If you’re a Facebook user looking for a place to watch New York’s Time Square ball drop this New Year’s Eve, check out the live video webcast on TimeSquareNYC.org, and Livestream.com/2010, and Facebook.com/TimesSquareNYC, and in the embedded video below.

Facebook’s live-streaming widget is live on these sites, so you can chat with your friends — or everyone — while you count down. Bigger picture, this is another example of the the live-streaming chat feature being live on a major media site; among many past examples, it was also available on CNN’s coverage of President Barack Obama’s inauguration and Michael Jackson’s funeral.

There has been considerable confusion about the ways that Facebook Page owners can — or can’t — offer promotions inside Facebook. The company significantly updated its promotions guidelines in early November. Among many other changes, it prohibited owners from running any contests or promotions that required users to perform any action outside application canvas pages or tabs in order to enter – apparently prohibiting page owners from requiring users to become fans to enter.

As the marketers who read this site know very well, this is a big issue, because promotions have proven to be a great way for companies to get more fans on Facebook. Owners can then use Pages to engage these fans about new products and other announcements.

But Facebook made more changes to its promotions guidelines on December 22, adding the following line, in bold:

4.2 In the rules of the promotion, or otherwise, you will not condition entry to the promotion upon taking any action on Facebook, for example, updating a status, posting on a profile or Page, or uploading a photo.  You may, however, condition entry to the promotion upon becoming a fan of a Page.

Requiring people to become fans to enter a promotion “has always been allowed, but we wanted to make it explicit as we often got questions about it,” according to a Facebook spokesperson. “So it’s not a new policy, but is new language in the policy.” The company’s latest guidelines also offer some examples at the end of the document about specific ways Page owners can or can’t condition entry.

You cannot: Condition entry in the promotion upon a user providing content on Facebook, such as making a post on a profile or Page, status comment or photo upload.

You can: Use a third party application to condition entry to the promotion upon a user providing content. For example, you may administer a photo contest whereby a user uploads a photo through a third-party application to enter the contest.

You cannot: Administer a promotion that users automatically enter by becoming a fan of your Page.

You can: Only allow fans of your Page to access the tab that contains the third-party application for the promotion.

So, for example, the Subway campaign that launched last week was following the guidelines in requiring users to become fans in order to participate in a promotion — winning coupons for free sandwiches.

Web measurement firm Experian Hitwise said in a brief note this week that Facebook was, for the first time ever, the most trafficked site in the United States on Christmas Eve and Christmas Day last week.

We followed up with the company to get more details on what this exactly looked like. Here’s the graph it provided:

Google, overall, still got the largest share of US internet visits last week; while it also saw a holiday lift, the increase was not nearly as great as Facebook’s.

Hitwise also sent over a table showing Facebook’s unique visits each day last week. Christmas Even, Christmas day and the day after all gained substantially more new visits than previous days. Perhaps families were telling each other to join — or at least use — the service during those days. Overall, according to Hitwise’s Matt Tatham, traffic to Facebook rose 10 percent over the course of last week.

Meanwhile, many of the largest third-party applications actually saw drops around Christmas day. As we surmised earlier this week, the reason for this could have been that the people who were visiting Facebook during these days were busy looking at photo albums, updating their status, commenting on their friends and family’s Walls, and using other core parts of the site to share information with their loved ones instead of amusing themselves with games and other apps.

However, at least one app saw a massive surge around Christmas, too: Facebook’s iPhone app. Usage was possibly driven by many new owners of iPhones and iPod Touches going and downloading the app from the iTunes App Store.

Crunchyroll has until recently been a destination site that runs Japanese animation videos and other Asian media content licensed for international audiences. But it’s beginning to create social games as a way to promote this content, with the first one being the only official application for Naruto, a long-running manga and anime series about a young ninja.

The application itself is a straightforward role-playing game. You undertake missions to gain points and access new levels via text-based combat. While the game already includes offers so users can gain virtual currency for buying virtual goods, the bigger play — at least for now — is to try to promote the Naruto brand, as Crunchyroll chief executive Kun Gao tells us. While the company has not yet added direct payments for virtual goods, the app includes very clear integration points with the home site, including the ability to watch videos in order to receive special items.

> Continue reading on Inside Social Games.

