NEW YORK CITY — New York VC Fred Wilson always likes to share his insights to a wide audience. Today at TechCrunch Disrupt NY, not only did he talk about why Foursquare is doing fine, but he also shared what he thinks makes a good entrepreneur — being a little crazy.

Wilson is the cofounder of Union Square Ventures and someone who has placed a lot of smart bets. He’s invested in companies such as Twitter, Tumblr, Foursquare, Zynga, Kickstarter, Etsy, and Dwolla.

“You don’t want a psychopath, but it happens,” Wilson said. “You want someone who is crazy but mentally healthy. … To see things differently requires you to be wired a little differently.”

Wilson refused to name “pyschopaths” that he has funded, but he was willing to name a few people who fit the bill of “good crazy.” Two entrepreneurs he thinks fit that are Kickstarter’s Perry Chen and Zynga’s Mark Pincus. “They just do things differently,” Wilson said. “Perry and Mark have some common traits. … Pincus can drive me crazy.”

What not to do in a pitch session

Wilson also gave insights into things founders and entrepreneurs had done in past pitch meetings that were ill-advised. Here are few tips of what not to do:

• Don’t give a lengthy background. Get to the point. (“Going through a long backstory is a bad idea.)
• Don’t pitch something incredibly derivative. (An example of what Wilson hates: “I’m taking a Pinterest model and I’m applying it to automobiles, and there will be flash sales.”)
• Don’t demo a product that doesn’t always work. (“I had a meeting yesterday with an entrepreneur and the product didn’t work. It was a painful moment for both of us.”
• Don’t talk for 20 minutes and then show off your product. Show your product for 20 minutes and explain it.
• Don’t show 20 slides when you can show one really great slide that explains your product.

Photo via Sean Ludwig/VentureBeat

OMGPOP founder and Zynga New York GM Dan Porter is out at Zynga. He’ll be replaced by VP of mobile games Sean Kelly. More to come.

— Betabeat (@betabeat) April 2, 2013

At the time of Zynga’s acquisition, OMGPOP had 20.5 million daily active users and 37 million installs, and was the most-tweeted game ever. Of course, since, Zynga stock has cratered, OMGPOP’s chief revenue officer left, and the hits have not been fast and furious.

Zynga COO David Ko confirmed the departure in an email to VentureBeat, saying:

“Developing and launching games is a team effort, and we’re proud of the great work the Zynga New York team has done with Draw Something 2.

Our follow up to the original hit is even more social and engaging, and we’re excited to get it into the hands of our players globally.  We thank Dan Porter for his efforts in making the Draw Something franchise a success and wish him well in his future endeavors.

We’re proud to see talent like Sean Kelly take a bigger leadership role as the Head of our New York studio and lead the team to the global launch of Draw Something 2.”

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

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Essentially, the pitch is this: Mixpanel’s new Revenue Analytics product helps you determine the lifetime value of a customer. That’s a great metric on its own; and when it’s paired with the ability to track precisely how specific items in your strategy and tactics are impacting revenue, it grows wings. And helping product managers see, without having to run a report, that 35-50 year old female clients are twice as valuable as 18-25 year old males, or that customers acquired via Google AdWords spend three times as much as those who enter via Twitter, is magic.

That’s especially important right now, says Mixpanel CEO Suhail Doshi, because startups are having a hard time raising money — especially for consumer plays. But if they can show exactly how their product converts and funnels and ultimately produces cold hard green cash, the VC conversation is an awful lot easier to ace.

The new product is free to Mixpanel’s existing customers and installs, Doshi told me, with one line of code in your web or mobile app.

“The broader part of the industry doesn’t use this [lifetime value of a customer] metric,” Doshi told me yesterday. “But it’s an important number to know. Companies like Zynga and Netflix grew very fast because they could spend millions and millions of dollars and know they’re going to get a return on their investment.”

But in isolation, any metric is limited. The true magic comes when you know what factors drive your key metrics.

