Last week’s Social Casino Summit in San Francisco highlighted what appears to be a very narrow and crazy part of the game market: social casino games. But this sector has more than 100 startups and big companies fighting with each other, and it is one of the most lucrative, fast-growing, and disruptive segments of gaming. In the discussion that follows, we hope you’ll see why.

I moderated a debate about the blurring lines between social casino games, where players pay real money for virtual casino chips that cannot be cashed out, and online gambling, where you can bet, lose, and win real money. The industries are headed for a collision, and some think that regulators will have to sort through thorny issues that result from the conflict. What happens, for instance, when consumers become confused over what is a real-money gambling game and what is not? Regulators may very well reach different conclusions on a state by state or region by region basis.

Our panelists in this debate included Josh Grant (pictured with coffee cup), the head of business development at RockYou. Jill Schneiderman, the vice president of games for Social Gaming Network (SGN); Charles Harper, the vice president of business development for IGT’s DoubleDown Casino; Jez San (in white shirt), the founder of PKR; Sumit Gupta, the chief executive officer of Bash Gaming; and Raf Keustermans (red third), the CEO of London-based Plumbee. (Not pictured is Ben Dale, the international development director at U.K.-based sports-betting firm Ladbrokes.)

Here is part one of our conversation. It has been edited. I’ve moved a section identifying each speaker to the bottom of the story.

Dean Takahashi: Let’s jump right into something that can get the blood flowing here. Jez, should social gaming be regulated? [laughter]

Jez San: Very good question. I personally believe — this is only a personal opinion — that for the social gaming industry to avoid regulation, it needs to be seen to be taking more social responsibility. There are a lot of issues that people are raising, particularly in the press, that the industry could address without having to be regulated. In the regulated real-money world, games have to be fair. They have to be purely random. They have to protect the players from themselves. They have to be very socially responsible. A priority is social responsibility.

So should social gaming companies follow some of those steps to avoid being regulated? Because if they let it be a free-for-all, there are going to be bad actors out there that are going to take the piss.

Raf Keustermans: I disagree. I think the main job for a game studio is to create a fun experience. This is entertainment. This is people wanting to have a good time. The main job of a game studio is to make something that lets people have a good time. If that means that part of what you’re doing is to create a game that isn’t 100 percent the same as a real-money gambling game — it has a different mode of gameplay — as long as players come away from that game thinking, “I had a really fun 40 minutes,” that’s the only responsibility of a game studio, to create a fun experience. It’s not the responsibility of a game studio to create something which is 100 percent the same as the real-money gambling experience.

Sumit Gupta: Let’s look at what happened in Japan a few years back. It’s not related to casino, but they had a mechanic called “complete gacha,” which essentially used some kind of game mechanics to make users spend and spend.

Takahashi: Complete gacha was like a slot machine. Can you explain it more?

Gupta: It got out of hand, and the government intervened.

Keustermans: It was basically a collection mechanic. You want to complete your collection, but there’s quite a few rare items, so you have to spend loads and loads of money on buying more and more collectibles. People were chasing a jackpot because if you managed to complete your collection, you could be super powerful. The result was that a lot of users spent meaningful amounts of money chasing it. As Sumit said, it got a bit out of hand.

Takahashi: The Japanese government intervened, and stock prices on some of these companies fell hard.

Gupta: The point is that casino games do not necessarily have the highest level of paying users. There are many other games, other game genres, where people are spending more money than in casino games. Who is leading this move to regulation? It’s interesting to see. Is it the entire industry that’s going to get regulated because this kind of thing also happened in other genres in Japan? Or is it just going to happen to casino games because we’re talking about — in the future — hopefully merging online and offline and opening up online casinos in the U.S. and creating users who, because they’re used to playing casino games on the social side of things, will spend more money that ends up in a lot of different hands?

Takahashi: I think there is a safe solution that they came up with where there is a form of gacha that’s okay. What did they wind up with there? The components that drove players to spend so much money were what they got rid of, some of the elements of chance.

Keustermans: They limited the amount of money underage players could spend in those games. This is specifically in Japan and Korea, but if users under 18 still spend more, then the game company has to pay them back, basically. That was part of the solution as well.

Josh Grant: To continue on the point, the examples that we hear about in the press — the one in Japan, and there was an action in Florida earlier this week to shut down these Internet cafes that providers operate fraudulently, claiming they were contributing money to veterans’ charities when in fact they were not — I feel like a lot of the big case studies and alarm-bell warnings that we see really amount to fraud. They’re taking advantage of underage kids. They’re doing things that are clearly wrong outside of the casino mechanic or the gaming mechanic.

Takahashi: And there are already laws against these things.

