German social game maker Kamicat has raised a round of funding from iVenture Capital to expand its social games for Facebook, PCs, and mobile devices.

The Hanover, Germany-based Kamicat has scored a hit with its cross-platform Kamicat Football game, which has attracted more than 5 million registered users since its launch last year. This game combines live action soccer with team management elements, and it is available in nine languages.

Traffic Captain, a promotional network for games, is another iVenture Capital portfolio company, will now be the exclusive marketer of that game. The aim is to make Kamicat Football into a bigger worldwide title and to generate more advertising revenue. A mobile version is coming later this year.

“The quality of Kamicat’s top title, ‘Kamicat Football,’ in particular convinced us to move forward with this new investment,” said Michael Reul, the cofounder and chief executive of iVenture Capital in Hamburg, Germany. “In fact, I am an enthusiastic ‘Kamicat Football’ player myself. It will add top-notch value to our portfolio as well as the TrafficCaptain performance network.

Kamicat cofounder Christoph Reisner said in a statement, “Kamicat Football’s staggering growth on Facebook over the past several months is largely due to viral effects. Players spend above-average amounts of time with our game – a combination of football action simulation and management – and recommend it to their friends.”

IVenture Capital, founded in 2011, has also invested in game companies Farbflut Entertainment, Infernum, MobileBits, Pro 3 Games, Games.de, Allvatar.com, Kamcord, and Traffic Captain. It also invested in payment service provider BillingPartner. IVenture typically invests anywhere from 50,000 euros to low-seven-digit euros.

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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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Back in the year 1999, a trio of game designers created a title called Sissyfight 2000. It was a turn-based strategy game that reproduced the antics of “sissyfighting” by girls on a school playground. Now three members of the original team are launching a Kickstarter project to fund an online remake, which they will then post as an open-source title.

At the same time, they hope to create a conversation around the game’s evidently “sexist” characterizations of girl fighting. Sissyfight 2000 was groundbreaking as a social game when it was created by a team of Word.com online magazine staff. The question is whether today’s Internet community is ready to understand the message behind Sissyfight and whether it’s sexist or not.

The original team included Eric Zimmerman, Marisa Bowe, Ranjit Bhatnagar, Yoshi Sodeoka, Jason Mohr, and Naomi Clark. Zimmerman, Bhatnagar, and Clark are reuniting to create the Kickstarter, which aims to raise $20,000.  The art work of Henry Darger and Edward Gorey inspired the project’s visual style.

The team plans to bring back the game with indie game site Venus Patrol, which will have a new arcade section. The original Sissyfight 2000 went offline years ago. Instead of developing a sequel, the team decided to bring the original multiplayer game back for everyone to play online. It will be available for free and open source, so anyone can create their own version of Sissyfight.

I participated in a playtest of the game, and it was spectacularly fun. The player tries to dominate the playground in a duel with five others. Each becomes a bratty little girl who has to deal with bullies, tattle-tales, and shifting friend allegiances. It sheds light “on a different kind of schoolyard violence — the emotion and social violence of the Mean Girls variety.” The original game was built in Adobe’s Shockwave and was pretty plain in its animation.

The goal of the game is to reduce the self-esteem points (the little hearts) of your opponents. When one or two girls are left, they win. With each turn, every player picks a single action without knowing what move everyone else has selected. You can “scratch” another player for one point of damage. You can “tease,” which is twice as effective as a scratch, as long as two or more girls tease the same target. A “grab” does no damage but interrupts your target’s action. A “tattle” is a powerful attack that does three damage points to everyone, but if two players tattle at the same time, then only the tattlers get in trouble. You can only tattle twice in a game. You can “lick your lolly” and get two self-esteem points back. But you can only do that three times per match. Lastly, you can “cower,” which defends you from grabs and scratches.

I actually won three matches and lost a couple as well. I found that my fellow players were quite aggressive, so I let them slug it out while I cowered or stepped back from the action. Then, when they had expended their efforts, I stepped in with a powerful “tease” attack. I found that I could take my rivals off-guard. But the same strategy never worked twice, and players could overtly collude with each other through the chat system. They could also launch verbal feints by doing the opposite of what they said they were going to do.

In many ways, Sissyfight was ahead of its time, a social game before social-networking games became popular. Chatting with other players is an important part of the strategy. In fact, Sissyfight has been used to teach game design students for nearly a decade in college courses, workshops, and the Game Developers Workshop. Zimmerman, one of the original designers, has been an active member of the indie game development community, and he later became the founder of Gamelab, the company that developed the hit title Diner Dash (for PlayFirst).

All of your team members are potential enemies or allies.

The developer plans to use the Kickstarter money to recode the game to make it playable under today’s browsers. Bhatnagar, the original programmer, will head the recoding effort. He is now a media artist who exhibits around the world. His sound sculpture will be exhibited this year at the Palais de Tokyo Museum in Paris and at the Tinguely Museum in Basel. Clark, based in New York, has worked on games with companies like Lego, Gamelab, and Fresh Planet. Zimmerman is on the faculty at the NYU Game Center and is an independent game designer.

Now, the intentional sexism of the game bothered me. I felt like I would never show this game to my daughters, who probably wouldn’t understand the intentional irony in the sexism. If a game looks sexist and plays sexist, then it must be sexist, right? I complained to Zimmerman that the game hadn’t kept up with the times and that it was wrong not to have boys fighting like sissies, as they are perfectly capable of doing so on the playground.

Zimmerman replied, “This is a great question. In fact, Sissyfight [which he spells SiSSYFiGHT] has an intentional gender imbalance. It is a conscious intervention into the culture of games — at least it was in the late 90s, and it still feels like an interesting statement today. Sissyfight is very much a feminist video game — in that it consciously grapples with ideas around the social construction of gender. I wrote about some of this in Rules of Play — how Sissyfight creates a kind of female identity which is neither princess-to-be-rescued nor action-hero-in-tight-shorts.”

In the FAQ for the game, the team acknowledges that a game where the goal is to “bully and humiliate other girls” seems a little wrong. It is intended for adults to reflect back on “adolescent struggles with dark humor, morbid nostalgia, and maybe a touch of vengeful revisionism.” It also depicts the aforementioned emotional violence.

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Zynga continues to expand from its social-game roots with plans to publish Disruptor Beam’s Game of Thrones: Ascent social game.

In partnership with HBO, Disruptor Beam is making a social game based on the epic television series. Zynga will publish the third-party game to its audience of 250 million monthly active users, said Rob Dyer, the vice president of partner publishing at San Francisco-based Zynga.

Disruptor Beam CEO and founder Jon Radoff said that his company’s goal since 2010 has been to “disrupt” the world of social games with what he claims are immersive gameplay experiences based on the worlds and stories that players love most.

“Disruptor Beam has done an outstanding job with the game’s design – creating an engaging and authentic experience that appeals to midcore and casual players alike and reflects the incredible world of Game of Thrones,” Dyer said.

In Ascent, you lead the life of a noble during a time of upheaval, similar to the storyline in the books and TV series. You swear allegiance to a Great House (such as the Lannisters), select your lineage, secure your holdings, develop your lands and reputation, and assign sworn swords to quests. Social aspects include making alliances with other players and even marriage pacts.

Game of Thrones is moving fast in the world of transmedia. It’s the first book of the “A Song of Ice and Fire” series George R.R. Martin (though many people now associate that books name with the entire series) and brought to life by HBO as a cable TV show. It has traditional role-playing and strategy games for consoles and PCs. Game of Thrones: Ascent launched on Feb. 21 on Facebook in an open beta test. Since that time, more than 500,000 users have installed the game, which places them in the world of Westeros. The studio has been refining the game mechanics and features, and it hopes the partnership with Zynga will expose the title to many more potential fans.

“One thing that I’ve learned in my years of starting and building companies is that gaming companies cannot always be solely responsible for 100 percent of their ‘hits,’” Radoff said.

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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 said today it will shut down four major games as part of its continued effort to lower costs as it reported earnings today.

Chief operations officer David Ko said in a conference call with analysts that the company plans to shut down four once-big games: The Ville, Empires & Allies, Dream Zoo, and Zynga City on Tencent.

“We are moving to shut down lower-performing games,” on top of canceling CityVille 2, The Friend Game, and Party Place in the first quarter, said Ko.

Mark Pincus [above], chief executive of Zynga, also said that Zynga had canceled two major unreleased games during the first quarter. Those games would have led to “better short-term performance,” but they would not have been good for the company in the long run. For the most part, Pincus said 2013 is a transition year for Zynga as it adapts to mobile games and becomes a publisher and platform for third-party games.

Meanwhile, the company has released its big mid-core game, War of the Fallen, which is aimed at hardcore gamers but offers short play sessions on mobile. And Zynga is launching its Draw Something 2 game today.

Draw Something 2 is an especially important game for Zynga. When the publisher acquired Draw Something developer OMGPOP in early 2012, the game has over 13 million daily active users. As of April 2, it is now down to over 1 million DAUs. Figuring out how to retain players could be a significant issue for Zynga should a similar drop occur with the sequel.

Zynga is also in the testing stages on a new endless runner game, Running with Friends, which is a more social version of the endless running genre that includes games like Temple Run.

The embattled social-game publisher reported better-than-expected earnings for the first quarter ended March 31 and managed to stay profitable. Zynga’s results are closely watched as a bellwether for digital gaming, since Zynga is a huge player in social games on Facebook and it has a big — and growing — presence in mobile games.

