Reynolds (Rise of Nations), Chris Trottier (Spore), Frank Lantz (Parking Wars), Paul Bettner (Words with Friends), Christy Marx (Conquests of Camelot), Bill Jackson (Age of Empires), Toby Ragaini (Asheron’s Call), Bruce Shelley (Age of Empires), and others. All told, Zynga has 150 game designers and 40 percent of the total employee count is engineering.

“These are heavyweight designers doing good and creative work at Zynga,” Bates said.

Why, Bates asks, would Zynga actively recruit and hire these designers if it had no interest in real game design?

Tim LeTourneau (pictured right), a former Electronic Arts veteran who worked for a decade on The Sims, said in an interview with VentureBeat, “I would never have come to work at a company I considered to be evil. I sit and play Zynga games at night with my wife. That was one of the reasons I came here. EA was accused of being a lot of things. Any company leading a space is bound to have a lot of detractors. The Sims reached more than 100 million players over 10 years. CityVille got to that many in a month. That was why I came.”

A 20-year veteran of EA, LeTourneau said, “There is a way to touch players here in a way we couldn’t in traditional games. On a daily basis, my wife plays Zynga games and she plays those with people around the world. I think that is an amazing thing that Zynga has done. She has friends in Australia and Thailand that she talks with on a daily basis.”

LeTourneau said he wanted to learn how to create games that could do that. The team he works with can make any kind of AAA console game, but they are all choosing to making social games. That focus on social is something new for the game industry and it requires a tremendous amount of creativity, LeTourneau said.

“I haven’t looked back,” he said. “My time here has been really exhilarating.”

Asked about Zynga’s copycat allegations, LeTorneau said, “All games are in some way influenced by things that came before them. Is every first-person shooter a copycat of Doom? I certainly don’t feel like a copycat. And games like FarmVille need to innovate to continue to entice players to come back on a continual cadence. That’s not unlike what I had to do with The Sims.”

All of these defenses of Zynga may seem like rationalizations for working at a company that behaves badly. And Zynga has been accused of copying another company’s game as recently as February. As a side note, some sources have hinted that Pierce wasn’t a team player, and Business Insider wrote a story about how he was going to be fired. McCreary said Zynga’s policy is not to comment on the records of employees. But the Business Insider piece clearly indicated that sources associated with OMGPOP are trying to discredit Pierce. But Pierce noted that Zynga extended a job offer to him, which would seem odd if he was about to be fired.

I corresponded with Pierce via email, and he said that no one at OMGPOP had ever told him he was going to be fired. He believes he was doing good work and never received any indication from his manager or company that he was performing poorly. He noted that he has never tried to take credit for OMGPOP’s Draw Something (CBS News erroneously reported that and an email suggesting that was taken out of context), and he has been clear in saying in his article that he never worked on it. Asked if any of the reaction prompted him to change his mind about anything, Pierce replied, “No.”

As for Zynga’s image as evil, Skaggs said, “I hope people get past it. I don’t focus on it. It comes from disruption. Are people still mad at Apple for creating the App Store? I focus on making games.”

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.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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According to a filing with the Securities and Exchange Commission, certain shareholders will sell their stock in the offering, but Zynga itself will not sell any shares and will not receive any proceeds from the offering.

The purpose of the offering is to facilitate “an orderly distribution of shares and to increase the company’s public float.” The latter means to have more shares available for the public to buy. Morgan Stanley and Goldman Sachs  Co. will handle the offering, while BofA Merrill Lynch, Barclays Capital, J.P. Morgan Securities and Allen & Co. will assist. The pricing of the offering hasn’t been set yet.

As VentureBeat reported yesterday, the implicit purpose of the new offering is to let Zynga investors sell stock while getting large shareholders to agree to a longer lock-up period that stops them from dumping shares. Typically, employees and other shareholders are allowed to sell their stock about six months after an IPO, which often leads to a dip in the stock price as the market becomes flooded with sellers. The secondary IPO could reassure investors that employees won’t dump their stock as soon as they are able.