Grant: Right, and perpetrators should be punished, and that’s why we have governments and state attorneys general. You could have a separate discussion around game mechanics and the extent to which they touch on certain people’s competitive or collecting or decorating behavior. That exists in all games. RockYou has had a zoo-animal collecting game on Facebook for several years, and we have VIPs who have spent more money than whales [big spenders or high-rollers] in casinos. It’s two separate issues, but obviously if people are breaking the law — if they’re misleading through their marketing or delivering an unsafe product or selling a mature product to 13-year-olds — those are clearly wrong.

San: But in the real-money world, regulations protect the vulnerable. The vulnerable aren’t always children or problem gamblers. They’re also just regular people who overspend their intentions. In the real-money world, you can voluntarily choose your spending limit, and then when you hit it, you don’t go above it. Your whales in the social-gaming world, they might actually unintentionally spend a lot. If you empower them with tools so they can set their own limits, maybe the regulators wouldn’t worry about you. But the regulators probably do worry about you because you don’t know who your whales are.

Takahashi: What if your business model is driven by the whales, though?

San: If your whales are rich, it doesn’t really matter. But if the whale is some starving housewife somewhere, you’re going to be in the headlines.

Keustermans: The problem here is that there’s a lot of anecdotal data. Jez has one concern, someone else has another concern, but nobody really knows anything. There’s no data showing that there is a problem, that people are overspending.

San: You still get headlines. You still get the Daily Mail saying, “This kid spend 1,000 pounds on his iPad without his parents knowing.”

Gupta: But now you’re going from casino games to social gaming. From here, where do we stop? Should we stop people from creating an account?

San: We stop people drinking who shouldn’t drink.

Pages: 1 2 3 4

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.”

Pages: 1 2

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

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

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

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

What Zynga needs to do is expand its franchise strategy.

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

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

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

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

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

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

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

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

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

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

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

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

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

This story originally appeared on CNet.

---

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!

---

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

This week, EA is reportedly working with Fox on a Battlefield: Bad Company TV series, Valve wants gamers to help playstest unreleased products, Kixeye opens up about last week’s racism allegations, and OnLive’s assets sold for a mere $4.8 million.

You’ll also find reviews for Dishonored, XCOM: Enemy Unknown, Forza Horizon, and Nights: Into Dreams HD.

News:

• The DeanBeat: The pace of disruption from physical to digital gaming
• Xbox Live tells us who won the vice presidential debate
• Temple Run developer has figured out how to make money on Android
• Rocket-powered robots to shoot other robots in Hawken beta this month
• Block by block: How Roblox is building one of gaming’s biggest platforms
• Linden Lab grabs its second life with creativity games
• How big is League of Legends? 12M daily users play for 1B hours each month and 75 die every second (infographic)
• September NPD: Borderlands 2 nearly tops best-seller list as overall sales take another dive
• Sony refreshes interface for its entertainment network
• Amazon gets Assassin’s Creed III Encyclopedia Edition for PlayStation 3 and Xbox 360
• Streaming tech company T5 claims Sony’s Gaikai infringes on its patents
• The first Borderlands 2 expansion is filled with booty — date and price announced
• Both ToeJam & Earl games headed to PlayStation Network and Xbox Live Arcade in November
• Valve wants your help playtesting unreleased games and hardware prototypes
• ‘Fight Club’ director producing Halo 4 launch trailer
• Wing Commander creator Chris Roberts returns to gaming with Star Citizen online game universe
• With nine brains, this hydra-like Tilera chip is a multitasking wizard
• OnLive’s assets were sold for only $4.8 million
• Three-day badges are sold out for the PAX East gaming convention
• Windows 8 now defaults to real currency, but Xbox 360 still uses Microsoft Points
• The exodus continues: Zynga Poker general manager quits
• D&D artist casts ‘resurrect’ spell on old art, with help from Kickstarter
• Fanhood enters the sports-betting game fray on Facebook (exclusive)
• Updated: Developer Backbone Entertainment lays off workers
• Rovio: Star Wars Angry Birds ‘is the best Angry Birds we’ve ever done’
• EA reportedly working with Fox to develop Battlefield: Bad Company TV series
• 2012 game investments: Number of deals is up, but average raised per startup is dropping
• Sony sues Kevin Butler actor (update: Sony comments)

Mobile News:

• 23 percent of app gamers play only on mobile devices
• Heyzap launches a ‘play with friends’ feature for multiplayer mobile games
• He-Man game for iOS in the works
• Stunning mobile game Contre Jour goes multitouch in HTML5 with Microsoft’s help
• Moga mobile game controller to debut in 7,000 stores (video)
• AOL remakes Games.com for social-mobile era
• Sega brings Crazy Taxi to iOS

