On the heels of rumors of a possible investment this weekend, Facebook has just announced this morning that it has indeed raised a $200 million round of financing from Russian Internet investment firm Digital Sky Technologies. DST will receive 1.96% equity stake in the company in the form of preferred stock at a valuation of $10 billion.

In addition, DST plans to purchase “at least” $100 million of Facebook common stock from existing stockholders that would give current and former employees a chance to cash out some of their vested shares. DST will not get a seat on the Facebook board of directors.

“This investment demonstrates Facebook’s ongoing success at creating a global network for people to share and connect,” says Facebook CEO Mark Zuckerberg.  “We’ve worked hard to bring more than 200 million people – 70 percent outside of the U.S. – onto Facebook to share with friends, family and co-workers.  A number of firms approached us, but DST stood out because of the global perspective they bring – backed up by the impressive growth and financial achievements of their internet investments.  We’re looking forward to working with the DST team.”

DST is a large Internet holding company in Russia and eastern Europe. The company estimates that its portfolio companies, including Mail.ru, Forticom and vKontakte, cover 70% of all page views in the Russian speaking Internet.

DST CEO Yuri Milner was previously CEO of Mail.ru, the most highly-trafficked website in Russia. Milner’s partners are Gregory Finger, previously head of the Moscow office of NCH, a large hedge fund, and Alexander Tamas, previously co-head of internet and software coverage in EMEA for Goldman Sachs.

“Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact,” said Yuri Milner, chief executive of DST.  “By every important metric – user growth and engagement, technological innovation and financial performance – Facebook is on a similar trajectory, though on a much more global scale.  We’re delighted to invest in Facebook, Mark and his management team as they make the world more open and connected.”

Facebook CEO Mark Zuckerberg has been characterizing recent financing rumors as preliminary in public comments as recently as last week, when he told the Reuters Global Technology Summit, “If there’s an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future.”

The $200 million investment from DST brings Facebook’s total debt and equity financing raised to date to at least $640 million. In addition to the $200 million announced today, Facebook raised $240 million from Microsoft in 2007 as part of a preferred equity investment and strategic alliance that valued the company at $15 billion, $100 million investment from Chinese billionare Li Ka-Shing in early 2008, $100 million loan from TriplePoint in May 2008, and an undisclosed investment by Germany’s Samwer brothers early last year.

Pet Society, the addictive virtual world from Playfish, has reached #3 on the AppData gaming application leaderboard. With nearly 11 million monthly active users, the game has grown nearly 50% in total reach over the last 90 days, and now only trails Texas HoldEm and Mafia Wars on the charts.

But we wouldn’t be surprised if Pet Society grew even more in the next few months. Just this week, Pet Society launched its own website, PetSociety.com. Now, users can play the game inside Facebook via the Pet Society application, or on Pet Society’s new site through Facebook Connect.

The Facebook Connect integration is a move that should get the attention of other social gaming companies, especially those that didn’t get their start inside Facebook, as Facebook applications are now expanding onto the web. And for those that did start as Facebook applications, offering your users more types of game play experiences while still staying connected to Facebook could be a simple way to increase retention. Below, you can see what it’s like for users to update their Pet’s status and publish it to their Facebook profile from the Pet Society site.

This week, Facebook also announced the first batch of verified applications – 120 in total – and Pet Society is one of them. If Facebook’s Verified Apps Program is able to deliver increased visibility to these 120 apps, then Pet Society will likely continue to grow even more.

As we continue our look at the Facebook Platform monetization ecosystem, today we turn our attention to Sometrics, a social analytics and monetization platform that helps developers optimize across advertising and offer networks. We recently spoke with Sometrics CEO Ian Swanson about his view of the monetization landscape on the Facebook Platform and Sometrics’ approach to the market.

Inside Facebook: Thanks for your time, Ian. Can you start by giving our readers some background on how Sometrics began?