Source: Mixpanel

Mixpanel retention analysis

That’s the target Mixpanel’s new product is squarely aimed at. Mixpanel already knows an awful lot about your users; now, the plan is to tell you exactly which factors lead to maximum revenue. That’s how, Doshi told me, social dating site Grouper found out that Chicagoans were their most valuable users (who would have known?). And how project management company Sprint.ly discovered that customers who integrated their product with Github were 1,400 percent more valuable.

“This is actually very, very hard, and most companies don’t do this because the data is hard to access, it’s a manual process,” Doshi said. “But when you have it integrated, you can ask questions like, ‘Is Facebook Connect actually getting our customers to stay?’ and ‘What’s the actual value of that?’”

We’ve seen the clash of titans in mobile as Apple, Google, and Microsoft have released new phones, tablets, and mobile operating systems. We’ve seen a single network connect over a billion people worldwide. We’ve seen the once-great mobile company of the far European north forced to hawk its headquarters to raise cash. And we’ve seen social media move from cutting-edge to mainstream as the Obama campaign celebrated four more years.

In every year, we see winners and losers: companies, devices, or operating systems. Here’s our look at some of the biggest successes and failures of 2012.

The winners

	Android What more can you say about Android? With 75 percent market share in the third quarter of 2012, the free mobile operating system from Google looks poised to take over the world.
	Samsung  Not many companies sell 55 million smartphones in a quarter. Samsung did, and it will probably do it again.
	Galaxy S III Samsung is hot in large part due to its top smartphone, the Galaxy S III. With over 18 million units shipped in the third quarter, and 30 million shipped in five months, it’s easy to see why.
	iPhone 5 Sure, it was Time’s gadget of the year. But more importantly, iPhone 5 catapulted Apple back into the smartphone leadership position, at least in the U.S.
	iPad Mini We called it immediately: light, portable, awesome, and expensive. And it even looked better up close and person in our review. But we had no clue it would become one of Apple’s best-selling iPads. And now that it’s probably going Retina in April/May, it’s just getting better.
	YouTube YouTube continues to be the online leader, by far, in online video with 800 million visitors and billion-view channels created by individuals and brands. Despite getting the boot from iOS6, YouTube just continues to grow, with 25 times the video streams of its nearest competitor.
	Twitter 2012 is the year that Twitter went mainstream, reaching 500 million users mid-summer and just recently announcing 200 million monthly active users. And despite major new API restrictions that soured its relationship with developers, a very public spat with Instagram, and an evolving shift from social utility to media company, the company continues to grow and solidify its space in fast-breaking news.
	Instagram With a sale initially priced at almost $1.3 billion and an exploding user count, not even a tone-deaf terms-of-service change that spurred a class action lawsuit and a possible exodus of some users can keep Instagram off our winner list.
	Google Android is hot — 75 percent market-share hot. Search is still a massive strength for the iconic company that runs an ad 30 billion times each and every day. And so Google makes over $100 million a day – and hits our list of hot companies in 2012.
	ARM With the vast majority of the chips in smartphones running ARM processors, ARM has people wondering whether the mobile juggernaut will challenge Intel for CPU dominance. That’s still a stretch, but not nearly what it was just a few years ago.
	Reddit With 3.8 billion page views and 46 million unique visitors in October — double the previous year’s numbers — Reddit is continuing its torrid growth. And it doesn’t hurt when the POTUS himself chooses your site to do an informal meet-the-people session — which required 60 dedicated servers.

Next page: The losers

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Tonight, Game Closure‘s 27-year-old chief executive took the stage at StartX’s demo day to inspire fellow entrepreneurs with the company’s founding story.

A year ago, almost every investor in Silicon Valley rejected the social gaming startup. ”We were cold emailing investors,” the young CEO and StartX graduate, Michael Carter, told the audience. Carter launched Game Closure on that very stage and vowed to take on  Zynga with a new brand of “social and frictionless games.”

In the past year the company has turned down acquisition offers from both Facebook and Zynga. It has grown its engineering team three-fold. The company made the promise that its growth would rival Zynga’s, which would have seemed incredulous a year ago. But as the gaming giant’s stock continues to plummet, Game Closure has received applications from more than 5,000 gamers, and the daily user data that its partner games produce has grown 1,000-fold.