Reviews:

• The open road meets dubstep-laced stereotypes in Forza Horizon (review)
• Threeview: A critic, an analyst, and an academic review Resident Evil 6
• PlayStation 3 Super Slim isn’t worth the upgrade (review)
• Naughty Bear: Panic in Paradise is a dead bear’s party that’s not much fun
• Threeview: A critic, an analyst, and an academic review Bad Piggies
• Nights into Dreams HD is too brutally difficult to overcome nostalgia (review)
• XCOM: Enemy Unknown is peerless in modern game design (review)
• Dishonored lets you take sweet, sweet revenge (review)

Previews:

• Vehicles are the real stars in the chaotic world of team-shooter Ravaged (hands-on preview)
• EA invests big in Medal of Honor: Warfighter multiplayer combat (hands-on preview)
• Far Cry 3 balances an unforgettable narrative with an open world (hands-on preview)

Interviews:

• A successor to Nintendo Power magazine has less than 8 hours left to raise $5k on Kickstarter (interview) (update)
• Medal of Honor: Warfighter focuses on buddies and international warriors to boost multiplayer audience (interview)
• Gaming luminary Trip Hawkins talks about a $400 mouse, his new gig, and gestural controls (interview)
• Kixeye CEO says his company is aggressive, but not racist (exclusive interview)
• Dead or Alive 5 director discusses Hollywood, eSports, and tips for beginners (interview)

Pitch us in one Tweet:

• The top 10 games of ‘Pitch us in one Tweet’ (#1: Sixty Second Shooter)

Pieces of Flair:

• The weird and bizarre side of 25 years of Street Fighter
• Game industry pros confess their piles of shame
• Cool concept art for Chris Roberts’ Star Citizen online game (art gallery)
• Star Citizen features stunning sci-fi visuals (screenshot gallery)
• Borderlands 2′s Mechromancer: A girlfriend plays ‘girlfriend mode,’ boyfriend plays ‘boyfriend mode’
• The best of Skyrim mods #3: Super Skyrim Bros.
• Nonlethal and undetected: 10 essential tips & tricks to mastering Dishonored
• GamesBeat’s massive Street Fighter tournament: Decide who moves on from Division 1
• Gaming art for your Twitter header (Part 7: Consoles)
• Gaming art for your Twitter header (Part 6: Retro arcade)
• Gaming art for your Twitter header (Part 5: Mobile)

---

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!

---

As Zynga’s financial situation continues to deteriorate, its executive in charge of its poker game becomes the latest employee to walk out the door.

Zynga Poker general manager Laurence “Lo” Toney updated his LinkedIn page to confirmed he is no longer working at the social-gaming giant. This news comes on the heels of several other key exits from Zynga as well as a falling share price due to players slowly draining out of its FarmVille and CityVille games on Facebook.

Zynga Poker is still a bright spot on the developer’s financial ledger. On Google’s Android Play Store, Zynga Poker is the sixth highest-grossing game. It has investors excited at the prospect of Zynga’s real-money-gambling initiative, which would bring a huge stream of revenue into the successful game. Toney’s departure could dampen that excitement.

“My departure is less about Zynga and more about the vast number of opportunities that currently exist in the Valley,” Toney told All Things D. “I have been approached by several organization to lead teams and companies that I find exciting and compelling. It is the right time for me in my career to move on.”

The San Francisco-based social-gaming company is in a transitional period. It’s attempting to pull its brand out of a Facebook-dependent model into a more diversified plan that involves a deeper investment in mobile and its own Zynga.com platform.

In an open letter last week, Zynga chief executive officer Mark Pincus announced the company would miss its financial projections for its fiscal year. That led to a 16-point decline in its share price. In the Pincus letter, the CEO recommitted his company to investing in casino-style games.

Zynga shares sit at $2.33 today, which is down from a 30-day high of $3.25.

---

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!

---

IGT made a few jaws drop wide open when it bought DoubleDown Interactive, a social casino game publisher, for $500 million in cash in January.

Following short on the heels of a U.S. Department of Justice decision in December that legalized online gambling with certain restrictions, the acquisition of DoubleDown was a triggering event for the investment craze in social casino games this year. As legal barriers between land-based casinos, online gambling firms, and social casino games melt away, investors are pouring money into startups like Playsino, Blitzoo, and Betable on the assumption that legalization will lead to huge profits.

But Glenn Walcott, president of DoubleDown, says that social casino games are a good business in their own right. They now account for about 13 percent of game playing on Facebook, which has 955 million monthly active users (MAU), about half of them game players.