Ian Swanson: Our business started as an advertising solution for banner advertisements. In June 2008, we started talking to publishers on MySpace and found out that the majority of revenue, 95 percent, was coming from direct payments and offers, and only five percent was coming from banner ads. We asked: Can we target offers and optimize offer networks? And so we started building a solution by the end of July 2008, ran the first test of users in December, and launched a beta version in March.

Who are the main players in your business?

At the bottom of the chain are the 2,200 publishers, or game developers, who we work with. Above them come a dozen offer networks such as Gambit, Super Rewards, Offerpal, PayByCash, etc. Then come the 2,400 different advertisers. Sometrics works directly with publishers to help them optimize across dozens of offer networks. We’ve built a few products, many of which are free. Developers on Facebook, MySpace, and large multiplayer games use our products.

What process does Sometrics go through to optimize across offer networks?

We work directly with publishers. Say the publisher comes to us with four different offer networks – we help them optimize across them. We plug in the codes that these offer networks provide, and our system outputs one optimization code. Using our central dashboard, the publisher can make changes that affect revenue growth. Our dashboard truly affects revenues: our publishers have seen a 10 to 15 percent revenue lift.

What are some demographic trends that you’ve noticed across different online platforms?

It’s well known that the demographic on MySpace is younger, and we tend to see more completions on MySpace. With Facebook, we see more paying completions (e.g., Netflix). There are more offer completions on MySpace, but each completion has a lesser payout; thus, higher conversion rates on Facebook have greater value.

How will Facebook’s entry into virtual currency affect your company?

It’s a smart move by Facebook and good for the economy as it will bring more validation. We look at Facebook as one method of payment. There will still be a need for solutions like Sometrics that manage different payment solutions. For example, developers can use our services to get central statistics on how any payment method is working.

What’s your competition looking like in today’s market, and what’s the business opportunity abroad?

No one is doing offer optimization for third parties. In terms of offer management, a lot of companies are still trying to directly compete with offer networks. The international market is thriving, it’s big. Korea has a multi-billion dollar industry. In China, social networking sites have adapted much sooner to a virtual currency system, and the results have been tremendous.

Thanks again, Ian. Any final thoughts?

Our standpoint is that it’s important to have a diversification of offer networks if publishers are using offers as a way to make money. Our solution proves that it’s advantageous to use multiple offer networks. We have the numbers to back it up.

To date, Facebook’s 200 million active users upload about 850 million photos and eight million videos per month, according to the company. While most users don’t consider the burdens of hosting that much information, Facebook’s leaders and investors surely are, if a report from Data Center Knowledge provides any indication of how much it costs to run the site.

According to the analysis, Facebook spends between $20 million to $25 million alone on the space that houses its servers. That figure does not include the cost of equipment (mostly servers) used to host the data.

DCK’s estimate will further fuel speculation about the rate at which Facebook is spending its cash, which has led the company to seek additional financing. The site was able to make its estimate because Facebook leases the data center space; it doesn’t own it. Facebook’s data center landlords (Digital Realty Trust and DuPont Fabros) made the information public through quarterly earnings statements and SEC filings that DCK obtained.

The $25 million price tag includes Facebook’s main data center spaces in Silicon Valley (where it has two), Virginia and Santa Clara, Calif. More established technology heavyweights Google and Microsoft own their main data center properties. What’s perhaps more striking about the report is that the estimate doesn’t account for all of Facebook’s back-end costs:

[The report] doesn’t include Facebook’s investments in server and storage hardware, which is substantial. Some reports say the company spent $30 million on servers in 2007 and another $60 million in 2009. There’s also the cost of electricity to power the servers, which is not included in the data center lease.

Conclusion

While this report isn’t foolproof, it makes some educated guesses about just how much money it takes to support Facebook’s operations. Soon, Facebook may need more capital in order to keep things moving – be it through an IPO or additional funding.

Each week we are hearing new rumors of term sheets Facebook is seeing. While Facebook says it is open to having conversations with interested parties, the company also insists it doesn’t need to raise money any time soon.

Just last week, Facebook CEO Mark Zuckerberg told the Reuters Global Technology Summit, “If there’s an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future.”