If you’re not familiar, Game Closure’s Javascript game software development kit lets publishers distribute video games across multiple platforms, including iOS, Android, and web browsers.

“We have gained 21-fold against Zynga in just one year,” Carter told the entrepreneurs who had just demoed their startup ideas to a packed house of press and investors.

Game Closure also succeeding in raising $12 million from Highland Capital, Greylock Partners, Charles River Ventures, Benchmark Capital, General Catalyst Partners, SV Angel, Yuri Milner, and Joi Ito. More than one of these investors had flatly rejected Carter less than a year ago, he said. In the early days, StartX leveraged its connections to secure Carter and his cofounders a meeting.

To add insult to injury, the startup hired Laurent Desegur, former chief technology officer of Zynga Mobile, as its new vice president of mobile engineering.

Unlike rival programs like Y Combinator, StartX is a Stanford-affiliated accelerator that doesn’t take any equity. We’ve been covering the group’s recent batch of startups, and the recent injection of $800,000 in grant funding. Alice Brooks, founder of Maykah, the toys for girls company, presented on stage tonight alongside Carter. WifiSLAM, the indoor location startup, is also a StartX graduate. 

Now that bad week is in turn becoming a bad month as August starts with yet more lawsuits being announced, and a C-level executive demotion to boot.

San Francisco law firm Kessler Topaz Meltzer & Check has now filed suit, alleging that Zynga acted improperly in allowing key executives and investors to sell their stock earlier than other employees. And Robbins Geller Rudman & Dowd joined the party yesterday, alleging that Zynga “issued false and misleading statements regarding Zynga’s business and prospects.”

Those are both in addition to law firm Newman Ferrara’s suit, which we reported on yesterday, making three lawsuits so far. Three may not be the final tale of the tape, however, as other firms are also considering their own lawsuits.

That’s a big enough sea of troubles, you might think, but there’s additional trouble in Zyngaville: Chief operating officer John Schappert was demoted recently, according to Bloomberg, losing oversight on new games.

If the name sounds familiar, that’s because Schappert sold $3.9 million of stock in the now-infamous executive sell-off and is, you guessed it, a defendent named in the insider trading lawsuits.

That’s a bad few days for Schappert: demoted and sued inside of a week.

But it’s just the tip of the iceberg of the chaos inside the company right now, if analyst Richard Greenfield is to be believed. He told Bloomberg yesterday that Zynga is “in utter meltdown mode.”

It’s enough to make an online gaming company want to press the reboot button.

The problem?

As we reported before, Zynga executives and investors, including CEO Marc Pincus, sold over $500 million in stock just three months before. Pincus sold $200 million of Zynga stock, chief operating officer John Schappert sold $3.9 million, and chief financial officer David Wehner sold stock worth $4.6 million.

Those five firms were Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky.

Today San Francisco-based Newman Ferrara has announced the first lawsuit on behalf of Mark H. DeStefano and “all other persons similarly situated.” In other words … a class action. The firm believes that hundreds of investors share the same concerns and may be included in the suit.

Key among the law firm’s allegations are these:

• Executive stock lock-up agreements were initially set to expire May 28, 2012
  • All of our officers and directors and the holders of substantially all of our capital stock have entered into lock-up agreements with us which provide that they will not offer, sell or transfer any shares of our common stock beneficially owned by them for 165 days, subject in certain cases to extension under certain circumstances, following the date of this prospectus. We have agreed with Morgan Stanley & Co. LLC and Goldman, Sachs & Co. not to waive these lock-up restrictions without their prior consent.
• Zynga issues positive guidance on stock price
  • In announcing its 2012 outlook, Zynga stated that “Bookings are projected to be in the range of $1.35 billion to $1.45 billion. We expect that growth will be weighted towards the back-half of the year with slower sequential growth in the first half of the year.”
• The lock-up agreements were revised on March 23, 2012
  • On March 23, 2012, before the Secondary Offering was completed, Zynga filed an Amendment to Form S-1 with the SEC. The Amended Registration Statement authorized the Secondary Offering of 42,969,153 shares of Class A common stock. Zynga’s March 23 Amended Prospectus waived the lock-up restrictions that previously restricted Zynga insiders from selling their common stock until May 28, 2012. Indeed, the Prospectus announced “[w]e are releasing the selling stockholders from these lock-ups to permit them to sell up to 49,414,526 shares (including the underwriters’ option to purchase additional shares) in this offering.”
• Which enabled Zynga insiders to sell stock early
  • The March 23 lock-up restriction waiver enabled Zynga insiders, including the Defendants, to sell their shares of Zynga stock when the Secondary Offering was on April 3, sooner than the May 28, 2012 expiration date.
• And allowed them to profit while ordinary investors did not (and rank-and-file employees could not)
  • As detailed below, the Individual Defendants promptly sold the shares they received in the Secondary Offering, for proceeds of over $500 million. While Zynga insiders were able to sell their holdings at $12 per share before Zynga’s second quarter financial results were announced, Zynga’s non-executive employees and other public shareholders suffered colossal losses on their investments.
• In addition, Zynga continued to issue positive guidance
  • On April 26, 2012, Zynga issued a press release on Form 8-K with the SEC and filed a corresponding Quarterly Report on Form 10-Q with the SEC announcing its financial results for the first quarter of 2012. Zynga touted its growth in both web and mobile bookings, reporting record bookings of $329 million for the quarter, up 15% year-over-year. The press release announced that “[w]e’re pleased with the progress that Zynga has made in the first quarter growing our audience reach 25% year over year and nearly 20% quarter over quarter.”
  • In issuing its 2012 outlook, Zynga announced that “Bookings are projected to be in the range of $1.425 billion to $1.5 billion. We expect growth to be weighted towards the second half of the year.”
• And, misrepresent or failed to disclose important information
  • Zynga misrepresented or failed to disclose material adverse facts about its business, operations, and growth prospects including, among other things, that: (1) Zynga had been experiencing a rapid decline in user numbers and virtual goods sold in existing web games; (2) Zynga had faced substantial delays in launching new web games; and (3) Zynga’s revenue and bookings were entirely dependent on Facebook’s online gaming platform.

It’s a serious lawsuit and obviously a major problem for Zynga. But the company and its executives will have their day in court and will be able to present their view of the events at that time.

One possibly bigger problem for the company right now?

I wonder if the rank-and-file employees, who were forced to wait longer to sell than key executives, are one of the parties feeling particularly aggrieved right now.

Especially if their options happen to be underwater at the moment.

Those executives include CEO Marc Pincus, who sold $200 million in stock, chief operating officer John Schappert, who sold $3.9 million worth, and chief financial officer David Wehner, who, arguably, would have the best data on how the company would perform and sold stock worth $4.6 million.

As Kotaku reports, the law firms investigating now number at least five: Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky.

Source: Zynga

How do you like them apples, Zynga?

In a statement released late yesterday, Schubert Jonckheer & Kolbe says its investigation will focus on “whether these insiders were privy to material adverse facts about Zynga’s business and financial condition at the time they sold their shares.”

Wold & Fruchter, which has a history of class action lawsuits, said that it was also “investigating possible violations of federal securities laws and breaches of fiduciary duty by officers and directors of Zynga.”

Some of the investors who sold, such as Reid Hoffman, are also on the Zynga board of directors, and therefore would be part of the investigation. Hoffman sold shares worth $8.2 million.

It’s worth noting a couple of things.

First, all of the executives and investors still hold substantial amounts of Zynga stock. So it’s not as if they dumped everything and ran.

And second, given the litigious nature of American society and the dare-we-say-it ambulance-chasing nature of some law firms, it’s not hard to believe that these investigations are proceeding. But it’s far too early to make any conclusions, one way or the other.