Zynga previously raised $1 billion in December through its initial public offering.

The maker of games such as CityVille and FarmVille, Zynga has more than 240 million monthly active users on Facebook, and it has generated more than $1.85 billion in revenue since its founding in 2007, the filing says.

The names of selling shareholders won’t be available until later. Michael Pachter, analyst at Wedbush Securities, said the offering could be positive for Zynga’s stock price because it will result in staggered lock-up release dates for inside shareholders.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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For better or worse, snacking and gaming seem to be inexorably linked. Now social gaming giant Zynga is building on this relationship, by teaming up with Frito-Lay and Walmart, to offer in-game rewards for its popular Facebook games with purchases of specially-marked snacks.

The promotion is a great way of giving the Zynga brand a strong presence in Walmart stores, where $15 and $25 top-up Game Cards will be sold alongside the snacks. They will be prominently placed, in displays near the check lanes, and will no doubt make a great impulse purchase for some of the 240 million active Zynga game players that will be out doing their weekly shop.

From March 1 to April 12, 2012, the promotional codes will be featured on five million bags of snacks. The codes can be redeemed against exclusive virtual items in the three participating Zynga games — FarmVille, CastleVille, and CityVille.

If you want a Flowery Oak to spruce up your castle, you’ll need to grab yourself some Funyuns. A Spring Dragon can be obtained by eating your way through a bag of Cheetos Crunchy Cheese, and a packet of Doritos Nacho Cheese will reward you with a virtual Nacho Garden for FarmVille. Seriously.

Players wanting to get their hands on super items, such as Glowing Glass Condos or Spring Pegacorns, will need to do some serious snacking. These items are unlocked by redeeming on-pack codes from four different specially marked Frito-Lay snack brands, along with a $15 or $25 Zynga Game Card, in the same game.

Jeff Karp, Zynga’s Chief Marketing and Chief Revenue Officer, said: “This promotion between Zynga, Frito-Lay and Walmart is a fantastic example of how brands can work together to bridge the online and offline worlds, all for the benefit of the consumer. We are continually looking for ways to surprise and delight our more than 240 million monthly active users, and we can’t wait to offer our players online, in-game rewards for their offline purchases.”

Full details of the promotion, including a picture of what a Nacho Garden actually looks like, can be found at the Zynga website.

Just remember, as much as you want that Spring Pegacorn, snack responsibly folks.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The company confirmed the layoffs but declined to say how many people had been let go or why the layoffs were necessary. It shows that even in fast-growing emerging markets, companies have to grow carefully or reset their strategies as the market changes.

In a statement, a Vostu spokesman said, “Vostu grew a significant amount in the last 18 months and is constantly focused on improving efficiency for future growth which includes select and strategic hiring. We are consolidating our game design and development at our new headquarters in Buenos Aires.”

The company will continue to have offices in New York and Sao Paulo, Brazil. Vostu has raised $46 million to date from Intel Capital, Accel Partners, General Catalyst, and Tiger Technology Global Management.

The firm was founded in 2007 by chief executive Daniel Kafie, Mario Schlosser, and Joshua Kushner. It grew up to be one of the largest social gaming companies in South America.

The company made casual social games and was sued in June 2011 by Zynga, which accused Vostu of outright copying Zynga’s games such as FarmVille. Vostu settled the case in December and made a monetary payment to Zynga. It also changed four of its games. Vostu’s traffic on Facebook grew in 2011.

Vostu has a couple of new games coming out soon. It has also made a foray into mobile games.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The deal helps keep Hasbro more relevant for a generation of kids who are growing up with online social games. While Facebook is still technically not for kids, a lot of social-game players are either children or people who like to play with toys.

Zynga has more than 227 million monthly active users for games such as FarmVille, CityVille and Words With Friends. Hasbro already has a deal in place where Electronic Arts turns Hasbro board games such as Monopoly into digital versions for video game players.

Hasbro is paying Zynga for the license to develop a wide range of products based on Zynga’s game brands.