Zynga said it had GAAP net income of $4.1 million, or break-even results per share, compared to a loss of $85 million, or 12 cents a share a year ago. Non GAAP net income was $9.1 million, or 1 cent a share, compared with non-GAAP net income of $47 million, or 6 cents a share, a year ago. Revenues were $263.5 million, compared with $320.9 million on a GAAP basis a year ago. Non-GAAP bookings were $229.8 million, compared with $329.1 million a year ago.

Analysts were expecting the company to report a loss of 7 cents a share on bookings of $209 million. Still, Zynga’s stock is tanking in after-hours trading, down 11 percent at the moment, erasing much of the run-up the stock had in the closing of today’s trading. The stock may be down since all of Zynga’s core metrics are down in the first quarter compared to the fourth quarter.

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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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Mobile gaming is taking off, and studios like Supercell, which revealed a $130 million funding round yesterday, are making everyone envious.

But market researcher Interpret has published a report today that reveals numbers that would scare a mobile-game developer. The latest data in its semi-annual global GameByte study shows that the average gamer on smartphones and tablets spends only 92 cents a month on full game apps and only 79 cents a month on mobile in-game items.

That is significantly lower than the $3.25 a month spent on free-to-play massively multiplayer online games, the $4.25 a month spent on subscription MMO games, or the $10.40 a month spent by players on traditional retail home console games.

“In the U.S., 48 million people are actively engaged in smartphone and tablet gaming, more than double the 23 million playing free-to-play MMOs on PC,” said Jason Coston, a senior analyst at Interpret. “But the average spend is so much weaker for mobile games that the two business models generate comparable revenues.”

Mobile games also face an uphill battle in converting players into paying users. Only 47 percent of U.S. mobile gamers paid for a full game app over six months, and only 21 percent paid for in-game items. By contrast, 75 percent of traditional gamers paid for a physical console or PC game in the same period.

The challenges facing mobile gaming extends to countries abroad, where microtransactions are popular. China, where console games are banned, sees about half as much spent on virtual items per mobile player as per free-to-play player. The situation is similar in South Korea.

“The mobile-game market may be a pretty big cookie jar,” said Coston, “but the neck is rather narrow, the cookies are small, and there are a lot of hands trying to reach into the jar.”

Interpret will roll out other data for its 2013 report soon.

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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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Leave your virtual bucks in your space wallet because I — like Facebook — only deal in cold, hard cash.

In June, Facebook announced it would drop its Facebook Credits payment system in favor of using local currencies. Now the social network is setting a timeline for the migration, explaining why it made the decision in the first place, and inviting developers to prepare for the transition.

“We are migrating all game developers on Facebook.com [to local currency] in Q3 2013,” Facebook engineer Yongyan Liú wrote in an update. “After launch, developers will have a minimum of 90 days to implement the updated payments infrastructure to continue accepting payments.”

Facebook’s outgoing payment system forces developers to increase prices based on $0.10 increments, which was about the value of a single FB Credit. This caused inconsistency in the value of social-game items from region to region due to fluctuations in the currency market.

“For example, a developer can now choose to price 1,500 ‘pirate rubies’ for $9.99 or 1,600 ‘pirate rubies’ for €7.99 for roughly the same value,” wrote Liú. “Using Facebook Credits, the developer would have had to price 1,500 ‘pirate rubies’ for $9.90 or €7.72. International pricing often changed on a daily basis.”

This enables developers to use the “.99″ pricing format in every region around the world.

In addition to the new pricing flexibility, Facebook is working to speed up the checkout process.

“The updated Facebook Payments requires fewer callbacks to complete transactions and improves caching for a quicker payments flow for users,” wrote Liú.

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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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Warner Bros. is diving deeper into digital games today as it announced the formation of WB Games San Francisco. The new studio will specialize in developing and publishing high-quality, free-to-play, mobile, social, and browser-based games.

This is another example of The Battle Royal (our theme for GamesBeat 2013), where all the walls come down between industries competing in entertainment. In this case, a big movie studio with a sizable console game division is now expanding into games that are distributed in a digital fashion. As it does so, it will compete with some of its own allies, such as Kabam, the San Francisco-based maker of Warner Bros.’ Hobbit games.

“We are extremely pleased to add WB Games San Francisco to our global portfolio of studios and publishing capabilities,” said Martin Tremblay, the president of Warner Bros. Interactive Entertainment, in a statement. “As our company has grown over the years, it has been a high priority to attract and cultivate creativity and innovation in top markets for game development around the world.”

Greg Ballard, Warner Bros. Interactive Entertainment’s senior vice president of Digital Games, will lead the studio.

“The Bay Area is the home of social and mobile gaming, and WB Games San Francisco is Warner Bros. Interactive Entertainment’s opportunity to expand our game development capabilities into the epicenter of the digital world,” said Ballard in a statement. “San Francisco is a hotbed of local talent and convenient access to major partners, and this will help us achieve our goal to bring our top entertainment and gaming brands, as well as original IP, to multiple mobile, social and emerging platforms.”

WB Games San Francisco will oversee publishing of all other mobile games developed by Warner Bros. Interactive Entertainment, and it will share offices with Flixster. Warner will have to manage the projects that it undertakes in-house with those that it farms out to specialists such as Kabam, which makes mobile and social games. The tension on that front is similar to Warner’s relationship in past years with Electronic Arts, which made the Harry Potter games for Warner.

The company is making the announcement just in time to hire folks at the Game Developers Conference in San Francisco next week.

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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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After making a killing on mobile, Kabam and Warner Bros. are launching a new version of their Hobbit game on Facebook and the web. The companies launched the Kabam-created free-to-play browser game, The Hobbit: Armies of the Third Age.

The new launch follows the successful debut of The Hobbit: Kingdoms of Middle-earth for mobile devices. That game debuted in the fall before Peter Jackson’s blockbuster film, The Hobbit: An Unexpected Journey, hit theaters. Now as that movie from New Line Cinema and Metro-Goldwyn Mayer Pictures debuts on disc and streaming, the companies hope to cash in on another transmedia game. This one will be available on Facebook, Kabam.com, and the Google Chrome Store.

I’m still playing the mobile version of the game, which is typically addictive in that it resembles many other Kabam games, such as Kingdoms of Camelot: The Battle for the North. In the mobile game, you build up your kingdom and armies, join an alliance (mine is the Levellers — hi, mates!), and then battle other players in real-time fights that can involve scores of players. You grow your Might and try to wipe the enemies off the map.

That mobile game was the No. 10 grossing game worldwide on iOS in January, and it was one of the top 15 games on Google Play that month, according to market researcher App Annie.

The Hobbit: Armies of the Third Age is similar. But you can’t cross-play between the mobile and the web versions. In the new game, you select a character like Bilbo Baggins, Thorin Oakenshield, and Radagast the Brown. You lead an army of Elves, Dwarves or Orcs in a tactical combat game. You can join alliance and partake in an epic war online.

“The Hobbit: Armies of the Third Age and The Hobbit: Kingdoms of Middle-earth deliver two immersive and dramatically different ways to experience the most iconic fantasy world of all time, across the Web and mobile devices,” said Andrew Sheppard, the president of Kabam Game Studios. “Kabam is unique in its ability to deliver compelling, high-fidelity free-to-play games across genres and platforms.”

The new Hobbit game is available in English, French, German and Spanish.

“The Hobbit: Armies of the Third Age from Kabam and Warner Bros. Interactive Entertainment is a great example of the type of high quality games being built on Facebook,” said Sean Ryan, the director of Games Partnerships, Facebook. “Kabam’s first strategy game Kingdoms of Camelot launched on Facebook in 2009 and became a major franchise, and we’re excited to see Kabam build their latest game on Facebook. As the Facebook games ecosystem grows, we look forward to seeing more highly engaging experiences from Kabam.”

“We’re eager to bring The Hobbit: Armies of the Third Age to the millions of Middle-earth fans who engage online,” said Greg Ballard, the senior vice president, digital games, for Warner Bros. Interactive Entertainment. “The Facebook and browser-based portals are key locations where The Lord of the Rings and The Hobbit film fans can regularly engage with Middle-earth in a shared interactive environment.”

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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 “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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Gritting your teeth long enough to ask the resident music snobs what they’ve been listening to usually provides much better results than most social music discovery technologies.

Music startup TastemakerX understands this. It has created a social game that specifically appeals to those precious music snobs.

Essentially, TastemakerX lets people pull music from several different sources (Spotify, YouTube, SoundCloud) to play songs they believe the community would enjoy. Snobs (which I should probably start referring to as users) get rewarded by participating in a “fantasy football league” for music artists that allows them to assign value to their favorite bands in the form of records, add songs to a collection, and more. Users get rewarded with “notes” for positive interactive with the service, such as if their artists or songs get played a lot by the community, a high level of activity on the service, and other things. You use the notes to “buy” more records. If you are an awesomely good music snob, you’ll continue picking music the community likes, thus improving your status as the most cultured and musically savvy person among your friends.

I don’t really understand the whole concept of framing fantasy football around music, because it just doesn’t translate well. First of all, this isn’t a music service for people who only like to listen to Jock Jams. Second, football players that are more athletic and talented really are more valuable than sluggish second-stringers that rarely see any time on the field. But music aficionados may end up really getting into the new Tastemaker, which will allow the service to create more enjoyable music discovery algorithms that play songs/artists you’ve never heard of and really like. (I also believe the “fantasy music league” angle is superior to the “music stock exchange” angle the company was promoting last year.)

TastemakerX has also secured a new $1.25 million round of funding that it will use to improve development of its music discovery technology platform as well as forge new partnerships. The new funding included investments from Baseline, True, Guggenheim, and AOL.