One thing is for sure: The optics of the timing are certainly not helping Zynga in the court of public opinion. As one of the commenters on our previous post said (and this is verbatim):

I LOST 250K ON THIS PIECE OF S*** !!! iM IN A VERY VERY ANGRY MOOD RIGHT NOW.

Johnson and Weaver may provide similar investors with some hope. The firm said that “investors who purchased shares of Zynga common stock at any time before July 26, 2012 … and who currently still own any shares may have legal rights to compensation.”

Given this kind of investor fury and the dollar amounts involved, I would not be shocked to see more smoke and noise before all this is settled.

Stay tuned!

Image credit: Gunnar Pippel/ShutterStock

As Henry Blodget points out, Zynga insiders, including chief executive Marc Pincus, cashed out in April, selling 43 million shares for over $516 million in a secondary stock offering. Pincus himself raked in about $200 million of that total, according to Blodget’s report. All of the proceeds went to the stock holders, not the company.

[ update July 27: five law firms are now investigating Zynga for possible insider trading ]

Yesterday, results for the past three months were announced: earnings of precisely one skinny American penny for each of Zynga’s 736 million shares, driving Zynga’s stock price sharply downward.

Besides Pincus, other Zynga employees who cashed out include Zynga’s chief operating officer John Schappert and chief financial officer David Wehner. Investors who took the opportunity to sell include LinkedIn’s Reid Hoffman, Google, and four venture capital firms including Fred Wilson’s Union Square Ventures. Each of them sold over 300,000 shares at an average price of $12 per share.

Source: Dean Takahashi

Zynga CEO Marc Pincus

That netted all of these insiders a nice chunk more than anyone who sold at today’s price: just over $3.

There’s no indication of insider trading or improper behavior. Zynga blamed the blown quarter on a number of things that happened quickly: delay of The Ville game, Facebook changes that hurt engagement with older games, and Draw Something’s spectacular implosion.

But the optics look bad. And they look double plus ungood if you happen to be a Zynga investor with stock that has shed 80 percent of its value in a single year, coming down from a high of over $16 per share.

Good thing that all of the sellers, including Marc Pincus, only sold “a fraction of their holdings,” according to Blodget, so all of them remain well-vested in the company’s future.

Otherwise what just looks bad right now might actually be bad.

Image credit: Pakhnyushcha/ShutterStock

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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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Draw Something, the game that saved small studio OMGPOP and prompted a huge buyout from Zynga, is coming to CBS. Draw Something is the game in which you draw something and a friend guesses what it is. According to Variety, celebrities and everyday users will test their skills on live TV while audiences at home can join in to win prizes — including a chance to compete with the celebrities. A group including Sony and Ryan Seacrest is producing the show, but no date has yet been set for the first airing.

Of course, Zynga has been widely criticized for its purchase of OMGPOP, a one-hit studio. Draw Something has been an immense success but has tailed off sharply in the past few months, losing about seven million users in the past month alone.

This drop has paralleled Zynga’s own stock woes. The company has lost almost two-thirds of its value in the last few months:

All of this suggests that Zynga has to do something, anything, to make its exuberant $200 million purchase make cold, hard financial sense. A network TV deal has the potential to do this in two ways. One, the deal itself will be worth some money — how much was not released. But two, and perhaps more importantly, a popular TV show could reignite public interest in Draw Something.

It’s easy to be a little bit cynical about this deal, but all sarcasm and joking aside, this has the potential to be something very, very innovative. Zynga and CBA will be combining live game-show-style television with interactive audience engagement on smartphones and tablets. That’s interesting and, at the very least, should suggest some new twists in the future of entertainment.

Image credit: Draw Something Facebook page

In a statement, chief executive Sebastian Sujka said that Social Games Observer launched AppStats for two specific purposes: “to break the Appdata monopoly and to improve the industry standard.” AppData, part of Inside Network,  is currently the industry leader, and has been in operation since 2008.

Anyone can use AppStats to see the top games and apps in use on Facebook, as well as the top developers. For example, in the last month, Zynga’s Texas HoldEm Poker is the top game, with 35,200,000 monthly average users, followed closely by Zynga’s other top titles: CityVille, Draw Something, FarmVille, and CastleVille. King.com’s intriguingly-titled Bubble Witch Saga is the closest non-Z-contender, pulling up in sixth with 20.5 million monthly users.