“It’s exciting to partner with Hasbro as we share a common vision for play and a mission to connect the world through games,” said Mark Pincus, founder, CEO and chief product officer of Zynga. “This partnership is so special because it represents an exciting leap forward in enabling people to connect their virtual and real worlds. Hasbro has inspired play through their famous toys, games and action figures and we look forward to working with a company that continually creates meaningful and fun brands.”

“Hasbro is thrilled to have the opportunity to bring Zynga’s immensely popular social games to life in a variety of creative and new expressions that reflect consumers’ growing desire to surround themselves with gaming brands they love anytime, anywhere together with their friends and family, ” said Brian Goldner, President and CEO of Hasbro.  “Zynga is bringing more games to mainstream culture and is redefining how people play. At Hasbro, we’re proud to help bring their games to even more people around the world. This strategic alliance plays off of both Hasbro’s and Zynga’s proven strengths and is emblematic of the new innovations and new platforms we are creating across our entire gaming portfolio.”

The first toys will be out in the fall.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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In 2011, games took center stage. Game investment changed fundamentally during the year, as investors shifted their money into social, mobile and online games as they chased after users who were embracing the newest platforms for games.

The total game investment number is up more than 47 percent from the $1.05 billion raised by 91 companies a year ago, based on VentureBeat’s own research. By comparison, 115 game companies raised a total of $663.1 million in 2009. And in 2008, 112 game companies raised $936.8 million.

Keep in mind that Nexon raised $1.2 billion and Zynga raised $1 billion in their IPOs in 2011, bringing the total amount of capital raised by game companies to $3.75 billion.

Even if you don’t count those two IPOs, venture capital funding for games has never been bigger. Zynga, the social gaming giant and creator of FarmVille and CityVille, accounted for a third of all of the venture funding raised in 2011.

Those numbers chronicle the biggest gold rush in the history of games. Just a few years ago, venture capitalists were afraid to invest in games because they were a lot like Hollywood movies, where it was too hard to pick the hits. But the collision of the web, social, mobile and online gaming trends led to a huge disruption for the industry and lots of opportunities for game startups.

Major VC firms such as Accel Partners, Sequoia Capital, Kleiner Perkins Caufield & Byers, DCM, Andreessen Horowitz, and others all poured money into big game companies this year. Google Ventures became an active strategic investor as it recruited startups to make games for its Google+ social network.

Powered by the success of games such as Rovio’s Angry Birds, mobile game startups came into their own during the year, raising as much as $18 million per round.

Investors and startups saw huge exits, starting with Electronic Arts’ purchase of PopCap Games for $750 million in cash and stock plus $550 million in potential bonuses.

We’ve chronicled the gold rush religiously ourselves but have also pulled data for these fundings from the internet at large, the Internet DealBook, Digi-Capital, and the National Venture Capital Association.

We’ve ranked them here in order of the amount of money raised, and I’ve linked to our coverage or to those or who covered the funding. If there were no stories on the funding, I linked to the company’s own web site. Fundings where the amounts weren’t made public are listed alphabetically at the end. If you’ve heard of others, please note in the comments and we’ll add them to the list.

The list includes companies that raised funds in prior years but disclosed for the first time in 2011. It’s likely that some companies from last year’s list or this year’s have gone out of business. If so, let us know in the comments. We expect that we’ll be revising the list upward in the coming weeks as we add more deals that we didn’t know about.

This year, we decided to add fundings that involved gamification, or the use of game mechanics in non-game applications.

Each company link takes you back to the story we wrote about the company. In the rare cases where we did not cover the story, the link takes you back to another publication’s story on the funding. Happy reading.

1. Nexon — $1.2B for initial public offering on Tokyo Stock Exchange. Investors: the public. Dec. 13.

2. Zynga — $1B for initial public offering on Nasdaq. Investors: the public. Dec. 16.

3. Zynga — $490M for strategic expansion. Investors: Morgan Stanley, T. Rowe Price, Fidelity Investments, Kleiner Perkins Caufield & Byers. Feb. 1.