“With exponentially more music being made today than 30 years ago, music discovery has gotten considerably more difficult despite technology’s great advances,” said Tastemaker founder and CEO Marc Ruxin in a statement. “Games inspire people to search harder and accumulate more knowledge and therefore force discovery in new ways.”

Founded in 2011, the San Francisco, Calif.-based startup previously raised $1.8 million in 2012, making for a total of $3.05 million in funding to date. TastemakerX’s advisers include John Battelle, Marc Geiger, Andrew Anker, Mich Mathews, Michael Kassan, Ian Rogers, Paul Bricault, Ted Rheingold, and Mike Lazerow.

Original snobby douchebag music guy photo via ollyy/Shutterstock; Illustration by Tom Cheredar

Started by the team that created Zynga’s FarmVille, Red Hot Labs has raised $1.5 million in funding to create a mobile-technology platform and the games that prove it works.

The San Francisco company, started by founders and Zynga veterans Amitt Mahajan (pictured right) and Joel Poloney (pictured left), is creating a platform that allows developers to create games rapidly and bring them to market on multiple other platforms. And to show how well it works, the team is also creating mobile games.

“It’s an approach where we’re eating our own dog food,” Mahajan told GamesBeat.

Investors include Andreessen Horowitz, Greylock Partners, SV Angel, General Catalyst, and Japan’s IT-Farm. Angel investors in the company’s previous seed round include Keith Rabois, Chris Dixon, Bill Tai, Charles Huang, and Kai Huang. It’s not a big amount, but the investors are an all-star team. The hope is that the company can create a platform that mobile developers can use to create hits that spread in a viral fashion, lowering their expenses for advertising their own games.

Mahajan and Poloney proved their mettle at Zynga. They co-founded MyMiniLife, a social virtual world company, after they got out of college. They sold that business to Zynga in mid-2009, and the social-gaming giant used the MyMiniLife technology and its team to quickly launch FarmVille, which became its most popular game of all time. Zynga used that technology to produce a variety of other games, and the Red Hot Labs team has veterans who worked on games such as FrontierVille and CastleVille. The new startup wants to essentially do the same thing for mobile games.

“In the last few years, the combination of powerful technology combined with intuitive user interfaces built on top of Facebook has disrupted the industry and changed the way consumers interact with one another,” said Amitt Mahajan. “We believe mobile is the obvious next disruptive platform, but the tools to realize its potential do not yet exist. Our focus is on creating better ways of  building and distributing applications that will be essential to companies and consumers in an increasingly mobile-­centric world.”

The team has six employees and was founded last year. Mahajan spent time in Japan after leaving Zynga and watched the mobile-gaming explosion there, where they’re advertised on TV.

“The success with FarmVille came from a powerful technology with an intuitive design on top of a disruptive platform,” he said.

But the team saw there were huge gaps between what was available for making Flash games on Facebook and the tools that can be used to make games on mobile. Mahajan said that the team has created tools that enable fast game development on mobile. He said they enable the development of cross-platform games in perhaps half the time it normally takes.

Rivals include Game Closure and Ludei. Red Hot Labs will create one server that can be shared across multiple games, and it will bring down the cost of user acquisition.

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Following up on its promise to be more cost efficient, casual and social game publishing giant Zynga is shutting down its Baltimore studio today and consolidating locations in three other cities. About 1 percent of its work force, or maybe 30 people, will be out of work as a result of these moves.

The Baltimore shutdown isn’t a surprise since its leader, Brian Reynolds, the former chief game designer at Zynga, recently resigned. Zynga also shut down the game that Reynolds and the studio made: CityVille 2 (pictured above). Zynga is also consolidating studios that it acquired in locations that are near each other. So the two Austin studios are now one, two studios in New York are merging, and the McKinney, Texas, studio is moving to Dallas. In all of those moves, Zynga will save on real estate costs, but it is not laying off large numbers of staffers in those areas.

In a statement for GamesBeat today, chief operations officer David Ko said, “While these decisions are always difficult, these steps will affect approximately 1 percent of our workforce and enable us to focus our resources on the most significant growth opportunities.”

The move is consistent with comments made by Ko in an interview with GamesBeat just after Zynga’s last quarterly earnings report, when Zynga announced the CityVille 2 shutdown and closures of other poorly performing games. Ko said that Zynga’s focus for 2013 is on emphasizing game franchises — or titles like FarmVille that are developing more loyal followings and brand recognition — as well as Zynga’s network and profitability. To be more profitable, Ko said Zynga has set up “guard rails,” or controls that tell it when to shut money-losing ventures.

The latter isn’t easy to do in a service-based game, where companies launch a title and then continuously update it on a weekly basis to keep up with fan feedback and to draw players back into the game. When a game peaks and starts to lose players, Zynga has typically scaled back its investments or doubled down on them. Ko said that the company will pay more attention to the signs for shutting unsuccessful games down earlier.

A Zynga spokesperson said that the company is trying to find jobs within Zynga for the Baltimore employees. The moves impacting the other locations aren’t as severe. Zynga’s McKinney, Texas employees (acquired with the Words With Friends developer Newtoy) are about an hour from the Dallas location.  And the two offices in Austin, Texas, are just about a mile apart. The same is true for the New York locations.

In any event, these offices closures may lead to some turnover. Ko had said that the company would make tough decisions when it need to do so. Both the McKinney and Baltimore studios were essentially leaderless. The Bettner brothers who started Newtoy left last fall, and Paul Bettner started a new game startup to create titles for the Android-based Ouya game console.

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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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Cmune has raised a round of funding today to publish more games like its Uberstrike first-person shooter on digital platforms like Facebook.

The Beijing-based company believes that social shooting games will overtake game consoles. That may seem silly right now, with games like Call of Duty: Black Ops II generating more than a billion dollars in revenue in a matter of weeks after launch. But Cmune, which has 10 million registered users and 1.2 million friends on Facebook, is looking ahead.

DCM provided the funding, but it did not disclose the amount of the investment.

Games such as UberStrike are pushing graphics on web-based social platforms and mobile devices forward, and Cmune hopes that there will eventually be a billion-dollar first-person shooter game market on the new platforms. The advantage that Cmune has is that its games are free-to-play, requiring no upfront investment from the gamer in playing a hardcore game on Facebook or other platforms.

Cmune recently announced that it was spreading beyond Facebook to GameStop’s Kongregate and is developing versions for iOS, Android, and other mobile devices. It previously announced it had raised money from Atomico, the international venture capital firm founded by Skype co-founder Niklas Zennström.

Cmune makes free-to-play 3D shooter games such as UberStrike (pictured), which is the largest first-person shooter game on Facebook. It is also available on UberStrike.com and the Mac App Store. Cmune now has 1 million downloads on the Mac.

Cmune now has 20 employees, and it has tapped fans to generate new maps and concept art for UberStrike. Cmune was founded in 2007 in Seoul, but most of its team is now in Beijing.

Rivals include Kabam, Kixeye, SuperCell, Zynga, DeNA-Ngmoco, UbiSoft, EA, and Activision Blizzard.

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Japan’s mobile-social-gaming network Gree and Yahoo Japan are investing $2.2 million in a joint venture to make social games on smartphones.

The GxYz startup will open on March 15, and it will make social-mobile games on smartphone platforms for the Japanese market. It will benefit from the user acquisition capabilities of Yahoo Japan.

Gree will own a 51 percent share in the business. Several games are expected to be released within the year. While Gree is expanding in the West, it has a multibillion-dollar market value because of its lucrative business as a platform for social-mobile games in the Japanese market. Gree’s archrival in Japan in DeNA, which also has a close relationship with Yahoo Japan.

GxYz will be headed up by Tomoyuki Isaka, the ex-president of Gree Korea.

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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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Pulitzer-Prize-winning authors Nicholas Kristof and Sheryl WuDunn announced today that they’ll launch the latest installment of the Half the Sky Movement web-based Facebook game on March 4.

The title is an adventure game targeted at making mainstream audiences aware about the trafficking of girls and women as sex slaves — and other issues facing females in the third world. The New York Times writers want to raise charitable donations to empower girls and women around the world. Half the Sky debuted in November.

Executive produced by Games for Change, the title has support from Zynga.org, Ford Foundation, Intel, Johnson & Johnson, The Rockefeller Foundation, Pearson Foundation, National Endowment for the Arts, and the United Nations Foundation. All of the proceeds will benefit The Fistula Foundation, GEMS, Heifer International, United Nations Foundation, ONE, Room to Read, and World Vision.

Half the Sky introduces “direct virtual-to-real-life translation,” which is achieved by inviting players to move through a series of quests and stories related to real-world challenges that women and girls face. The issue-specific solutions come from seven nonprofits: The Fistula Foundation, GEMS, Heifer International, ONE, Room to Read, United Nations Foundation, and World Vision. The game invites players to make an impact on the real world.

“We want to reach a broader audience for these issues we care deeply about,” said Kristof and WuDunn in a statement. “We hope that a Facebook game that is fun and viral can be a way to do that, reaching people who aren’t now interested in women’s empowerment. This is an experiment because we’re not sure that there has ever been a social-purpose game with as much collective effort, and we’re hoping it is going to make a difference for the players — and for women and girls around the world.”

The game is part of a cross-media campaign for the Half the Sky Movement, which includes the No. 1 New York Times best-selling book Half the Sky: Turning Oppression into Opportunity for Women Worldwide, published in 2009. It chronicles the problem of human sex trafficking around the globe. It also inspired a PBS television series, produced by Show of Force, which features celebrities America Ferrera, Diane Lane, Eva Mendes, Meg Ryan, Gabrielle Union, Olivia Wilde, and George Clooney. The first part of the series aired Oct. 1 and Oct. 2, and the next installment airs on PBS on March 8 at 10 pm. That day is International Women’s Day.