In addition, AppStats features a developer leaderboard, which reveals that Yahoo! is today’s biggest gainer, with an increase of 1.8 million users. The comparison module is a helpful feature, showing that while Zynga has been gradually shedding users over the past month, King.com is very slowly adding:

Facebook app stats packages are essential for app developers, marketers, and social media observers. But since Facebook is so ubiquitous, with close to a billion users, it can also be used as a proxy for other types of data. Take the below graph, which provides interesting insights into phone platforms:

Clearly, while Android and iPhone are vying for the smartphone lead among Facebook users, BlackBerry is not dead yet and neither are plain old feature phones. Meanwhile, Windows Phone is nowhere to be found.

While established market leader AppData suggests that it uses information provided by Facebook to track over 75,000 Facebook apps and create its leaderboards, Sujka told VentureBeat that AppStats pulls data from the Facebook graph, “the same way Appdata is getting their data.” To distinguish the service, however, AppStats has redefined ”all game categories and sorted all games accordingly for a very precise search.” As a result, Social Games Observer claims to be  ”the most reliable and comprehensive Facebook application metrics database.”

A premium account offers additional filtering, demographics, and app data for $249/month.

Here are a few screen shots demonstrating the new service. Click to view full-size.

[ update ]

(This story was updated June 4, at 8AM PST: the AppStats website initially said “a most reliable,” but that was a typo. It has been edited to “the most reliable.”)

Map image courtesy ShutterStock

In just five years, social-gaming company Zynga has gone from scrappy, sometimes-shady underdog, to multi-billion dollar company. On Friday, Zynga capped of the first leg of its journey and started another when it went public on the Nasdaq.

VentureBeat’s lead games writer Dean Takahashi has followed the company from its beginnings as Presidio Media in 2007, through lawsuits, hit games, failures and internal drama. This tale was originally published on VentureBeat as a 12 page article. If you’d like a more mobile-friendly version, the $2.99 Amazon e-book is available now. Read it on your Kindle, or any mobile device with a Kindle app.

This book’s narrative is based on extensive interviews and research conducted by Dean since 2008. The story of Zynga is very much about its founder, Mark Pincus. But it’s also about the whole cast of characters who surrounded him, the rivals who drove him to succeed, and the industry that challenged Zynga to prove itself over and over.

In this book, we’ve done our best to triangulate on how Zynga became what it is today — and how it almost didn’t happen.

If you’re a game-history buff, check out Dean’s last book, “Xbox: Making of a Bad-Ass Machine” on Amazon and in Apple’s iBookstore.

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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 social game maker, responsible for titles such as Farmville and Empires & Allies, filed its S-1 on July 1, and many expected the company to list itself on the NASDAQ exchange by this time. Zynga is hoping to raise $1 billion in its IPO.

A representative from Zynga told VentureBeat, “We’re not commenting.”

The Zynga IPO would follow closely on the heels of Groupon, which listed itself this past Friday at $20 per share, and may augur in a new wave of tech IPOs. Zynga games are played inside social networking platforms such as Facebook, and have been minting money for the San Francisco company.  Zynga recently amended its S-1 filing to show that the company has 6.7 million paying subscribers, up significantly from 5.1 million one year ago.

The question that will be on many people’s minds will be how soon Facebook will follow suit.

The company, the creator of massively popular social games like Farmville and CityVille, has yet to specify the price and number of shares for the offering. But the prospectus contains enough information on Pincus’ ownership stake for us to do back-of-the-envelope math on his pending worth, as well as that of other well-placed people at the company.

It’s widely believed that Zynga will push for – and receive – a valuation as high as $20 billion, pending any major upheaval in the markets in coming weeks or a sudden downturn in Zynga’s ability to maintain its popularity among gamers.