4. Kabam — $85M for hardcore games on social networks. Investors: Google Ventures, Pinnacle Ventures, Performance Equity and SK Telecom Ventures, as well as existing investors. May 26. (Kabam CEO Kevin Chou pictured right).

5. Razer — $50M for gaming peripherals and hardware. Investors: IDG-Accel China Capital. Dec. 20.

6. Rovio — $42M for mobile games such as Angry Birds. Investors: Accel Partners, Felicis, and Atomico. March 10.

7. OnLive — $40M for games-on-demand service. Investors: HTC. Feb. 9.

8. 6waves Lolapps — $35M for social and mobile games. Investors: Nexon. Aug. 3.

9. Lumosity — $32.5M for brain-training games. Investors: Menlo Ventures, FirstMark Capital, Harrison Metal and Norwest Venture Partners. June 16.

10. Kabam — $30M for hardcore social games. Investors: Redpoint Ventures and Intel Capital. Jan. 20.

11. Gaikai — $30M for game-streaming technology. Investors: NEA, Qualcomm, Benchmark Capital, Rustic Canyon and Intel Capital.  July 20.

12. Happy Elements — $30M for Chinese social games. Investors: Legend Capital, DCM. Oct. 16.

13. Tapjoy — $30M for mobile ad network and monetization services. Investors: J.P.Morgan and existing investors. July 5.

14. Online Warmongers — $25M for free-to-play online games such as War Inc. Battlezone. Investors: Cybergun. Aug. 25.

15. Wooga — $24M for social games on Facebook. Investors: Highland Capital Partners, Tenaya Capital, Balderton Capital, and Holtzbrinck Ventures. May 30.

16. CrowdStar — $23M for social, mobile and Asian online games. Investors: Intel Capital, Time Warner Investments, The9 and NVInvestments. May 23.

17. Funzio — $20M for social games such as Crime City (pictured right). Investors: IDG Ventures in the U.S. and IDG Capital Partners in China. May 10.

18. Gazillion — $20M for online game worlds. Investors: Temasek Holdings, Revolution Ventures, Oak Investments, Hearst Corp., Pellon Ventures, Abu Dhabi Media. Nov. 8.

19. Kixeye — $18M for hardcore games on Facebook. Investors: Jafco Ventures, Trinity Ventures, Lightspeed Venture Partners. Aug. 4.

20. Papaya Mobile — $18M for mobile social gaming network. Investors: Keystone Ventures and DCM. April 27.

21. TinyCo — $18M for social mobile games. Investors: Andreessen Horowitz. Feb. 25.

22. Zeebo — $17M for interactive education console for kids. Investors: undisclosed. Aug. 29.

23. Fourth Wall Studios — $15M for alternative reality entertainment. Investors: California Capital Equity. March 8.

24. Raptr — $15M for gamer social network. Investors: DAG Ventures, Tenaya Capital and Accel Partners. Feb 10.

25. Rumble Entertainment — $15M for mobile and browser-based games. Investors: Google Ventures and Khosla Ventures. Dec. 1.

26. CocoaChina — $14M for mobile games in China. Investors: Sequoia Capital China, Steamboat Ventures, Northern Light Venture Capital. Aug. 26.

27. Nubee — $13M for mobile games in Singapore. Investors: Vega Corp. Dec. 10.

28. SNS Plus — $12.5M for Asian social games. Investors: WI Harper Group and Matrix Partners. Nov. 28.

29. Badgeville — $12M to create a platform to gamifiy web sites. Investors: Norwest Venture Partners, El Dorado Ventures, Trinity Ventures and Webb Investment Network. July 13.

30. Digital Chocolate – $12M for social and mobile games. Investors: Intel Capital, Sutter Hill Ventures, and Bridgescale Ventures. Feb. 22. (CEO Trip Hawkins, pictured right).

31. Kontagent — $12M to expand social analytics service into mobile. Investors: Battery Ventures, Maverick Capital, and Altos Ventures.  Nov. 10.