Inspired by the book and TV series, the game invites players to become part of the solution and make real-world impact through play. The idea for it arose when the authors participated in the 2009 Games for Change Festival. The next event will be held in New York from June 17 to June 19.

“Around 300 million people play games on Facebook across the globe on a monthly basis,” said Games for Change co-presidents Asi Burak and Michelle Byrd. “If we’re able to inspire a portion of this group of players to spend 15 or 30 minutes of their time with this game, the ripple effect of players’ actions will result in significant and much-needed funding for this critical cause.”

The story takes players on a global journey that begins in India and moves on to Kenya, Vietnam, and Afghanistan, ending in the U.S. The more you play, the more you help unlock charitable donations for the cause.

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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 shared data today on why developers should publish their games on its social network and use its mobile platform. The move shows that the company is still wooing studios in the wake of increasing competition for developer attention in the era of many platforms.

More and more game developers are integrating their mobile apps with Facebook. And that is leading to an increase in the number of people who discover new apps through the social network. Facebook revealed today that those people tend to spend more time in apps, come back more often, and are more likely to become paying customers.

“Facebook creates a stronger network effect and connection to the game and among gamers, which results in higher retention with our games,” said Perry Tam, chief executive of game publisher Storm8. “Features like a leaderboard and gifting keep users engaged as they progress through game levels together while at the same time attracting new players.”

Within Storm8′s games, Facebook users are three times more likely to come back and play again. Facebook users are seven times more likely to spend money within a game.

“Besides seeing greater results from the players who connect to our games with Facebook, these people also play and pay more, which are essential parts of every game’s success,” said Anton Krasny, founder of Murka.

About 15 percent of gamers who play Murka’s Slots Journey log into the app with Facebook on iOS. The seven-day retention rate is 322 percent higher than non-connected users. Facebook users are 214 percent more likely to spend money in the first seven days.

“Diamond Dash has shown us that being social on mobile ultimately results in a better experience for the player. Users who play socially are more engaged and are able to get the most out of the game by sharing their experiences with friends,” said Jens Begemann, CEO of Wooga, the third-largest publisher of games on Facebook.

In October, Facebook directed users to the Wooga Diamond Dash app more than 19 million times. The number of players connecting via Facebook has risen from 28 percent of users in December 2011 to 70 percent now. People who log into the game are nine times more likely to spend money.

Meanwhile, Francois Daoud, vice president of marketing at Ludia, said, “We can assume that lifetime value of a Facebook-connected install is at least double the value of guest connected players over time.”

Facebook users provide 70 percent of the revenue from Ludia’s Are You Smarter Than A 5th Grader?.  About 52 percent of players are connected to Facebook.

For Bingo Blitz (pictured above) by Buffalo Studios, Facebook users are 55 percent of the iPad app’s audience and account for 62 percent of iPad revenue.

For TopEleven by Nordeus, 83 percent of payers on iOS are Facebook users and players are 4.3 times more likely to become payers than those who do not connect with Facebook.

And with Dragonplay games, Facebook users engage with the games 135 percent more than non-connected users. Those users are 133 percent less likely to churn, or drop the game, after 30 days.

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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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Measured in daily active users on AppData, King.com’s Candy Crush Saga has 9.7 million users while FarmVille 2 has 8.8 million and Texas HoldEm Poker has 7.1 million. In monthly active users, Zynga still has the top games with FarmVille 2 at 41.8 million and 35.2 million for Texas HoldEm Poker, compared to 25.8 million for Candy Crush Saga. The game is a simple one where you match three pieces of candy together, but it is played in a fast-action, arcade style. Such games have gathered huge momentum on Facebook in the past year.

Still, the daily active user count is significant because it means more when it comes to monetization of users, said Riccardo Zacconi, the chief executive of London-based King.com, in an interview with GamesBeat.

“We’ve seen tremendous growth on social and mobile,” said Zacconi. “Candy Crush Saga is doing well everywhere. We use our existing user base to launch our new games, and that helps each game grow bigger than the last one.”

King.com has been methodically gaining on Zynga for the past 18 months, and its users now play 5 billion game sessions a month, up from 3 billion just months ago. Its strategy is to launch a game or two a month on its web-based and social network platforms. It tweaks those games until it gets the gameplay and monetization right. And then it takes only the most successful titles over to mobile platforms such as iOS. That formula helped it boost revenues from ads in social games more than tenfold in 2012.

Candy Crush Saga, which was the company’s most popular game on Facebook, released on mobile platforms in mid-November. The title is fully social, with leaderboards, scores, and virtual goods synchronized between mobile and social networking platforms.

“People are playing their games on mobile devices even more than they have on their computers,” said Zacconi. “This complements our ‘play everywhere’ strategy.”

What is remarkable about King.com’s progress is that it has been able to create the top game on Facebook with a team of just 400 employees. By comparison, Zynga has more than 3,000 employees. Zynga is strong on Facebook, but King.com’s biggest gains have come on the mobile side. King.com is active on Facebook’s mobile network, and it uses a variety of mobile ad networks to market its games.

On the advertising front, King.com is running ad campaigns in its social games that have attracted major brands such as Samsung, Procter & Gamble, Macy’s, Nestle, and T-Mobile. The click-through rate on King.com’s ads (such as incentivized video, where a user gets something in exchange for watching a video) is more than 5 percent. About 85 percent of the people who start watching videos complete them. That’s higher than the industry average. King.com appeals mainly to women ages 25 to 55, a key demographic for advertisers.

Candy Crush Saga is listed in the top five grossing iPhone and iPad apps in 10 of the top markets, according to market research firm AppAnnie. King.com has three games in Facebook’s top 10 game apps, including Pet Rescue Saga with 3.2 million daily active users and Bubble Witch Saga with 3.6 million daily active users. Bubble Witch Saga launched in September, 2011, and it was in the top 10 through the whole year.

Candy Crush Saga launched on the web in April 2012. Currently, the game is played over 55 million times a day across both Android and iOS (iPhone, iPad, and iPod Touch devices). King.com still has a long way to go before it is done converting its titles from its website to Facebook and mobile platforms. Altogether, it has 150 exclusive games in 12 languages. King.com launches a couple of mobile games a quarter.

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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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Kabam made a successful transition beyond Facebook in the past year, and now it is expanding again. The San Francisco free-to-play game company is acquiring Exploding Barrel Games, a 35-person development startup in Vancouver, Canada. Terms of the deal were not disclosed.

As free-to-play social and mobile games become higher quality, Kabam has set its sights on matching the quality of console games, said Kevin Chou (pictured left), the chief executive of Kabam, in an interview with GamesBeat. And Exploding Barrel Games is full of people like Scott Blackwood (pictured right), the studio’s president, who worked at companies like Electronic Arts for years building franchises such as Need for Speed.

Most recently, Exploding Barrel worked on Margaritaville, a critically acclaimed Facebook game published by THQ. But THQ has struggled, filing for bankruptcy in December, and it is no longer focused on social games. That created an opportunity for Kabam, which has doubled down on its free-to-play game studios with multiple acquisitions. With the addition of Exploding Barrel, Kabam will have more than 600 employees.

Exploding Barrel is based in Vancouver’s historic Gastown district. It is working on three unannounced games. Since 2010, Kabam has also acquired WonderHill, Fearless Studios, Gravity Bear, Wild Shadow Studios, and Balanced Worlds. In May 2010, it opened a development studio in Beijing, and it created a development studio in Austin, Texas, last year. It is hiring across the board, said Chou.

The company can do this because it has made a well-timed shift from social to mobile games. Its Kingdoms of Camelot: Battle for the North placed first on Apple’s highest grossing apps list for 2012. Kabam grew its revenues more than 60 percent above its 2011 revenue of $100 million. Once dependent on Facebook, it now earns more than 70 percent of its revenues from web and mobile games. Titles include Kingdoms of Camelot, which has generated more than $100 million since its launch in September 2009, and The Hobbit: Kingdoms of Middle-earth.

“We blew away our targets for 2012,” said Chou. “We did much better than we publicly talked about. It was a phenomenal growth year for us. That’s why we felt it was the right time to acquire EBG.”

Blackwood said in an interview that his team formed the company in 2009, focusing at first on triple-A console games and platforms such as Xbox Live. Then the studio switched its focus to digital platforms such as Facebook, and now it is making both social and mobile titles. One of the company’s games is undergoing testing in Canada, and it worked closely with Kabam on that title. Blackwood said that the studio looks forward to creating triple-A games, but not on the consoles. Rather, he’ll do that for new digital game platforms accessible via smartphones, tablets, and the web.

“Kabam is at the top of their game in the free-to-play space,” said Blackwood. “We learned a lot working with them.”

Chou said he sees free-to-play games as a merger of art and science, combining traditional gamemaking with analytics and science for running games with a trove of customer behavior data.

The industry is clearly changing, said Chou. He went to the Consumer Electronics Show in Las Vegas, where you could “symbolically see mobile is the wave of the future with Paul Jacobs of Qualcomm taking the opening keynote from Microsoft. The whole focus of the show was going mobile. And the connected living room is coming to fruition in the market. The next generation of consoles is coming, but they will battle a whole line-up of smart TVs from every TV maker. Those are Android-based TVs, and they will have 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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Zynga is shutting down 11 games soon as part of a cost-cutting measure, according to TechCrunch. The free-to-play games are either unpopular or are older titles that stopped monetizing well. Still, some of those, like PetVille (pictured above), had millions of fans once upon a time.