But the market could turn out to be a bloody one. Big players like Zynga and rival Playtika-Caesars are out to steal audiences interested in social casino games. The card sharks are everywhere. But DoubleDown has a full suite of games within a single app, and it has 5.4 million monthly active users who are highly engaged. Three percent of them spend real money on virtual casino chips, and that’s enough to make a good business for DoubleDown.

We caught up with Walcott at the recent Casual Connect game conference in Seattle, where social casino games were a hot topic. Here’s an edited transcript of our interview.

GamesBeat: You guys are an interesting new player on the scene here. You have some history in this social casino game market that other people don’t.

Glenn Walcott: Yeah. It’s funny. People look at us and think — relative to the world of gaming, the Facebook world — it seems like we’re dinosaurs.

GamesBeat: How did you get started on Facebook?

Walcott: The three founders of the company had another game company before this. It was generally in the sweepstakes category. It was very successful. It printed money.

But they said, this is not what we want to do with the rest of our lives. They were spending time playing games on Facebook, especially Zynga Poker. They thought that it would be awesome to build a great casino-style game. They liked that style of game. But the problem with those games is: How do you monetize that style of game? It’s not like the download world, where there’s a great product that you can download for $5 to $20 dollars.

But Zynga was the first company to come out with a virtual currency for a casino-style game. It became so obvious. You just spend money to buy more chips. So they said, let’s go out there and do it.

We didn’t want to go right after Zynga Poker. That was the 800-pound gorilla. Zynga had a great product. Our founders said, let’s come out with a product that nobody else has come out with. Let’s do blackjack.

They came out with blackjack with a multiplayer engine because multiplayer is very difficult to build. That provides a major barrier to entry.

So we came out with blackjack, which launched in March of 2010. After that was successful, we moved on to another game that we liked, which was roulette. We launched a roulette game in the summer. Later that summer, we launched three slot games as well. So now we were on our way to really building a casino. We started ramping up the marketing of it on Facebook. We realized that our marketing dollars paid for themselves in about a month, which is a great return-on-investment (ROI) on a marketing investment. At that point in time, around October of 2010, we became a break-even company. We had eight people at the time.

Then we decided, hey, let’s go on a tear. Let’s think big. Let’s make this a really big company. We went on a hiring spree and spent tons of money on marketing. We had a product that monetized well. The casino-style genre monetizes well on Facebook. And we understand, anecdotally anyway, that we monetize very well within the casino genre. Because of that, our marketing dollars have been able to go further than many companies’ have.

Fortunately we’ve done a great job at continuing to launch innovative new products, all within the casino suite, and we’ve done a great job with the marketing to understand who our demo is and how to go after them. It’s not just acquisition marketing, but…how can we make sure that we get in front of people from a retention perspective? How do we continue to provide unique and incredible content to our customers? That’s the way we believe we’re going to retain them.

One of the things that’s unique about the DoubleDown Casino app versus many other apps that are out on Facebook is that we have one application, the Casino. It’s the only one. Whereas all these other companies — Zynga, Electronic Arts, other big companies — have multiple apps.

Every game, as you know, has a life cycle to it. It’s very successful for maybe up to three months of that life cycle, then it starts to go down, and you have to try to convert those users to another one of your applications. When you’re doing that, you hit another barrier to entry. You have to get someone to click an “allow” button to get access to that game. They have to give out more information. That’s just another reason for people to say no.

We’re just accumulating all these games into one spot, and we’ve found it to be very successful. It’s funny to us that we’re unique and that most people don’t like building the full casino. They’re just building blackjack or poker or slots, and if they do have other games, they’re putting them out as a different application. That’s one of the things we think has differentiated us.

Pages: 1 2 3 4 5

Mark Pincus, the chief executive of Zynga, said in a conference call with analysts today that the company will launch its first real-money online gambling poker game in the first half of 2013. The game will likely be launched outside the U.S., since real-money online gambling is still illegal in the vast majority of states.

There are regulatory roadblocks in many countries, but Europe is rather open. Pincus said the launch will be subject to online gambling regulatory reviews. Zynga’s non-real-money poker game, Zynga Poker, accounted for 18 percent of revenue. In that game, users purchase poker chips with real money, but they cannot cash out any winnings.

The announcement on the earnings conference call with analysts confirms speculation that Zynga has big plans to cash in on the lucrative real-money online gambling market. While 2 or 3 percent of Zynga’s users spend money ($2 or $3 per user per month) in social casino games, online gambling is much more lucrative. Online gambling revenues often reach $300 per paying user per month.