32. Rivet Games — $12M (estimated) for web, social and mobile games. Investors: Softbank Capital, Baseline Ventures, Floodgate, and Outpoint Capital. April 20.

33. Supercell – $12M for hardcore real-time social games. Investors: Accel Partners and Klaas Kersting. May 25.

34. Unity Technologies — $12M to expand market for Unity 3D engine and game development tools. Investors: WestSummit Capital and iGlobe Partners. July 21. Pictured: David Helgason, CEO, right; Joachim Ante, chief technology officer, pictured left, and Nicholas Francis, chief creative officer, pictured center.

35. HealthTap — $11.5M for gamification of communication in doctor-patient relationships. Investors: Eric Schmidt’s Innovation Endeavors, Mohr Davidow Ventures, and Mayfield Fund. Dec. 6.

36. Peak Games – $11.5M for social gaming in emerging markets. Investors: Earlybird Venture Capital, Hummingbird Ventures and an unnamed strategic investor. Sept. 27.

37. DreamBox Learning — $11M for adaptive learning education games. Investors: Reed Hastings and John Doerr. Dec. 7.

38. Tiny Speck — $10.7M for web games such as Glitch. Investors: Andreessen Horowitz and Accel Partners. April 12.

39. OMGPOP — $10.1M for social game site. Investors: Spark Capital, Betaworks, Rho Capital and Softbank. June 1.

40. Moca World — $10M for mobile social networking games. Investor: Infinity Venture Partners. June 14.

41. Funcom — $10M for massively multiplayer online games. Investors: Stelt Holding. Dec. 13.

42. Idle Games — $10M for social games based on its proprietary Idle Engine, with social recommendations. Investors: not disclosed. Oct. 13.

43. Sourcebits – $10M for mobile games and apps. Investors: Sequoia Capital and IDG Ventures. May 11.

44. A List Games — $9.3M for marketing games via digital distribution. Investors: The Ayzenberg Group. Nov. 21.

45. Red Robot Labs — $8.5M for location-based mobile games. Investors: Benchmark Capital, Shasta Ventures, Playdom co-founder Rick Thompson, former Facebook executive Chamath Palihapitiya. Sept. 14. CEO Mike Ouye, pictured left, and chief product officer Pete Hawley, pictured right.

46. Icarus Studios – $8.1M for online game development platform. Investors: undisclosed. March 24.

47. Kobojo — $7.75M for social games in France. Investors: Endeavour Vision and IDInvest Partners. April 26.

48. Ignite Game Technologies — $7.5M for online racing games. Investors: Steve Bellotti and Bill Budinger. July 12.

49. Rocket Ninja — $7.5M for social games. Investors: Marcel Boekhoom. Nov. 22.

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The maker of games like FarmVille and CityVille now has enough cash to buy many of the hardcore game companies that openly scoffed as Zynga came of age.

Founder Mark Pincus is now a multibillionaire on paper, as the majority shareholder in a company that has staged one of the largest initial public offerings of the year — bigger than Groupon’s $700 million raise and the biggest tech IPO since Google went public in 2004. Trading begins on Friday on the Nasdaq under the stock symbol ZNGA.

At the $10 price, Zynga will raise as much as $1.15 billion for its coffers and will be valued at the opening bell at $8.9 billion — the upper end of its range. That $8.9 billion value includes outstanding stock options. When Zynga first announced it planned to go public in June, the rumored valuation was about $15 billion to $20 billion. Since that time, the stock market has cooled and Zynga’s growth has slowed.

Zynga’s IPO will go down as one of the biggest events in gaming history. Through the IPO, the company hopes to meet the ambitious goal of investing more “in play than any company in history.”

The pricing could generate interesting reactions. A similar company, online gaming firm Nexon, saw its shares fall after its IPO on the Tokyo Stock Exchange on Tuesday (Pacific time). Nexon raised $1.2 billion. It makes about the same in revenues as Zynga, but focuses on hardcore gamers who play online games, which users play for free but pay real money to purchase virtual goods. Nexon has profits of $260 million this year, while Zynga’s profits are at $30 million year-to-date.