Zynga chief Mark Pincus announced 13 closures as part of a cost-reduction plan in November. At that time, Zynga only identified FishVille and Treasure Isle. But now the company has also notified players of shutdowns in other games. Besides PetVille, the list includes the mobile games Mafia Wars Shakedown, ForestVille, Mojitomo, and Word Scramble Challenge. On Facebook, the affected titles include Vampire Wars (shut down on Dec. 5), Montopia (shut on Dec. 21), Mafia Wars 2 (shutting Dec. 30), and Indiana Jones Adventure World, which is closed for new players and will close Jan. 14 for all.

At the PetVille page, players are greeted with this message:

“Thank you for supporting PetVille and for being a loyal player! We’re sorry to inform you that PetVille will be shutting down on Dec. 30, 2012. In place of PetVille, we encourage you to play other Zynga games like Castleville, Chefville, Farmville 2, Mafia Wars and Yoville. We appreciate your participation in PetVille as it helped make the game a fun place to meet and war with friends. As a loyal PetVille player, you are eligible for a one-time, complimentary bonus package in one of either Castleville, or Chefville, or Farmville 2, or Mafia Wars or Yoville. You can start the process by logging into PetVille and clicking on the “Redeem” button. Please note that this offer will be valid only until Dec 30, 2012.”

Zynga is offering the bonus package of free stuff in other games. PetVille had 1 million monthly active users, while Mafia Wars 2 had only 200,000 monthly active users, according to market analyst firm AppData. At the time that Zynga announced closures, the company also said it was cutting 5 percent of its work force. Zynga shares are trading at $2.39 a share, far below the initial public offering price a year ago of $10. A spokeswoman for Zynga confirmed the closings.

[Editor's note: I didn't link to actual TechCrunch story since my antivirus software flagged it for malware.]

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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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It’s already clear that free-to-play games are having a profound impact on the industry landscape. Their initial success is in large part driven by the frictionless reach being free enables. By removing the need to pay up front, a game can reach an audience that’s as much as 10 to 25 times larger. Anyone who owns a smart mobile device or a PC with an Internet connection is now a prospective player.

But to catapult the growth for free-to-play games to truly massive audiences, a subtle – and perhaps counter-intuitive – design philosophy is required: Your game’s free players are actually more valuable than its biggest spenders. It is free players who hold the key to creating sticky communities, driving virality through word of mouth, and maximizing the opportunity for long-term engagement and monetization of your game service. If you want to avoid the headwinds that companies such as Zynga have run into in recent months and instead ride the tail winds that are driving Riot Games into a multi-billion dollar enterprise, you must learn to love your free players.

To date, most free-to-play game developers have eschewed free players and instead focused (at times myopically) on a handful of big spenders, known in the industry as whales. Whale-driven games are designed to create monetization friction early in a player’s life cycle. This culling process effectively eliminates 98 percent-plus of the new players in a game so that it can instead focus on diving deeply into the wallets of those remaining 2 percent of players who pay. Among that 2 percent, only a tiny fraction has the desire and ability to spend large sums of the money. So the breakdown in some games can become scarily skewed, with as much as 50 percent of the profits coming from 2 percent of the paying players – or just 0.0004 percent of the total audience.

As the free-to-play game market has evolved and the number of competitive whale-driven games has increased on both Facebook and smart mobile devices, an uncomfortable fact has settled on the industry. Despite the ability to reach billions of potential players, the number of whales with a desire to spend thousands of dollars is relatively tiny. Moreover, whales are not going to be able to spend huge amounts of money across multiple games at any given time. As a result, companies are seeing new whale-driven games perform worse than their predecessors, while also cannibalizing their own whales in existing games.

Contrary to popular belief

The truth is that players who choose not to pay anything are far more valuable to any game company looking to create sustained value for its shareholders. Here’s why:

The best free-to-play games are socially driven. The entertainment value of playing the game is either intrinsic to playing with other players or at the very least materially enhanced. By designing your game to compel free players to stick around for a long period of time, you create social stickiness that will result in a higher retention of your paying users. This is common sense. Who wants to save for months to buy that shiny new BMW if there are no friends or neighbors to admire it?

Moreover, free players are by far your best means of low-cost, high-quality player acquisition. Free players who enjoy the game are viral in the old-fashioned sense: They actually tell their friends to try the game because they enjoyed it. Instead of paying for 50 percent of your new users and then watching them churn out in a week, design your game to ensure free users enjoy it and watch your cost of player acquisition drop dramatically.

And it’s a funny thing about those free users:  the longer they play any free-to-play game, the more likely they are to convert to paying players. The cohort of free players who continue to be actively playing a new game for a month are nearly three times as likely to convert as new users you paid to acquire. The financial advantages of focusing on free players are further enhanced when your game caters to a more diverse demographic and geographic player base. There are simply more players in the world who will happily spend $5, $10, or maybe even $25 on a game they love than there are those who are capable of spending thousands of dollars.

Games that get it right

It’s no surprise then that two most profitable free-to-play games currently in the market have eschewed whale-based monetization. League of Legends from Riot Games and World of Tanks form WarGaming.net decided to focus their game design and monetization efforts with a long-term view of value creation, which prioritized the free players.

Unlike their Moby Dick-obsessed competitors, LoL and WoT are designed to convert a far higher percentage of their players – in some cases ten times as many players as a whale-driven game. Instead of designing the game to optimize for a handful of big spenders, they’ve created economies that allow players to incrementally spend in lockstep with the time they spend in the game, which has resulted in higher retention, effective word-of-mouth virality, and a higher median lifetime value of players.

Both League of Legends and World of Tanks made a conscious decision not to force players into “purchase or else” decisions early in the game. Their pricing and merchandising systems are optimized for consistent small- and medium-sized transactions instead of a handful of big-ticket items. They thoughtfully open the vast majority of the game’s experiences to a free user while making sure value is delivered when a player makes the decision to pay. Thus, a virtuous cycle is born.

Happy free players lower overall acquisition costs, while paying players feel a stronger relative bump for their decision to spend. And all players are compelled to keep playing with one another, as there are plenty of teammates and opponents to fuel the multiplayer and social dynamics of the experience. That leads to higher retention; with higher retention comes higher conversion to paying, higher spending, and ultimately higher profits.

There are challenges in designing games to achieve those goals.  Basing your monetization systems off the game mechanics that generate real fun is the starting place.  Inspiring players to make themselves unique or benevolent in the eyes of fellow players are great incentives — while frustrating them by designing the game to be enjoyable only when you pay is not.  Don’t force failure for free players and make sure the forks you create with opportunities to pay come with a balanced frequency, and not as hard walls.

The opportunity for the free-to-play game space to grow is limitless. With browsers, smart phones, tablets, and Facebook, the digital reach of games is quickly going to reach a number closely approximating the entire population of this planet. The realization of this opportunity is going to be driven by great products that create real value, products that are designed and managed to entertain 100 percent of their players – not just the 0.0004 percent known as whales.

Greg Richardson is the founder and CEO of Rumble Entertainment, a premium free-to-play game company dedicated to create irresistible and beautiful cross-platform multiplayer game experiences for connected gamers.  A 20-year video game industry veteran, Greg was vice president and general manager of EA Partners, senior vice president at Eidos in charge of product development, and an investor with Elevation Partners, where he led the investment in Bioware and Pandemic, and served as chief executive of Bioware/Pandemic through its sale to Electronic Arts.

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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 San Francisco maker of social games for hardcore gamers — known best for its kick-ass recruiting video and hardcore social games like Battle Pirates –is opening an office in Victoria, British Columbia. It has also hired a former Zynga developer Clayton Stark as the general manager for Kixeye Canada. That’s not going to help relations with Zynga, which sued Kixeye and former employee Alan Patmore for trade secret theft after he joined Kixeye.

Kixeye says it is generating record revenue month over month, every month, and it expects to reach “nine digits in revenue” by year end. The new game studio is the third office for Kixeye, in addition to its expansion in Brisbane, Australia.

“Our search for top talent is not limited by international boundaries,” said Kixeye chief executive Will Harbin (pictured). “Victoria is a hotbed of technical talent, and Clayton and his team have aggressive goals to expand Kixeye Canada.”

Stark will lead the efforts set up the studio in his hometown of Victoria. He has more than two decades of experience. He served as chief operating officer at Mercurial Communications, which helped to develop and restart the 8.0 browser for Netscape, and was the chief technology officer and vice president of engineering at Flock, which created “the social browser.” Flock was acquired by Zynga in 2010, and Stark worked at Zynga as director of development.

“Victoria is exploding with engineering talent and is one of the largest tech hubs outside of Silicon Valley, especially for game companies,” said Stark.  “It’s also consistently ranked among the most beautiful cities in the world, and we’re setting up Kixeye Canada right along the inner harbor at Bastion Square. For developers, it doesn’t get any better than working on projects they’re super passionate about, and having an incredible amount of fun while doing it.”

Founded in 2007, Kixeye has more than 300 employees. Meanwhile, Kixeye has hired a general manager from Kabam. Justin Lambros has signed aboard as a Kixeye employee, according to his LinkedIn profile.

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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 big initials at Zynga these days are RMG. That stands for real-money online gambling, and the company just filed for the right to publish such games in the state of Nevada.

Formally, the company filed its “application for a preliminary finding of suitability” with the Nevada Gaming Control Board. The move positions Zynga to offer real-money online games (and, quite possibly, real-money gambling) in the state of Nevada, where it is already legal to play such online games as long as players are inside the state. The prospect of real-money gambling is the only piece of news that lifts Zynga’s stock price these days (up 0.43 percent in after-hours trading), and social casino games have been hot all year.