Pincus, the prospectus shows, will own 112 million shares, or about 18.1 percent of the company’s overall 618 million shares (see the details on this page). If the company does go public at a $20 billion valuation, that translates into a whopping value of $3.6 billion for Pincus’s stake.

That’s a significant milestone for Pincus, 45, who has long been an entrepreneur in Silicon Valley, but until now hasn’t enjoyed a grandslam. Pincus is known for his rapid-fire brainstorming of ideas. Earlier in his career, this personality seemed to exhibit itself in impatient bobs and weaves — for example, at early social networking company Tribe, where the company went through various incarnations, none of them very successful. For some, it suggested Pincus may not have sticking power.

But at Zynga, his ADD-like personality has become the perfect driver: If a game feature seems to work, Pincus runs with it. If it doesn’t, Pincus cans the idea, and moves immediately to the next one — an approach ideally suited for the fast-pace world of gaming innovation, where quick response to statistics, feed-back loops and other nuances of web engagement are critical.

The next big individual winner of the Zynga is Reid Hoffman (right in photo above), the founder of LinkedIn, and early investor in Zynga. Hoffman picked up 3.1 million shares of Zynga at about 5.6 cents in January 2008, before most other investors got into the deal. This now translates into about 0.5 percent of the company’s shares. But at a valuation of $20 billion, that’s a sweet $100 million. Of course, that’s just icing on the cake already enjoyed by Hoffman ($2 billion is the rough value of his stake in LinkedIn, the social networking company that went public in May).

Another big beneficiary is the venture capital firm Kleiner Perkins, which invested shortly after Hoffman did, in July of 2008. By then, Zynga shares were valued at about 42 cents each. Kleiner’s 64 million shares translate into about 10.4 percent of the company today, giving it a stake worth around $2 billion should Zynga hit $20 billion in market value. The firm’s gaming specialist, partner Bing Gordon (pictured right), sits on Zynga’s board and takes much of the credit for the investment (he’ll be speaking at our MobileBeat-GamesBeat event in July.)

Again, this is all just “best-possible” math at this point, because under the IPO rules, investors and other inside shareholders are usually locked up for several months after the IPO, so they won’t be able can’t cash in for a while. The IPO filing does not specify how long the lock-up period will be.

Other winners include venture firms Institutional Venture Partners, Foundry, Avalon and DST, all of which invested around the same time as or later than Kleiner, but in smaller amounts. They each hold between 5 percent and 6 percent of the company, stakes worth about $1 billion each if Zynga does get valued at $20 billion.

We’ll be exploring the most disruptive game technologies and business models at our third annual GamesBeat 2011conference, on July 12-13 at the Palace Hotel in San Francisco. It will focus on the disruptive trends in the mobile games market. GamesBeat is co-located with our MobileBeat 2011conference this year. To register, click on this link. Sponsors can message us at sponsors@venturebeat.com. Our sponsors include Qualcomm, Flurry, Greystripe, Nexage, Tapjoy, Fun Mobility, TriNet, Zong, Spil Games and WildTangent.

Mark Pincus, chief executive of the largest social game company, said in a blog post that the company is taking a baby step to bringing back offers, which are a special kind of ad where a user signs up for a service in lieu of paying for a digital good with money or a credit card in one of Zynga’s games. The company will only use offers from eight advertisers: Netflix, Discover Card, Blockbuster, HSBC Direct, Gamefly, Book of the Month Club, SnapFish and The New York Times. The limitation is meant to ensure that consumers have a good experience.

Zynga shut offers down in November because of a controversy where offer providers were accused of running slimy promotions that tricked consumers into buying services they didn’t want. The controversy provoked self-examination in the industry, led to bans of some offer providers and ad networks on Facebook. It also pushed more companies to adopt strict standards on the kind of offers they would make available to consumers.

But offers have made their way back because consumers like them — at least the good offers. In games such as Zynga’s FarmVille, you can buy things such as tractors to grow vegetables faster. They cost money, but players who don’t want to spend money can accept an offer instead. For those without credit cards, it’s an alternative. And for Zynga, offers have generated a sizable percentage of revenue.