In the U.S., new hope arose for real-money online gambling in December, when the Justice Department ruled that online poker and other skill-based games were not considered illegal as long as they were specifically legalized state by state. Nevada has legalized online real-money gambling, and other states are moving to do the same. Meanwhile, Zynga can likely operate real-money online gambling in other territories where it is legal, and then wait for legalization in the U.S.

Zynga’s stock price rose past $15 a share based on the rumors around real-money online gambling. But today, since Zynga missed its earnings target, investors don’t seem to care. The stock is down more than 36 percent in after-hours trading.

When asked about the real-money gambling opportunity and other avenues for growth, Pincus said that mobile games are a big opportunity. He said the first real-money gambling products are ready and will be released in markets where it is legal, subject to getting licensing. The company does not currently have plans for that in the U.S. because it is not legal.

---

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!

---

Those of us who follow video games know that a mind-boggling number of people play Zygna titles daily. But the breakdown of player stats shows that the social-game developer not only has a supersized pool of players but likely gobbles up huge hunks of the world’s productivity each day.

Here’s the breakdown for several of Zygna’s most popular games.

Zygna Poker:

• Has 33.8 million active players (per month). To put this into context: Throw in 4 million more people and you have the population of California in 2010.
• Has 61 million likes on Facebook. That’s up from 51 million likes from Inside Facebook’s Fall 2011 list of the 25 most-liked Facebook pages. The only page with more likes? Facebook itself.
• Sees gamers play 55 million hands daily.
• “Pays out” 16 trillion in chips daily. If each chip represents a dollar, that pays off the U.S. national debt in…less than a day, with a little more than 200 billion chips to spare.

Zynga Slingo:

• Has seen players make 23 billion spins since its February debut.
• Has “paid out” more than 2.2 trillion in chips.

Zynga Bingo:

• Has seen users play 368 million bingo cards since its February debut.
• Has had 69 million “bingos” called.
• Has 10 million rounds of bingo played daily.

Bubble Safari:

• Boasts of more than 6 million daily players.
• Has seen players pop 115 billion bubbles since its May debut.
• Has had users share more than 24 million bubbles.
• Has had 260 million on-fire moments.

Source: Zynga

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

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

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

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

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

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

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

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

GamesBeat 2012 is VentureBeat’s fourth annual conference on disruption in the video game market. This year we’re calling on speakers from the hottest mobile, social, PC, and console companies to debate new ways to stay on pace with changing consumer tastes and platforms. Join 500+ execs, investors, analysts, entrepreneurs, and press as we explore the gaming industry’s latest trends and newest monetization opportunities. Our top speakers include Mark Pincus, CEO of Zynga. The event takes place July 10-11 in San Francisco, and you can get your tickets here.

---

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!

---

Ever since the Justice Department opened the door to the legalization of online gambling, the leading creators of social games are feeling increasingly lucky. PopCap Games just launched Lucky Gem Casino with a collection of seven slot machines themed after its brands such as Bejeweled and Zuma. It marks the entry of the Electronic Arts subsidiary into the increasingly active casino game market.

Leading Facebook game publisher Zynga is adding Bingo and Slingo to its Zynga Casino family, which already features the most successful Facebook Poker game with more than 30 million active monthly users. Traditional gambling companies are quickly moving into the market as well. In January, slot machine maker International Game Technology acquired Facebook casino game publisher Double Down for $500 million.

The current crop of luck-based Facebook games are legal in the US because there is no way to cash out the virtual earnings. In Lucky Gem Casino players can purchase additional coins for real money, using the Facebook Credits system. But even if they hit the jackpot, payouts occur only in virtual currency and can’t be converted back into cash.

The big prize for social game makers could arrive when more states follow Nevada’s example and legalize online gambling, a move made possible after a Justice Department ruling in December that allows online betting as long as it does not involve sports. Companies who have already gathered large player communities could see revenue boosts if social game platforms allow money payouts.

Though the initial release version is limited to slot machines, PopCap pledged “to evolve Lucky Gem Casino to enhance the experience, add more games [and] community features” — which sounds a lot like the ideas behind Zynga Casino. PopCap VP Dennis Ryan also promises they will be “enlivening traditional casino games with our franchises,” as seen in the Bejeweled Spin slot machine. All of a sudden, a Plants vs. Zombies poker table doesn’t seem quite such a far-fetched idea.

---

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!

---

Zynga is the most recognizable name in social gaming. Facebook members and iPhone owners alike have seen Zynga’s games continuously rise and fall from the top of the charts over the past few years, and with CastleVille’s launch earlier this month, it is unlikely that will change any time soon. The company is likely to go public soon and raise a ton of money, so we thought we would show this primer on Zynga’s social games so everyone can see what the fuss is all about. These simple, time-consuming titles have taken the  world by storm, bringing in hundreds of millions of users internationally since Zynga’s beginning in 2007.