Surprisingly, Subway did not have an official fan Page on Facebook until Christmas Eve. Since announcing the Page on Twitter yesterday, they have been running a Facebook ad campaign that has helped it quickly climb to 215,000 fans (at the time of writing).

We say surprising because Subway is one of the top advertisers in the food service industry with a $375 million annual advertising budget, and because very soon Subway will have more locations than McDonald’s in the United States. So it is a bit surprising that they’ve taken this long to get on Facebook, where many other fast food chains and food brands already have a strong presence.

Though late to the game, Subway seems to have thought out their Page, and are already running a video commercial sneak peak and a giveaway promotion. The exclusive video is a new twenty second commercial featuring Olympian Michael Phelps underwater with his hands a foot apart (for their $5 foot-long subs).

The company’s promotion is also pretty strong. Subway will give away ten $50 gift certificates every week starting from yesterday and ending January 24, 2010 (and per Facebook’s promotional rules, users do not have to be a fan of Subway’s Page to participate). [Update: In fact, you do have to become a fan in order to participate.]. With the general popularity of Subway (and its $5 subs) coupled with this promotion and Subway’s penchant to spend on advertising, we anticipate that this Page will see very strong growth over the next month.

As we’re on the cusp of entering 2010, the Facebook Platform is now over two and a half years old. While that time has gone by quickly, the Platform has come a long way, and is starting to show signs of maturity. After the “wild west” of 2007, Facebook primarily opted for Platform stability and growth instead of monetization in 2008. But while Facebook continued expanding by leaps and bounds this year, 2009 was also the year that Facebook’s platform monetization efforts really began to take shape – in somewhat unexpected ways.

It’s somewhat hard to remember now, but during much of the last couple years the tech press was heavily focused Facebook’s plans to build a “PayPal killing” payments service. The idea was basically that Facebook would monetize its platform by owning both the payments layer and the identity layer, eventually spreading its tentacles further throughout the web via Facebook Connect, which would serve as the underlying infrastructure for both an ad network and payments service in the future. Less attention was paid to the role Facebook would play in paid customer acquisition for developers, primarily due to the fact that for a long time developers were able to distribute their applications very widely and very cheaply through aggressive use of Facebook’s “viral” communication channels.

So, what actually happened in 2009? While Facebook has indeed been working on its payments service, it’s looked quite different than many expected – primarily focused on currency, instead of building out broader direct payments infrastructure and operations – while in the meantime, developers have been playing a leading role in Facebook “beating the shit” out of its advertising numbers (we believe as many as 7 out of Facebook’s top 10 performance advertisers are Platform application developers). Let’s take a closer look at what has played out in each area and why.

1) Facebook: Monetizing Virtual Goods Through Currency

Although Facebook is building a payment service for app developers, it’s focusing more on partnerships with other types of payment services rather than building out the payments layer itself. Facebook still requires users to purchase Facebook Credits (its universal virtual currency) using a credit card, and it has begun testing additional payments partnerships. For example, earlier this fall, Facebook began testing mobile payments with Zong, and we expect Facebook to start testing more payments integrations with other payment services (from mobile, prepaid, and regional providers) in 2010.

Ultimately, however, Facebook has shown so far that it wants to rely on payments partners to manage deposits, and we think that will continue next year, instead focusing mostly on its currency experience. Why? Basically, currency is a much higher margin business. While we believe identity is vital to payments, and Facebook is in an interesting position to expand its role as a more generic payments platform in the future, we don’t believe Facebook is likely to build up the global operations necessary to build out such a service soon.

However, Facebook is interested in playing a more meaningful role in creating a universal currency that could assist the expansion of the virtual goods market. Although a couple payments aggregators have tried to create a quasi-universal currency on the Facebook Platform, no one has really succeeded as of yet.

Facebook believes it can add significant value to the Platform virtual goods market through its currency, and has started experimenting with efforts in this direction with developers. If Facebook Credits can provide a better experience for users, who might trust Facebook with their data more than they do third parties, thereby increasing conversion rates for developers, Facebook could create the most valuable currency on the Platform, even without any mandatory Credit-use policies. At that point, it could reasonably charge 30% transaction fees and build a relatively substantial revenue stream.