Analysts are also mixed about whether Zynga is a good investment at its $8.9 billion valuation.

As we chronicled in our 25,000-word history of the company, Zynga has come a long way since Pincus founded the company as Presidio Media on April 19, 2007. At the time, Pincus wanted to jump on the Facebook bandwagon as that company took its shot at beating rival network MySpace by inviting third parties to make applications to run on the Facebook platform.

By July, Pincus’s small team of web veterans had created Texas Hold ‘Em Poker, a simple card game that would see its growth skyrocket into the millions of users as Facebook’s own popularity soared. Zynga then launched its Mafia Wars role-playing game, blatantly copying a rival, and figured out how to make money from the free games.

It did so by adopting the free-to-play business model, which was pioneered in Asian online games that tried to skirt rampant piracy. In those games, users played for free and paid real money for virtual goods in small transactions. While only a few percent of users paid, those users spent enough money to make up for all the freeloaders and make the games profitable. And since free was a pretty good price, Zynga was able to grow its users by the millions upon millions.

Traditional game companies tried to compete, but Zynga left them in the dust. It did so in part by heavily marketing and advertising its games so they quickly became dominant. It also cross-promoted new games among its existing users. While rivals had to launch games and build an audience from scratch, Zynga simply had to expand into new genres with its familiar cartoon style and get its existing users to adopt the new games. The rapid spread of games from friend to friend on Facebook helped Zynga games spread faster than any other games had done in the 50-year history of video games.

That enabled the company to climb to the top of the heap, and Zynga games have been No. 1 on Facebook for two years running now. But that doesn’t mean the company has it made. The firm has to expand beyond Facebook, grow its overseas business, establish leadership on new platforms, and grab market share in mobile. At the same time, low barriers to entry on Facebook make Zynga’s user base vulnerable to attack, as rival Electronic Arts demonstrated this summer with the launch of The Sims Social, which rose to No. 2 on Facebook, second only to Zynga’s CityVille. The intense competition will make it hard for Zynga to hit its goals.

The company reported net income of $12.5 million in the third quarter ended Sept. 30, down 54 percent from $27 million a year ago, according to an updated S1 filing with the Securities and Exchange Commission. The performance isn’t stellar, but it’s not so bad as to suggest Zynga’s planned initial public offering is in trouble.

Revenue was $307 million in the quarter, up 80 percent from $170.6 million a year ago. In other words, Zynga is working harder for the profits it gets by generating a lot more revenue compared to the past.

In the second quarter, Zynga reported only $1.4 million in profits on $280 million in revenue, so the third quarter report is an improvement on a quarter-to-quarter basis.

Critics are plentiful. Analysts at PrivCo.com say that Zynga is only profitable because of a change in its accounting, where it amortizes virtual goods revenue over a shorter time, which helps generate revenue faster than otherwise might happen.

Arvind Bhatia, an analyst at Sterne Agee, published a report on Tuesday initiating coverage of Zynga with an “underperform” rating that put Zynga’s price at about $7 a share.

That price is equivalent to about 11 times 2012 estimated EBITDA (earnings before income tax, depreciation and amortization). That gives Zynga a 30 percent price premium relative to its peer group, meaning it is viewed as one of the leaders of its pack.

A similar social gaming company, Nexon, went public on the Tokyo Stock Exchange with a pre-trading market capitalization of $7 billion, although it closed the day down about 3 percent off its IPO price. The Asian online gaming giant raised $1.2 billion and it made net income of $260.1 million, up 14 percent, on revenue of $853.5 million, up 26.5 percent, for the nine months ended Sept. 30.

But Andrew Cleland, a partner at Comcast Ventures, by contrast, has looked at the same fundamentals and come up with a different analysis. He noted that investors should not expect growth in the near future as Zynga invests heavily in the next stage of social gaming. Those who buy Zynga’s stock, he says, should understand that they are betting on Zynga’s long-term platform vision, not its 2012 cashflow.