CastleVille

Let’s begin with the most recent, and fastest growing, Zynga game – CastleVille, released on November 14, 2011. CastleVille follows closely in the footsteps of the other graphical ‘Ville games, focusing on maintaining a kingdom while fighting off monsters called Beasties and exploring the overwhelming Gloom that has swept over the land. The only way to advance into the Gloom is by increasing your Castle Level, which requires actions such as building protective walls. As your character levels up, more buildings, tools and perks become available.

Given its medieval oeuvre, CastleVille feels a little more like an RPG than previous outings, which might draw in some of the social game detractors and those who have tired of the repetitive formula of Zynga’s recent games. CastleVille aims to be yet another resounding success for the prolific company, and as we have reported previously, this title has surpassed CityVille as the fastest growing launch for a Zynga game yet. As of Dec. 12,  CastleVille has 30 million monthly active users on Facebook, according to AppData.

Mafia Wars 2

If any of the Zynga Facebook games warranted a sequel, it had to be Mafia Wars. Mafia Wars 2 launched on October 10th, and this follow-up to one of the most infamous of Zynga’s arsenal of games completely overhauls the text- and menu-based original to keep it in line with the current generation of graphics and combat-fueled ‘Ville games. Of course, the sentiment is the same: make money, expand your turf, earn street cred and don’t get shot (too much). The Bone Yard is a nice addition for those feeling the need to take out their aggression on tiny avatars of other players.

The recent Zynga games (like many of the older Zynga games) have a specific formula to them, which might be why a game about gangsters feels strikingly similar to a game about medieval kingdoms and another game about a burgeoning empire on a group of islands. Regardless, Mafia Wars 2 is still bringing in over 11.3 million users a month, hanging in there as one of Zynga’s 10 most played games on Facebook.

Empires & Allies

Empires & Allies is one of the first of the genre-specific Facebook games by Zynga, and was released on June 1 of this year. It follows in the footsteps of CityVille and FarmVille in terms of resource management, but the story and combat are reminiscent of real-time strategy games. Players must lead an army against the villainous Raven to regain the glory of their nation. You are initially given a small island in which to militarize and begin your siege on the enemy, but expansion is encouraged as more islands open up. It’s the first real Zynga game where combat is the core game mechanic. But the cartoon style is meant to appeal to more than hardcore gamers.

This military-centric ‘Ville also offers a relatively robust player vs. player option for those looking to show off their impressive armies. You can choose to invade other players’ islands in order to take over some of their production and gain extra cash. Empires & Allies maintains 18.2 million members, all of whom can’t help but continue the battle.

CityVille

Happy birthday to Zynga’s CityVille. Released on Dec. 2, 2010, the title is Zynga’s most popular game, consistently bringing in the most users of any Facebook game. In CityVille, players start off with a small plot of land to populate with houses and farms, growing in level and collecting rent until they can expand their land and their city alike. As you can tell from the screen above, investment in CityVille certainly pays off visually, with sweeping skyscrapers and crowded streets covering the terrain.

This socialized SimCity might not have quite as many gameplay elements as Empires & Allies or CastleVille, but the scope of progression and the grandeur of the cities has clearly grasped millions of players and refuses to let go. Even a full year after its release, CityVille receives over 49.7 million players every month. In other words, this is the biggest Facebook game of all time, and that title won’t be wrested from CityVille’s hands easily.

The Pioneer Trail (FrontierVille)

Another ‘Ville in the vein of FarmVille, FrontierVille, released on June 9, 2010, plops players in the midst of the Old West, tasked with fending for themselves among the wilderness. If you weren’t paying close enough attention, you might have mistaken this for FarmVille with a slightly anachronistic paint job, and you wouldn’t be too far off. Players farm, plant crops, raise animals, and basically complete FarmVille tasks in a new setting.

Lo and behold, over a year after its launch, Zynga decided to revamp FrontierVille with a new plot, new gameplay elements, and even a new name. The Pioneer Trail was born. This time, although the core FarmVille mechanics remain for those who prefer the Wild West to a modern farm, there is a fully fleshed out adventure players can embark on with three friends (NPCs or other players). This mode breaks the mold of Zynga’s other social games, with cutscenes, non-player characters, and even an ending, but it doesn’t stray too far from its roots in terms of actual gameplay. The Pioneer Trail is still inhabited by over 5.6 million monthly users.