That’s because Zynga makes the world’s most popular social casino game: Zynga Poker. It makes perhaps a couple of bucks a month per paying user, and a small percentage of players pay money. But with real-money gambling, the stakes are bigger. Players who pay real money to gamble online will spend several hundred dollars a month, according to market surveys. If Zynga can use its poker brand power to tap into the real-money gambling market, it will have a chance to disrupt the online gaming market and lift its sagging profits.

“This filing continues our strategic effort to enter regulated RMG markets in a prudent way,” said Barry Cottle, the chief revenue officer at Zynga, in a statement. “We anticipate that the process will take approximately 12 to 18 months to complete.  As we’ve said previously, the broader U.S. market is an opportunity that’s further out on the horizon based on legislative developments, but we are preparing for a regulated market. We’ve also recently partnered with bwin.party to bring the highest quality real-money gaming experiences to our U.K. players in the first half of 2013.”

Zynga has cut a deal to publish real-money casino games in the United Kingdom in a partnership with real-money online gambling firm bwin.party. In the U.S., online gambling is still illegal in most states, but the federal government is stepping back from enforcing a ban since the Justice Department reevaluated its stance on the matter in Dec. 2011. In the wake of that ruling, Delaware and Nevada approved online gambling laws in their states.

If all states approve online gambling, Zynga could have a bigger market. But the chances of that happening quickly are low. And in Nevada, the Gaming Control Board has a lot of power. It can decide whether or not to grant a gambling license to companies requesting permission. And for years, it has developed the know-how to determine whether companies applying for such permissions are shady or not. If Nevada grants a company a license, it is likely that other states could do so as well. Or so the theory goes.

Approval in Nevada takes an estimated 12 to 18 months.

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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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When developer Zynga’s stock price crashed earlier this year, it took a toll on the larger game industry. The social-title giant’s stock meltdown meant lower payoffs for game deals, and the valuations of game-startup investments dropped accordingly. The topic came up at the recent investor panel at the YetiZen game accelerator.

Sana Choudary (pictured far right), chief executive of Yetizen, moderated the panel, which consisted of (from left to right) Chris Gottschalk, vice president at Blumberg Capital; Jeff Karras, managing director of investments at Sing Tel Innov8; Chris Petrovic, general manager of GameStop Digital Ventures; and Eric Tilenius, executive-in-residence at Scale Venture Partners. Here’s a portion of the Q&A where we asked a question about valuations.

We’ll post a longer Q&A from the discussion later.

GamesBeat: We’re curious to know where you think game-company valuations are going. Was it really true that Zynga and its stock collapse brought down valuations for all game companies and startups? If so, does that make sense to you? And as investors, what do you think of the industry as a category now?

Chris Gottschalk: I can tell you a few things from our early-stage perspective. Clearly Zynga had an impact on the later-stage investments. We see it not only in gaming but in all sectors. The public markets are going to affect what’s happening in some of the later-stage deals.

On the early side, I definitely think there has been a little bit of a pullback in terms what expectations are. A couple of years back, you had people expecting uncapped notes or $20-million-plus capped notes. There were a lot of these big party rounds where people weren’t even meeting the entrepreneur and putting money behind it. Now, you’re seeing a lot less of that. You’re probably not seeing any of that. You’re seeing the caps come back down. You’re seeing people build prototypes and have some engaged user base or at least understand what their target market is. I don’t know that Zynga as a single point has done that. You’ve just seen a lot of that frothiness go away that we were talking about earlier.

Jeff Karras: I agree. It’s a more sober environment around valuation. Valuations get a little bit more skimpy. Still, the top games and the top companies are able to command good valuations. Maybe they’re a little frothy on occasion, but the majority — especially the ones that are less proven — are definitely more sober in terms of turns and valuation.

Chris Petrovic: It’s a great question. Our analysis continues to be more conservative. On a macro level I think valuations are leveling out. But at the same time, you have these diametrically opposite competing forces. There are the outliers like Zynga, with things like A Bit Lucky, where the dollar amount wasn’t a lot, but I guarantee there was a competitive bidding situation there. Where before there were informal metrics like $750,000 or $1 million dollars per engineer, they took it to $1 million dollars per employee. People start running around with that. “Look at this one example. This is what we should be doing.” Then you have the GREEs and DeNAs of the world buying unprofitable companies in the mobile space at huge multiples because they don’t want to have a competitive bidding situation. They have the cash flow that they’re drawing on back home.

Historically, as an acquirer, we face the conundrum of looking at a number of different metrics when we’re thinking about an acquisition. One is public comps, which is other publicly traded companies in your sector. For the longest time, and even today, those public comps have been pulled from Asia. There are very few pure play current-gen or next-gen game companies that are public in the West. All that we have are the console guys. Thankfully, now that Zynga is bringing down the valuation curve… [Laughter] It’s funny, because they never get listed now for social and mobile companies trying to pin valuations on themselves. Where’s Zynga in all this? Gameloft doesn’t even get brought up much anymore, which is interesting.

For acquirers, there are a lot of these forces of inertia that happen. Some are scientific, some are unscientific. Once an idea gains momentum, it’s hard to get these companies that are in the process of being acquired away from that line of thinking. Ultimately, for yourself and your investors, you want to sell at the highest possible bid. There are some folks out there that, first and foremost, want to get a good culture fit for themselves and their employees. They know that they’ll thrive in the long run. But others have a more mercenary outlook. I don’t blame either side. There’s merit to both. It’s a long-winded way of saying that, in general, valuations are leveling off from where they were in the last 12-18 months.

Gottschalk: We do pay attention to public comps, so the switch in public comps has affected our thinking on valuations. Obviously, if a company is growing fast, you can give it a premium to public multiples, but if you stretch your neck out too far as an investor, ahead of the public multiples, there’s more risk. It’s a factor in the equation. And it’s not just games, by the way. The consumer valuations across the board had gotten a little frothy. They’re starting to cool off and you’ll see them cool off more. That doesn’t mean consumer is a bad space. It’s just that some of the valuations got ahead of what was warranted. Once that breaks, you should be able to see the market resume. One twist on that, which I’ll add to this. Typically we will look at revenue comps. The challenge for Zynga, for example, is: What’s the price/earnings ratio when you’re not making earnings? You could argue that some good game companies would trade for a lot more on a price/earnings basis than on a revenue-multiple basis. It goes back to my argument about how it’s nice to make money. You at least have two ways to evaluate.

Petrovic: I don’t see us seeing Ngmoco- or OpenFeint-type deals happening again. Even from those companies that continue to be active here. I mean, both of those acquisitions were for all intents and purposes written down, if not totally off. OpenFeint is closing. The Ngmoco platform that was bought has morphed into something completely different today. They’re hiding that a little bit, but in any case, I don’t think we’re going to see those kinds of things again.

Gottschalk: I think that was a unique time and a unique environment. We definitely won’t be seeing that become as much of a strategy as it was. You had Japanese companies throwing around a ton of cash who had a huge currency advantage at the time. Those acquisitions were almost nothing to them.

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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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Social games were a phenomenon that transformed the way we looked at games, firstly with Facebook, but later also on mobile.  They provided a way for companies like Zynga and OpenFeint to burst onto the scene. But as we know, in recent months Zynga’s share price tumbled, and now Gree has announced that they are turning off the servers for the mobile social game network OpenFeint (which Gree paid $104 million for last year) in mid-December. Does this mean that social gaming has failed? Was this an experiment that went too far?

For a gaming social network to succeed, you need a platform that people would return to anyway; obviously this is where Facebook came in. Instead of having to be online together to share experiences, we can now see updates that have happened while we were offline.  This was combined with server-side stored game data which allowed for new types of ‘asynchronous play’ both on PC and subsequently on mobile. I could perform an action and this could affect your game when you returned to play. This expanded our opportunity scale friendships and to create acquaintance-bonds through play that would be otherwise unsustainable.

To isolate what’s happening with asynchronous play, let’s isolate its simplest form. The Facebook Poke. Its pretty simple when I visit your page I can select the option to “poke” you and this means you get a message saying that I “poked” you.  “So what,” you ask.  Well that “poke” is a transfer of information; it says I thought about you today.  It doesn’t require reciprocation, it’s not demanding, but by responding you are inviting further interactions. But, more profoundly, its meaning is completely independent of the action itself. The meaning of a “poke” is entirely subjective to the basis of the relationship of the two parties.  When I poke my wife or daughter it’s an act of love; when I poke my friend it might be a reminder that we had agreed to go to the pub; when I poke someone who owes me money…

Obviously a poke doesn’t have much longevity or intrinsic value and instead we now have games which can provide context and entertainment.  Visiting my friend’s farm and acting to recover their plants has a beneficial effect on the engagement of both players; as long as that action retains some meaning and mutual value.

So why do these relationships and mechanisms fail to last?

Well, of course, as humans we crave change to retain our interest, but more than that there is something about the relationship between players that we need to take into account.

I find it useful to use interdependence theory to help explain this; the concept was first introduced by Harold Kelley and John Thibaut in 1959 in their book, The Social Psychology of Groups.  It looks at why relationships can have positive outcomes and yet be unstable, while others can be stable despite the unhappiness of its participants.

What does this have to do with social games? Every interaction with other people has an outcome, expectation and a comparison. In a social game, we have an expected outcome for what we get out of playing with those other players, and playing the game reveals whether that is delivered or not.  There are many kinds of outcomes, such as emotional, social, instrumental and opportunity; each of which can have a positive or negative impact on the person affected.

My experience doesn’t just have to be overall positive, it has to exceed my expectations for me to be happy.  However, the stability of the relationship is dependent on my expectations of the alternative options where I might also be happy – such as other games my friends play.