BTIG also wrote a report on Zynga on Wednesday morning that said investors should participate in the Zynga IPO within the $8.50 to 410 a share price range. The research firm’s analysts Richard Greenfield and Brandon Ross wrote that they believe Zynga’s social games are  cure for boredom, much like TV, and can be played anywhere. They said that Zynga is a “media company” focused on taking a greater share of your time and money spent on entertainment. They said Zynga’s growth will be driven by launches across more game platforms, with a powerful network effect. They see continued growth of social networking beyond 1 billion users, with both Zynga and Facebook benefiting.

Investor’s Mosaic, a research firm for investors, said in its analysis that favorable trends for Zynga include its powerful business model, market leadership in social games, and strong social gaming growth. The negative is the dependence on Facebook, and Investor’s Mosaic is neutral on the valuation. The company believes that a fair valuation is about $9.25 a share, but it foresees risks for Zynga in the next 12 to 18 months as it tries to reduce its dependence on Facebook.

Zynga says it has 230 million monthly active users, down from 232 million when it first filed for an IPO in June. It has 58 million daily active users in 175 countries. Those users play 2 billion minutes a day and engage in 4 billion in-game user-to-user connections a day.

Zynga said that, according to AppData, its games are played by more daily active players than the next 14 social game developers combined. It also said it has four of the top five social games on Facebook, based on daily active users.

Cumulative revenue to date is $1.5 billion since 2007. Zynga now has 2,789 employees, compared to 2,543 at the end of June.

By comparison, Google raised $1.7 billion and its valuation after it went public in 2004 was $27 billion. Hilariously, Zynga updated its IPO papers this morning after Google chairman Eric Schmidt called Pincus a “fearsome negotiator.”

“Pincus is critical to our vision, strategic direction, culture, products and technology,” Zynga said in today’s updated prospectus statement, echoing previous filings. “The loss of our founder and chief executive officer, even temporarily, or any other member of senior management would harm our business.”

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The San Francisco-based social gaming company is planning to raise about $850 million to $1.15 billion at a price of $8.50 to $10 a share, giving the company an expected valuation of $7.6 billion to $8.9 billion. Zynga, whose history we chronicled in a 25,000-word story on Monday, has argued that the social gaming revolution has just begun and that the $9 billion virtual goods market could triple in five years. If Zynga raises those funds, it will be the largest tech IPO since Google in 2004 and significantly more than Groupon’s recent $700 million raise.

But Arvind Bhatia, an analyst at Sterne Agee, published a report on Tuesday initiating coverage of Zynga with an “underperform” rating that put Zynga’s price at about $7 a share.

While that’s lower than the expected IPO price, that price is equivalent to about 11 times 2012 estimated EBITDA (earnings before income tax, depreciation and amortization). That gives Zynga a 30 percent price premium relative to its peer group, meaning it is viewed as one of the leaders of its pack.

Bhatia wrote, “While we believe in the potential for social games, we think that Zynga’s growth is slowing even faster than what is obvious at first, its margins are under pressure, and free cash flow has been declining recently; thus we believe the implied valuation in the IPO is not justified.”

A similar social gaming company, Nexon, went public on the Tokyo Stock Exchange with a pre-trading market capitalization of $7 billion, although it closed the day down about 3 percent off its IPO price. The Asian online gaming giant raised $1.2 billion and it made net income of $260.1 million, up 14 percent, on revenue of $853.5 million, up 26.5 percent, for the nine months ended Sept. 30. By contrast, Zynga made a paltry $30.7 million on revenue of $828.9 million for the nine months ended Sept. 30.

The Sterne Agee research note says that FarmVille, Zynga’s former flagship title, has peaked and other titles are coming online at a slower pace. CityVille, Bhatia says, is tracking 50 percent below where FarmVille was at the same point in its history.

Zynga would no doubt dispute that analysis. It said in its roadshow video that FarmVille is posting record quarterly earnings more than nine quarters after its launch. CityVille grew faster than FarmVille and CastleVille is growing faster than CityVille. It’s still pretty early to say how CastleVille will turn out.