The latest rumor this week comes from the Wall Street Journal’s Jessica Vascellero, who says that Russian investment group Digital Sky Technologies recently submitted an offer for $200 million of Facebook preferred stock at a $10 billion valuation. The company also offered to buy between $100-$150 million in employee common stock at a $6.5 billion valuation as part of the deal. Last week, TechCrunch reported that Facebook turned down another $200 million offer at an $8 billion valuation from an unnamed source.

Facebook won’t comment on the rumors. However, Zuckerberg has publicly characterized all of the conversations as preliminary.

“Some of the rumblings that people are reporting on, are just different conversations that have happened, but there’s really nothing new to talk about there,” Zuckerberg told Reuters.

Nevertheless, the Facebook investment rumor mill has been gaining steam in recent months. As the company matures (revenues are said to be expected to surpass $500 million this year), interest in the company from larger investors and investment banks certainly seems to be increasing.

Update (May 27, 2009): A few days after Iran’s ban on Facebook, the site is now restored and available to Facebook users in Iran. The government gave no reasons as to why the site was initially blocked and then reopened.

This weekend there has been much talk about Facebook users in Iran not being able to access the Facebook site. This marks the second time that Iranian authorities have banned Facebook, the first being in 2006 when Facebook was banned along with YouTube. Facebook was since unblocked and has climbed to become one of the most popular websites in Iran.

But Internet users around the world were skeptical of Tehran’s reopening of the site. As Christophe Ginisty of Internet without Borders says, “During election periods, as in the case of Iran, it allows the government to give the impression that it is offering more freedom. But that’s absolutely not what’s happening, because the first thing that happens following an opening is that filters and controls are established. It means they reopen Facebook when they have the possibility to put people in place who can control it.”

But apparently, that hasn’t been the government’s strategy this election season. On Saturday morning, Facebook users in Iran logged in to Facebook to find that the site was no longer available. The timing of this Facebook ban comes less than 20 days before presidential elections on June 12, when incumbent President Mahmoud Ahmadirejad is running for re-election against reformist candidate and former Prime Minister Mir Hossein Mousavi. The ban is seen by many to be an effort to stop Mousavi’s growing political campaign on Facebook: his Facebook Page now has over 6,000 supporters.

The 23 million Internet users in Iran are perhaps angry and frustrated, but they aren’t surprised. Internet censorship in Iran is severe, if not harsh. In 2008, the government blocked 500 million websites and arrested four bloggers, making its way to the “Internet Enemies” list. Censored content ranges from politics and religion to women’s and human rights.

In the recent U.S. presidential race, we saw how online platforms like Facebook and Twitter can change the potential for increased political communication – not just measured in reach, but also in the depth of conversation and engagement. And in this case, the Iranian government is feeling threatened by the power of the social graph to sway history against its favor.

You can now get the latest updates from the Pope on Facebook, with the new Pope2You application just launched by the Vatican. Adding the app allows you to view pictures of the Pope, send postcards to friends, and read speeches and messages. Here’s how it looks:

Each of the postcards can be sent to any of your Facebook friends and feature pictures of Pope Benedict XVI and an special message. There isn’t really anything more to the app right now, but more should be added soon.

The application is part of a new site that is attempting to appeal to current and potential Catholics and interested parties though social media. The Vatican is also letting users find the Pope’s messages on a YouTube channel as well as an iPhone app for keeping up with Church news.

So is this evidence that the Catholic Church is recognizing the power of Facebook as a communication tool?

“We recognize that a church that does not communicate ceases to be a church,” said Monsignor Paul Tighe, secretary of the Vatican’s Social Communications department.

“Many young people today are not turning to traditional media like newspapers and magazines any more for information and entertainment. They are looking to a different media culture, and this is our effort to ensure that the Church is present in that communications culture,” Tighe says.