Pincus said that Zynga has set up a team that will check the quality of any offer displayed in Zynga games. The group will follow standards that Zynga has published. As more companies meet the standards, Zynga will add them.

Zynga will also test new brand engagement ads in its games. PetVille will test ads from Visa, Sprint, XBox, Timberland, MTV, TV Land, CW and HTC. This type of brand engagement will allow users to gain currency in a fast and easy way. In these ads, you can get a free virtual good if you do something like watch a video ad.

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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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Electronic Arts

The value of the deal — $275 million in cash, $25 million in stock, and up to $100 million in bonus cash if certain milestones are hit by 2012 — reflects the rapid growth of Playfish over the last couple of years. Playfish is the second-largest developer on Facebook, behind only Zynga. It has more than 60 million monthly active users, according to AppData.

With the deal, EA will become a major player in social games, the hottest part of the game industry and a field dominated by three companies: Zynga (see our profile), Playdom (see profile) and Playfish (see profile). Playfish will operate within EA Interactive, a division focused on the web and wireless games.

The deal is a big win for Accel Partners and Index Ventures, which together invested only $21 million into the Playfish.

In acquiring Playfish, EA is putting pressure on the social game market leader Zynga — an upstart which is now reportedly making well over $100 million in revenue a year. But in many ways, Playfish may be a better deal for EA. Had EA tried to buy Zynga, it probably would have had to pay a much higher price. And Zynga is considered by some to be more risky, because has been more aggressive with controversial in-game offers.

Playfish created original titles such as “Who has the biggest brain?” and “Restaurant City.” While these titles resemble older video games, they were new to Facebook and consistently performed well.

Zynga, by contrast, has been known for a few hits such as its poker and mob games, which made Zynga a cash cow — and allowed it to create knock-offs of other hit titles. Zynga’s Cafe World, which many deride as a clone of Playfish’s Restaurant City, launched many months after the Playfish title and shot ahead of it to 28 million monthly active users, compared to Restaurant City’s 18 million users.

EA itself has tried to come up with hit Facebook games, but it hasn’t been easy. While console games take a team of 100 people and sometimes two years to three years to develop, Facebook games are created within a matter of weeks. And the games are constantly revised in response to user feedback. They are also launched as free games to attract lots of users. They make money with ads and because a small number of the users will pay for virtual goods, such as better weapons or clothing.

The emphasis on doing original and high quality games set Playfish apart and made it more attractive to EA. As mentioned, Playfish avoided heavy advertising of its games and relied more on word-of-mouth than controversial promotional techniques to spread its games. Even with that conservative strategy, Playfish grew to more than 150 million registered users. Playfish chief executive Kristian Segerstrale noted in a statement that EA Interactive’s entrepreneurial culture is a match for Playfish’s.

“Social gaming, with its emphasis on friends and community, is seeing tremendous growth and this is the right time to invest to strengthen our participation in this space,” said Barry Cottle, senior vice president and general manager of EA Interactive in a statement. “…with the addition of proven expertise from Playfish, their broad consumer base and strong game brands, we’re moving ahead aggressively in our plans to lead in the category of cross-platform social entertainment.”

The word about the acquisition had been spreading for weeks, but both EA and Playfish executives dismissed them as rumors. Jeremy Liew, managing director at venture firm Lightspeed Venture Partners, said it will be interesting to see what happens next. Zynga seems determined to do an IPO, and Playdom would likely command a high price. But there is a tier of smaller social game companies that will likely be acquired by other big game companies and brands who want to get a piece of the social gaming action. Liew said the price that EA paid validates those who believe that social games is a disruptive force in games.

“It’s a reflection of the opportunity in this space,” Liew said.

[The excitement in this industry is one of the reasons why we're holding an executive event called DiscoveryBeat on Dec. 8 in San Francisco. The event will explore the secret recipe for getting your social game or mobile phone application "discovered" in an age of increasing noise. We'll have Playfish Co-founder and President Sebastien de Halleux speaking, among others. Get your early bird ticket by Nov. 20.]