Continuing to play a social game requires that it is both meaningful and beneficial, not just to me as a player, but which I perceive to be better than the alternatives. Players expectations and needs evolve and the game has to adjust or we will lose interest and look elsewhere to satisfy our social needs. When the effort to continue exceeds the perceived outcome, then it’s no surprise we stop playing when something new arrives to tempt us away.

From my experience working on British Telecom’s Wireplay, PlayStation Home and Papaya Mobile, I know that maintaining a social service is a hard thing to do and it is dependent on the lure of the content that it serves.  It’s no surprise to me that many companies have come and gone in the social games space, but there still remains huge potential for when it work. I believe that relying just on content to maintain interest in a social platforms isn’t sustainable and we need to other reasons for our audience to want to return to us.

If we can find those additional reasons players’ expectations will more readily be bested by the ‘outcome’ of using the platform.  More than that if we can achieve a scale of users (like Facebook has) the expectations offered by other platforms will be less appealing and that will bring greater stability.

To find those reasons we need to look at socialization differently.  We need to look at people and their desires and willingness to participate not just raw numbers. We need to look their willingness to engage and how we can turn that into a reason for other players to stay and share experiences. Only then can the platform become as valuable to the developer as the content is to the platform. The trouble is that I don’t think any platform is there yet.

Are we at the end of the line for socialized games?  No, I think we have only just started.

Oscar Clark (@Athanateus) is the evangelist for Everyplay from Applifier.  He has been a project strategist and designer on mobile, online and on console since 1998 with British Telecom’s Wireplay, 3UK and as Home Architect for Sony’s PlayStationHome. Additionally, he has acted as a spokesperson for RealNetworks, Nvidia and Papaya Mobile.

[Image credit: PictureYouth, Flickr]

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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 and Facebook haven’t exactly gotten a divorce, but they’re free to date other partners now.

Social-gaming giant Zynga filed a document with the Securities and Exchange Commission today that says it renegotiated its partnership agreement with Facebook when it comes to publishing games on the social network. Facebook also filed its own 8K filing.

The amended deal is important because of the symbiotic relationship between the two players: the largest social-gaming company depends on the largest social network and vice versa.

Both companies are now free to do more outreach to other partners. The deal reflects the changing conditions in the market in the two years since the companies created their five-year agreement. Much of the momentum in social games has shifted from social networks to mobile, and Zynga wants to be free to pursue its options to take its products to more platforms. On top of that, Zynga’s own Zynga.com is now established, and the company wants to have more flexibility there.

In a statement, Zynga chief revenue officer Barry Cottle said, “Zynga’s mission is to connect the world through games. In order to do this, Zynga is focused on building enduring relationships with consumers across all platforms from Facebook and Zynga.com on the web to tablets and mobile. Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services.”

In after-hours trading, Zynga’s stock price is down 10 percent, while Facebook’s is flat.

In particular, Zynga is no longer required to use Facebook as the official platform for Zynga.com. That means it does not have to use Facebook Credits, the virtual currency issued by Facebook. In Facebook Credits transactions, Facebook takes a hefty 30 percent cut. Zynga could theoretically create its own virtual currency or adopt one from another vendor that takes a smaller cut of transactions. Zynga is no longer required to use Facebook display ads either.

This is a big deal for Zynga, since it will allow it to fully exploit the benefits of creating its own game portal. Now, rather than pay 30 percent to Facebook, Zynga can theoretically keep a much higher profit margin for revenues associated with games published on Zynga.com.

But if Zynga uses Facebook data for Zynga.com games, then it has to abide by the Facebook terms of service. Zynga also has a guarantee: No other developer will get better terms for Facebook-related deals than Zynga. On mobile, Zynga is not required to prompt users to log in with Facebook. And Zynga is not required to put its future real-money gambling games on Facebook alone, as exclusives. If Zynga launches such real-money gambling services, it will make them available on Facebook but be free to put them on other platforms, too.

In return, Facebook gets the promise that Zynga-made games will be made available on Facebook. Facebook is also not prohibited from developing its own games. It’s not clear if Facebook wants to do that, but the restriction is no longer there. Zynga is not obligated to publish any of its third-party games made by external developers on Facebook.

And, also in Facebook’s favor, Zynga is also not allowed to promote its Zynga.com off-Facebook portal within Zynga’s own games that are running on Facebook.

In a statement, Facebook said, “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. We will continue to work with Zynga, just as we do with developers of all sizes, to build great experiences for people playing social games through Facebook. “

And regarding building its own games, Facebook said, “We’re not in the business of building games, and we have no plans to do so. We’re focused on being the platform where games and apps are built.”

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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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That was one of the topics debated at the Social Gambling Conference in London on Friday. The discussion put the real-money online-gambling companies at odds with the makers of non-gambling social casino titles, where users pay for virtual goods (such as poker chips) but are not allowed to cash out their winnings.

The panel, moderated by Stuart Tilly, director of a new group dubbed the Social Gaming Association, produced some fireworks at the first-time summit in London on Friday. Tilly’s group is a new association representing the non-gambling social-casino-game companies.

Jez San, president and founder of real-money gambling firm PKR, said he does not believe that gambling regulators should force social-casino-game enterprises to comply with responsible-gaming regulations.

But San (pictured above in blue on the far left), who spent two decades in the non-gambling video-game business and participated in the real-money gambling industry for the last six years, said that the social-casino-game industry should voluntarily submit itself to its own self-regulation.

“I don’t believe social games should be regulated. But I do believe the providers of the social games should take a more responsible attitude than they are currently taking,” San said.

He said the most important thing is that the social-gaming outfits should allow individuals to impose their own limitations on how much money they can spend in a month. The people behind real-money online gambling experiences must currently do so in order to show they are taking responsibility for the possibility that addicted players might overspend.

San said that he doesn’t want to see a newspaper like the (tabloid) Daily Mail write a profile of a single mother who lost all of her money playing casino-like social pastimes on Facebook. If the industry doesn’t impose its own regulations, it will inevitably face more strict government regulation in the future. If social-game companies (such as Zynga) do not self-regulate, they could make the whole industry look bad when the inevitable addiction problems surface.

“We don’t want to be profiled as having ruined someone’s life or bankrupted a single mother who can’t pay the bills,” San said. “We act in a very responsible manner. We don’t allow minors to play, and we don’t allow the vulnerable to play. The social gaming world doesn’t acknowledge such problems and would like to put its head in the sand and pretend that it’s a free world and people can spend whatever they want.”

Andrew Hughes (pictured left), chief executive of social-casino-title firm AbZorba Games, was on the other side of the discourse.

“There is a lot of debate still to be had,” he said. “I don’t think regulation should happen now. It’s too confusing … First, it is entertainment. You do not have to play. About 98 percent of my gamers never pay a single cent. They can earn chips looking at advertisements. Nobody can take the monetary value out of our game.”

Consumers can self-regulate now, and Hughes said voluntary self-regulation is fine. So in that sense, he agreed with San. But he would not grant that the social-game companies try to get people addicted. He noted that, among paying players of social casino titles, only 7 percent of them ever buy anything.

San said that average revenue per paying person is misleading, given that a small amount of gamers account for a large amount of sales. Hughes returned to the fact that it is clear in his releases that the play is just for fun.

San added, many of the social-game firms will not impose limits because “their job is to find whales” (people who spend a lot of money on social casino efforts, sort of like high rollers in Las Vegas) and then get them addicted.

“Can we keep it to social gaming,” Hughes asked. “We are not talking about social gambling. Social gaming is about a free experience.”

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The power of social games is in their communities. Legacy of a Thousand Suns is about being as social as possible.

The sci-fi massively multiplayer online role-playing game is turning 2-years-old this month. 5th Planet Games first released it in 2010 on Facebook, where it has experienced a particularly high retention rate. It currently has 50,000 monthly users. Meanwhile, Legacy has appeared on Kongregate and Armor Games, where it’s been played over 7 million and 3 million times, respectively.

“These are platforms known for their core audiences,” Robert Winkler, the co-founder and chief executive of 5th Planet, told GamesBeat. Initial discovery on these sites has been a key to the game’s success.

Winkler said Legacy’s main competition on all three platforms is its own fantasy-themed Dawn of the Dragons, an RPG that has over 20 million play sessions on Kongregate, nearly 3 million on Armor Games, and 130,000 monthly users on Facebook. Most people are either loyal to one genre or the other, fantasy or sci-fi, said Winkler.

“Beyond our own games, we track everything that shows up on Kongregate and Armor Games,” he said. “When we see a dip in traffic or revenue, it is usually attributed to new games launching in other genres. This is a positive since we feel like our community recognizes we are producing some of the best RPGs on the market, but it is also a good reminder that we need to stay focused on providing quality, value, and fun.”

A lot of different elements have contributed to the Legacy’s popularity over the past two years, said Winkler. Its narrative complexity, for one, is significant among other text-based RPGs, along with its high-quality artwork.

“Legacy of a Thousand Suns was one of the first titles on Facebook to be triple-A quality,” said Winkler. “We partnered with Concept Art House, an award-winning art studio known for their work with brands like Magic and Warcraft, to level up our visual fidelity.”

Co-op gameplay and community-building features — like raids, alliances, contests, and gifts — continue to engage players. “Our forums are extremely active as well,” said Winkler. “It is a truly ‘social’ social game.”