Check out the top headlines and insights this week from Inside Social Games:

Monday, May 18

• WonderHill Raises $7 Million, Building “Wholesome” Social Games
• Pet Society Expands to PetSociety.com with Facebook Connect

Tuesday, May 19

• Playdom Launches Poker Palace on hi5, Integrates hi5 Coins
• Some Social Games Have Facebook Pages With Over a Million Fans
• Leaf Trombone is an “MMMG” that’s Turning iPhones to Brass Worldwide
• Twitter – Now With Dating?

Wednesday, May 20

• Girl Wars on the iPhone is “Mobsters in Dresses”
• SGN Bringing Dogfighting to the iPhone

Thursday, May 21

• Acclaim Partners with Peanut Labs to Monetize its MMORPGs
• Girls in Tech Holding Panel on Casual & Social Games Next Thursday

Friday, May 22

• Funji Launches Avatar-Based Social Networking App for the iPhone
• Compare People – What Do You Think of Your Friends?

Facebook has just issued a Friday night press release announcing the settling of a trademark dispute with Think Computer Corporation, whose founder Aaron Greenspan created the houseSYSTEM student web portal while he and Facebook founder and CEO Mark Zuckerberg were classmates at Harvard. Terms of the deal were not disclosed, but if the rumored “$65 million” settlement with the founders of ConnectU is any indication, it’s possible Greenspan’s settlement could also be valued in the millions.

In the statement, Zuckerberg said:

“Aaron and I studied together at Harvard and I’ve always admired his entrepreneurial spirit and love of building things. I appreciate his hard work and innovation that led to building houseSYSTEM, including the Universal Face Book feature. At school, I was even a member of houseSYSTEM. We are pleased that we’ve been able to amicably resolve our differences.”

“I am glad that my contributions have been recognized by Facebook. Mark has built a tremendous company at Facebook, and I wish them continued success in the future,” Greenspan said in the release.

Here’s what happened: Greenspan’s houseSYSTEM, a web-based portal for students at Harvard that he built in 2003 (before Facebook was founded), included a feature called “The Face Book.” However, in 2005, Facebook was awarded a trademark for the term “Facebook” by the USPTO. Facebook was then awarded a second trademark in 2006. Greenspan had since filed petitions to have the USPTO revoke both of Facebook’s trademarks, saying he had used the term first. (See this 2007 NY Times story for more.) However, now all of that is going away: as part of the settlement, Greenspan canceled all of his legal actions against the company.

This isn’t the first time Facebook has settled legal matters originating from Mark Zuckerberg’s time at Harvard. Last year, the company settled claims from the founders of a company called ConnectU, whose founders Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra claimed Zuckerberg basically stole the idea for Facebook from them while they were undergraduates at Harvard. Drama has since ensued on the ConnectU side as the Winklevosses fired their lawyers and sought to have the settlement canceled, but the courts have upheld it since.

Facebook has just announced that starting tonight, the exchange rate for Facebook Credits (Facebook’s virtual currency) will be changing by a factor of 10X from $0.01/credit to $0.10/credit. At the same time, Facebook Gifts prices will fall by a factor of 10, keeping gift prices effectively constant. Users’ credit balances will be adjusted as well.

Why is Facebook making the change? Facebook says it wants to “simplify the use of those credit by taking away a zero from gift prices” in order to “make sure that even the smallest amount of credits is meaningful.”

“Now by accumulating as little as 10 credits, you can buy a gift to add more significance to a friend’s birthday, celebrate a special occasion or simply have fun,” Facebook says.

Since migrating to a credit-based currency system last fall, Facebook has been testing a variety of initiatives with its virtual currency, including credit gifts, branded virtual gift credit bundles, and soon, it will launch tests with third party Facebook Platform applications.

In many virtual economies, game designers and economists optimize performance by consistently tweaking exchange rates, and often providing variable price points for different quantities of virtual currency. However, it appears for now that Facebook is keeping it simple at 10 cents per credit with no bulk purchase discounts.

This adjustment will help preserve the value of the Facebook credit. In the future, I wouldn’t be surprised to see Facebook experiment with more sophisticated ways of pricing and selling currency to different users based on their demographic profile, payment layer constraints, and purchase pattern history.