Words With Friends

Possibly usurping the Wars and the ‘Villes as the most recognizable Zynga property, Words With Friends was not actually designed by the company. Newtoy, Inc. was bought by Zynga after the release of both Chess With Friends and Words With Friends, released in July 2009. But Words fits rather well here in the middle of rundown considering Zynga’s very first title, Zynga Poker. Zynga’s acquisition of the With Friends series complements their original poker title perfectly, even more so now that Zynga Casino is on the way.

Words With Friends is basically online Scrabble with fantastic Facebook integration and simple asynchronous gameplay. Players can start a game with a random opponent or with a friend, either by username or Facebook handle. The game can be played at whatever pace the players choose, and multiple games can be played at once. The game still brings in over 12.3 million users a month. Earlier this year, Zynga With Friends (formerly Newtoy, Inc.) released their third title Hanging With Friends, another iOS success.

FarmVille

If FarmVille succeeded in anything (other than making gobs of cash), it helped break down the wall between gamers and non-gamers. Nearly everyone with a Facebook account planted some corn and raised a few chickens since FarmVille’s release on June 19, 2009, regardless of gender or age. Plus, the basic farming mechanics of FarmVille have appeared in several of the more recent Zynga games, further proving the basic formula’s longevity. FarmVille was Zynga’s first break0ut hit.

FarmVille might be the most simplistic of the ‘Villes. Players own a small farm in which they must plant crops, raise animals…and that’s pretty much it. As players complete these tasks, their level increases and more animals and crops become available to purchase. If you have any neighbors, you can visit their farms and help fertilize their crops and harvest the milk from their cows. Incredibly, FarmVille still rakes in a crowd of over 30 million farmers a month, right behind its graphically superior successor, CityVille. FarmVille recently passed up The Sims Social to become the second-largest game on Facebook again.

YoVille

The father of the ‘Villes, YoVille, launched in May 2008, took a page from The Sims’ book and gave us a home to decorate and reside in, along with a static town to explore. This is yet another of Zynga’s purchases, one that later spurred them to continue the top-down, avatar creation, social games such as FarmVille and CityVille. YoVille is much simpler than Zynga’s successive games, mainly focusing on being social with other players’ avatars rather than reaching certain goals.

With all the new properties Zynga has introduced over the past few years, YoVille shows its age. The graphics and lack of any real gameplay might turn off new players, but the game still brings in over 2 million users a month, quite an impressive feat for a game as old as this.

Mafia Wars

Mafia Wars is the social game that started it all. No Facebook user has managed to escape at least one or two requests to join the Mafia since this game’s launch in early 2008. Mafia Wars, unlike most of Zynga’s more recent titles, including Mafia Wars 2, is a browser based game as opposed to a graphics based one. Players have a limited amount of rechargeable health, stamina, and energy with which to complete tasks and fight other players. Fighting stats are another factor determining which player is more likely to win in a fight.

Throughout its lifetime, Mafia Wars has increased in size by adding cities, which serve as expansion packs of sorts. Some of these cities have remained a permanent part of the game, but others, such as Moscow and Bangkok, were only around for a limited time. The original Mafia Wars, despite the introduction of its sequel, still has over 3.2 million users a month.

Zynga Poker

Of course, before Zynga invaded our social networks and mobile phones with farms, mafias, cities and castles, there was Zynga Poker, launched in July 2007. To this day, it remains one of the most played Zynga apps, with almost 29.6 million users every month. This is one of the most popular online poker games of all time. It functions like most other Texas Hold ‘Em games, but as with most of Zynga’s titles, players have the ability to level up. Leaderboards allow friends to compete for better rankings and everyone has the option to send gifts to their friends as well.

The game is available in a multitude of languages across nearly every platform imaginable, and it was recently announced that Zynga Poker would become part of a bigger Zynga franchise: Zynga Casino. All we know for now is that Zynga Poker and Zynga Bingo will be included in this package.

Conclusion

Zynga is a dominating force in today’s social gaming market. Despite the controversy and the shrinking profits, no one can deny the effect Zynga has had on gamers and (previously) non-gamers alike. These might be 10 of the most recognizable Zynga titles, but here are some of the others which still garner millions and millions of fans every month, including Zynga’s latest mobile titles:

Adventure World, Blackjack, Café World, Dream Zoo, Drop 7, FishVille, PetVille, Scramble, Treasure Isle, Vampire Wars, Chess With Friends, Mafia Wars Free, CityVille Hometown, Word Scramble, Hanging With Friends, Drop 7, and Word Twist.

---

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!

---

As part of the settlement, Vostu will make changes to four of its games and pay an undisclosed sum to Zynga. Vostu will also drop a counterclaim it had made against Zynga.”The parties are pleased to have settled their disputes and to now put these matters behind them,” the companies said in a joint statement.