“Community is what drives Legacy of a Thousand Suns and all of 5th Planet’s games and is the one thing we value more than any other,” he said. “We just wrapped up the second annual Legacy of a Thousand Suns player council. This is where we fly a group of players with varying play styles in to our headquarters and conduct a weekend-long focus group. Once the weekend wraps up, that group of players is then engaged on a daily basis for the rest of the year, and [they] serve as sounding boards and community advocates. Nearly a quarter of our payroll goes toward headcount that has some level of direct interaction with our players, and each game has a dedicated community manager.”

5th Planet is celebrating Legacy’s 2-year anniversary with a month-long celebration that includes weekly world raids, a treasure hunt event, new minizones, a comic-drawing contest, and more.

“It’s a game that continues to evolve, so our players never get bored,” said Winkler. “It’s something you can play for a few minutes here and there or for hours on end, which is what a lot of our players end up doing!”

5th Planet also publishes Clash of the Dragons and Legacy of Heroes on Facebook, Kongregate, Armor Games, and Kabam.

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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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Ding, dong, the witch is dead! Yes, all of you Dorothy fans, there’s a Wizard of Oz game that you can play on Facebook.

Spooky Cool Labs and Warner Bros. Interactive Entertainment are launching The Wizard of Oz on Facebook today as a social game based on the beloved film. You can take a trip down the Yellow Brick World along with Dorothy and Toto, as long as you build the road first. The title is a city-building game with 3D graphics and voice-over narration. It features music from the film, video clips, and animated likenesses for characters. You can spin the world to see it from a different 3D view or look at the world from the top down.

The company bills the game as a next-generation social game on Facebook. The fact that the start-up secured a big brand is a sign that Facebook is growing up as a medium. The social network has a billion users and 251 million monthly active gamers.

“We’re bullish on Facebook,” Joe Kaminkow, the chief executive and founder of Spooky Cool Labs, told GamesBeat. “We think it has broad reach and is a place where players can get enthralled with and engaged with a product. We’ve never had a chance to reach such a large audience with one of our visions for a game.”

In the game, you arrive in Munchkinland right after Dorothy’s house lands on the Wicked Witch of the East. The good witch Glinda shows you how to maneuver through the 3D space and work with the munchkins to build a better Munchkintown. You can pick the munchkins up and drop them on trees to get them to start chopping. Then you can use the wood to construct buildings and create the Yellow Brick Road. Your ultimate destination is the Emerald City. On the way, you’ll run into characters from the Land of Oz, and you’ll have to fend of the Wicket Witch of the West and her winged monkeys.

The Wizard of Oz is of course an enormously valuable license. Warner Bros. gave it to Chicago-based Spooky Cool Labs because it was founded by well-known game designers Joe Kaminkow and Larry DeMar, who have both created some of the most popular games in arcade, pinball, and slots.

“We earned their trust and treated their brand with the utmost respect,” said Kaminkow.

They got their start working in the coin-operated arcade business. DeMar was the partner of Eugene Jarvis, the creator of the classic arcade game Robotron 2084, and Kaminkow began working DeMar at Williams, one of the original arcade game companies.

“It’s a city-building game that makes use of 3D,” said Kaminkow. “You have to marshal the munchkins and build your virtual economy to get the bricks to build the Yellow Brick Road.”

The team has been working on the Wizard of Oz game for almost two years. That’s an unheard of amount of time for a social game, but the title is very ambitious and features 3D graphics based on the Unity 3D game engine. You can click on a munchkin and view “the munchkin cam,” where you can see the world from the view of the users. Kaminkow said he is impressed with the results he got from Unity. The team has 70 people. More unannounced games are in the works.

“We took a bigger bite of the apple than we should have, but we wanted to redefine this space, graphically and in gameplay,” said Kaminkow. “Our game is meant to be much more engaging and personal.”

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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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Tel Aviv, Israel-based Plarium launched its first games in 2009 and has focused on serving hardcore gamers in the popular medieval fantasy genre. In Stormfall, players build a castle and form alliances with other players to defend the throne of a fallen empire. It’s a real-time strategy title with cool 2D graphics. Players can battle each other, trade with friends, and go on raids with fellow lords. They also acquire food, gold, and iron to construct buildings and build armies.

Normally, social game companies target casual audiences such as older women on Facebook, which has a billion users and 251 million monthly active gamers. But Sean Ryan, the director of game partnerships at the social networking service, said last week that Facebook gamers are becoming more diverse and now appreciate hardcore titles such as Stormfall. He pointed to Stormfall as a beautiful-looking game that may not attract the biggest audience but would likely monetize anyway.

Plarium has more than 12 million monthly active users for its games across Facebook, Google+, Vkontakte, Odnoklassniki, and Mail.ru. Ryan also noted that Israel is becoming a hotbed for social gaming, as more than 450 developers showed up at a recent social game conference.

“Following the success of our popular Facebook games Total Domination and Pirates: Tides of Fortune, Plarium is focused on delivering the next explosive title with the launch of Stormfall: Age of War,” said Avi Shalel, Plarium’s chief executive. “The story of Stormfall is one that will appeal to hardcore gamers. We’re eager to introduce our fans to the world of kingdoms, magic, and more with this exciting title.”

Stormfall: Age of War is available in English, French, Spanish, Italian, German, Russian, and Turkish. The company has more than 250 employees.

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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 San Francisco-based Betable announced today that it has signed partnerships with Slingo, Digital Chocolate, and Murka Games. The news comes two days after Big Fish Games announced that it had launched a real-money gambling version of its Big Fish Casino game in the United Kingdom.

Betable makes it easy for companies to offer real-money gambling, helping them get around years of complicated legal and technical challenges. It offers a license so that they can offer real-money gambling to players on mobile devices or the web, provided the players are in territories where real-money gambling is legal.

“The real-money gaming space is moving faster than anyone could have predicted, and it’s exciting to have industry leaders implementing real money into their games through Betable,” said Christopher Griffin, the founder and chief executive of Betable. “Unlike recently announced IP licensing partnerships, Betable’s developers have the unique advantage of launching their own real-money games that they control. The freedom that Betable provides will be the backbone for innovation in real-money gaming and will allow developers to do what they do best: build great games and acquire users.”

Slingo makes a slots-bingo combination game that is a hit on both the web and in casinos. CEO Rich Roberts said, “Slingo was the first social game to successfully move to real-money wagering in casinos more than 12 years ago. Our agreement with Betable puts us again at the forefront of iGaming by offering immediate engagement with the more than 30 million users outside the U.S. who have played Slingo on Facebook. Most notably, 20 percent of the players who have interacted with Slingo have wagered around the brand, and Betable will enable us to maximize that dynamic.”

“We are already seeing very positive signs that betting mechanics will play a major role in the future success of our social games and Betable lets us get out ahead of the pack,” said Jason Loia, Chief Operating Officer of Digital Chocolate. “The ability to control our own development without needing to get a gambling license made a partnership with Betable the best fit for our real-money gaming strategy.”

“With more than 20 million monthly active users playing Murka’s casino-style games, we know how hungry players are for real-money games,” said Max Polyakov, the CEO of Murka Games. “Partnering with Betable is the best way for us to implement real-money play into future blockbuster titles, as well as existing ones including Slots Journey. We believe that our partnership with Betable will give Murka’s games the best average revenue per user in the industry.”

Founded in 2011, Betable’s investors include Bullpen Capital, CrunchFund, FF Angel LLC, Greylock Discovery Fund, Morado Ventures, Start Fund/DST, Tekton Ventures, True Ventures, Venture51 and a bunch of individual investors.

Here’s how we described Betable in a previous story:

In the U.K., Betable has a license to operate online gambling on a worldwide basis. It has the technology to verify where a user is, and it has antifraud technology that can overcome someone who “spoofs” their Internet protocol address to fake their location. It does so by checking into a variety of records, such as credit reports, bank accounts with real addresses, and voting records. If the location is spoofed, it rejects the user for real-money gambling. But if the user passes and it is legal to gamble in their actual location, Betable permits the gambling to take place.

Here’s one of the clever tricks in dividing the gambling process: The developer creates and builds the front end of the game. Betable’s servers handle the back-end processing. The user sees the front end, such as a slot machine. They bet money and play the slot machine. The game turns over this information to Betable, which then calculates the result of the slot machine play. If the user wins, Betable informs the game and credits their account. If the user loses, Betable deducts money from the their account. Betable handles the payment processing by itself, Griffin said.

This makes Betable’s platform universal. Any game can be plugged into its API and converted into a real-money gambling game. Betable can handle all sorts of games, including bingo, card games, and slots. The game developer simply tells Betable what type of game it has built, and then Betable spits out the right result. Betable can also create new kinds of gambling games through custom mechanics. An example: In a horse-racing game, you could pay real money for virtual goods to raise a proper horse. Then you could enter that horse in competitions and bet real money it would win. If it does, you collect real gambling winnings.

The significance of Betable’s system is huge. As of now, no other company has both a license and the technology to help the entire social casino game industry convert its titles from virtual currency games into real-money gambling games. The conversion process is painless, and the game companies can use Betable to stay within the constraints of territorial gambling laws.

Here’s where the economics matter: Typical social game companies make 10 cents to 20 cents on average per paying user in a month. For Zynga, about 2 percent of its users pay real money for virtual goods, and those paying users spend around a couple of bucks a month. That is why Zynga needs a massive number of users to make decent profits. But real-money gambling players spend $99 to $200 a month on poker games, according to market researcher Playtech. The lifetime value of one of these poker players is about $1,800. That’s a huge difference.

If the social casino game companies can convert some of their players to real-money gambling — in the areas where it is legal — then they could make a huge windfall. Zynga is already a billion-dollar company with virtual goods revenue. If it converted to real money gambling, its revenues could shoot upward.

[Image credits: Fellow Gamblers, Betable]

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