But Bhatia has other negative details. Mafia Wars 2, released in early October, hit 28 million players two weeks after its launch. But its daily active users have fallen to less than 1 million (it’s 680,000, according to AppData).

Still, Zynga’s picture isn’t dismal. The company has 222 million monthly active users and 51 million daily active users in all. In some ways, Mafia Wars 2 is probably losing users to CastleVille.

In 2012, Bhatia expects Zynga to launch its previously-released titles Hidden Chronicles and Zynga Bingo as well as grow its mobile business and expand internationally. But Bhatia said that bookings growth, a measure of cash-based revenue, will slow to 20 percent in 2012 and 17 percent in 2013. That compares to growth of 156 percent in 2010 and 37 percent in 2011.

Andrew Cleland, a partner at Comcast Ventures, by contrast, has looked at the same fundamentals and come up with a different analysis. He noted that investors should not expect growth in the near future as Zynga invests heavily in the next stage of social gaming. Those who buy Zynga’s stock, he says, should understand that they are betting on Zynga’s long-term platform vision, not its 2012 cashflow.

Bhatia said that other bearish arguments include Zynga’s dependence on Facebook for 94 percent of its revenue. And barriers to entry aren’t that high, as proved by the launch of Electronic Arts’ The Sims Social this summer, which took the No. 2 spot for a time on the top charts despite the fact that EA had almost zero presence on Facebook before. Lastly, Bhatia said that a small percentage of Zynga’s users — 2.5 percent, or 7.7 million users — generate most of the company’s revenue.

[Update: BTIG also wrote a report on Zynga on Wednesday morning that said investors should participate in the Zynga IPO within the $8.50 to 410 a share price range.

The research firm's analysts Richard Greenfield and Brandon Ross wrote that they believe Zynga's social games are  cure for boredom, much like TV, and can be played anywhere. They said that Zynga is a "media company" focused on taking a greater share of your time and money spent on entertainment. They said Zynga's growth will be driven by launches across more game platforms, with a powerful network effect. They see continued growth of social networking beyond 1 billion users, with both Zynga and Facebook benefiting. They see an acceleration of smartphones, tablets, and connected TVs, providing Zynga with more ways to grow. And they believe that brands will advertise with Zynga the more that its games engage users. ]

Atul Bagga, an analyst at Lazard Capital Markets, noted in a report dated Dec. 2 that the “toughening landscape” for social games bodes well for category leaders such as Zynga and EA. Those companies enjoy network effects, while smaller game companies are seeing rising costs for acquiring customers and declining virality for games. He also said that monetization on Facebook seems to be improving, but he did not put out an opinion on Zynga.

Michael Pachter, an analyst at Wedbush Securities, said in a report on Dec. 8 that he expects pricing at the midpoint of Zynga’s $8.50 to $10 a share range. He noted that Zynga has a revenue run rate (its implied annual income based on the current quarter’s revenue) of $307 million. Its valuation at the midpoint of the expected initial share prices implies a multiple of seven times revenue.

“For 2012, we think the company is well-positioned to grow revenue once again, considering the launches,” Pachter said. Pachter believes Zynga’s growth will correlate closely with Facebook’s own growth. Over the next four years, Pachter said Facebook could grow 25 percent, hitting the billion user level by 2015. He also said that Zynga has the first-mover advantage in social games and that the engagement of its games has been getting progressively better.

Pachter also said that FarmVille’s ability to earn revenues nine quarters despite user declines is worth noting. He also noted that new games are not cannibalizing current bookings, a good sign that Zynga simply isn’t stealing users from itself every time it launches a new game.

Investor’s Mosaic, a research firm for investors, said in its analysis that favorable trends for Zynga include its powerful business model, market leadership in social games, and strong social gaming growth. The negative is the dependence on Facebook, and Investor’s Mosaic is neutral on the valuation. The company believes that a fair valuation is about $9.25 a share, but it foresees risks for Zynga in the next 12 to 18 months as it tries to reduce its dependence on Facebook.