A Vostu spokesperson declined to comment further on the details of the settlement or which of its games would be changed under the terms of the agreement.

Allegations of game copying are widespread in the social and casual game industries, with popular titles quickly spawning copycats that slightly tweak the concept or gameplay in some small way. Zynga’s own FarmVille is widely considered to be a much more successful copy of Slashkey’s  previously released social game Farm Town.

But Zynga’s lawsuit, originally filed in June, accused Vostu of taking more than simple inspiration from Zynga’s titles by copying games including FarmVille, Zynga Poker, PetVille, Cafe World, and CityVille right down to key gameplay features and even structural glitches found in the titles.

At the time, Vostu called the lawsuit “frivolous” and said its titles were “chock full of original content” that had been “individually created.”

The settlement comes at a crucial time for Zynga, which will finally offer its long-mulled IPO starting December 15, though at a price much lower than previous expectations.

Vostu, which has offices in New York, Sao Paolo and Buenos Aires is backed by $46 million raised last year by Accel Partners and Tiger Global Management, among others. The company claims over 25 percent of all internet-connected Brazilians play its games, including recently launched soccer sim GolMania.

---

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!

---

To date, Zynga has only launched one game at a time. But at the company’s new headquarters in San Francisco today, chief executive Mark Pincus announced that the company is now rolling out a whole slate of games that cover new genres, new platforms, and new formats for the company. All of the games share common roots in that they are social, feature a cartoon style that is looking more and more refined, and are designed to reach a mass market.

The games include titles that are meant for Facebook, mobile platforms, China’s Tencent, HTML5 and Google+. The games include the just-launched Mafia Wars 2, CastleVille, Zynga Bingo (within the larger Zynga Casino), and Hidden Chronicles. New mobile games include Mafia Shakedown, Dream Zoo and FarmVille Express. These are part of a broadside aimed at taking back market share on Facebook from Electronic Arts, which has gained a lot of ground with The Sims Social, as well as new players like Wooga and Kabam.

“We want to be a the biggest macro bet on social gaming,” said Pincus. “We want to give you more of a World of WarCraft feeling, but packaged up in something you can understand in three clicks and five or 15 minutes.”

Zynga has acquired a company a month for the past year as part of an effort to create an army of game developers, who are the foot soldiers in the social game wars. Zynga now has more than 2,500 employees, including 1,700 at the company’s new headquarters alone. That is a huge amount of talent, considering it takes maybe six to nine months for a team of 25 or so game developers to create an average social game (at least that is our guess).

Until now, it seemed like Zynga was far too overloaded with staff, considering how many games it was launching. But the new game launches show that the company is quite serious about exploiting its game developers to the fullest.

Bill Jackson, creative director of Zynga Dallas, previously worked at Microsoft’s Ensemble Studios on titles such as Age of Empires. Now Zynga Dallas is launching CastleVille, the latest in the series of Ville games that have become the mainstay of Zynga’s simulation games.

“CastleVille takes Zynga’s Ville legacy to a new level of social,” Jackson said.

You can build your castle, show it to your friends, and craft things like potions or armor. You can follow the game’s story and its characters. You can trade and barter with friends by visiting their towns. And you have to defend your town against beasts who are outside the walls. The game has more personalized storytelling; players explore the world around them. You meet characters and make them happy and unlock new characters as you progress.

“In short, Zynga is bringing massively multiplayer role-playing games to the mass market,” Jackson said.

---

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!

---

Now, under the name Zynga Texas Poker, the game will be available in Mandarin Chinese for Facebook players in Hong Kong and Taiwan. As with the English version, players can enter a casino lobby and play at any table, meet people from around the world, or join friends in a game. They can choose from Texas Hold ‘Em tables, tournament play, or VIP tables. A leaderboard shows how players compare in chip ranking.

Zynga has approached the market with some savvy. The players get 8,888 Vegas-style poker chips, since the No. 8 is lucky in Chinese. And players will be able to compete in a local Shootout tournament for a grand prize of $880,000 Taiwanese dollars. Zynga will be giving away prizes such as trips to Las Vegas.

As it expands its footprint worldwide, Zynga is doing more to make sure its games keep expanding. It has to do that because games that launch on Facebook aren’t as viral as they used to be. Facebook cracked down on notifications that games send to users, so now it takes more effort to make sure that games spread. Zynga is diversifying away from Facebook to SoftBank mobile in Japan, and it has created its own FarmVille.com web site. At the same time, it is taking actions like today’s poker game launch to make sure it can get as many Facebook users as possible. Zynga says it has more than 215 million monthly active users.