How much money are we talking? To get our specific estimates for the size of the virtual goods economy on the Facebook Platform for 2009 and 2010, get our Inside Virtual Goods: The US Virtual Goods Market 2009-2010 report. But for the sake of comparison, let’s say developers on the Facebook Platform will do a) $250 million, b) $500 million, c) $750 million in virtual goods transactions next year.  If Facebook were to power the currency for, say, 25% of those transactions, it would see a) $19 million, b) $37.5 million, c) $56 million in currency related revenues next year (assuming a 30% fee). However, it’s important to remember that it’s still very early, and Credits doesn’t power very many transactions today.

Facebook’s ability to make money with currency on the Platform depends on its ability to get both the application integration and payments experiences right. The leading payment aggregators on the Platform have been doing this for years now, so we’re interested to see how much and how quickly Facebook finds success as it rolls out its currency more broadly in 2010.

2) Facebook Ads: Quietly Raking in Developer Spend

Although we’ve written extensively about this trend over the course of the year, many people are still surprised to discover just how much some developers are spending on Facebook Ads. While Facebook started to monetize the Platform directly through Credits this year, 2009 was really the year that developers started to meaningfully use Facebook’s advertising platform for paid customer acquisition.

Developers turned to Facebook to accelerate growth for a variety of reasons, including the competitive dynamics of the market, changes to Facebook’s communication channels, changes in the Facebook Platform ad market, and social gaming’s growth across a variety of interesting demographics (for details, see our Inside Virtual Goods report). But, unlike one year ago, as we enter 2010, developers now have enough data to start estimating the lifetime value (LTV) of different users, and they’re spending behind those calculations.

Because Facebook Ads are becoming an increasingly attractive way for developers to find more people in their target audience, developers are becoming increasingly sophisticated in their traffic buying. As you may expect, some are beginning to use proprietary tools that run on the new Facebook Ads API to automate and improve performance. We think this is a good sign, as it reflects that developers are finding valuable users with increasing efficiency, and we expect this to continue in 2010.

A side effect of increased developer ad spending is that some people are getting more concerned that this will create misaligned incentives that could lead to Facebook giving special treatment to big fish (i.e. Zynga, EA, etc.). The thinking here is that since large developers have gotten a lot more aggressive in aligning their interests with Facebook by spending a major piece of their marketing budgets on Facebook Ads, Facebook’s policy enforcement team might skip over some of their usual checks when reviewing their apps.

We think this is an important issue to keep watch on, but we also think that Facebook has a long term view and is unlikely to sacrifice the reputation of its platform for short term gains, somewhat akin to how Google hasn’t sacrificed the reputation of its search results for big AdWords spenders. It’s always possible Facebook could explore the gray area here more deeply, still offering sufficient incentive to all developers to keep them on the Platform, but we would be surprised if Facebook established the precedent that big spenders get significant policy privileges, especially at this point in the development of the ecosystem.

2010: Facebook Adds, Captures More Value

It cannot be understated how much the Facebook Platform has accomplished since it launched. Three years ago, it didn’t even exist. Today, the Platform is serving hundreds of millions of users per month with hundreds of thousands of applications, all for free. After the first wave of the gold rush subsided in 2008, and Facebook clamped down on early abusers of the Platform, a new wave of entrepreneurs building large virtual goods-based businesses has emerged. Today, Platform applications play a very important role both in keeping Facebook users engaged on the site and in growing Facebook’s user base – and the Platform is really just starting to generate revenue.

While it’s true that fundamentally Facebook is making money by “taxing” the moving parts of the Facebook Platform ecosystem, it’s important to remember that Facebook must continue to add sufficient value for developers if there are going to be any moving parts to tax in the future. Facebook must continue to offer a compelling value proposition to Platform developers and users, and there is no shortage of ways that Facebook could screw that up significantly – from policy blunders to privacy mishaps, from product problems to payments scares.

Ultimately, we think 2010 is going to be a year in which Facebook both adds and captures more value in both the currency and user acquisition components of the Facebook Platform ecosystem. Facebook’s currency and advertising tools are still very rudimentary, and a lot (if not all on the currency side) is still to be seen. It’s a good time to be building social games and apps monetizing through user payments for virtual goods, and Facebook will be increasingly getting in on the party next year.

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

Last year’s apps made a comeback in the wake of declining Christmas apps on this week’s list of the top 20 apps that gained the most daily active users in the week ending December 29, according to AppData.

First place, Facebook for iPhone is an older app but is also a first-party app put out by Facebook. It has the highest DAU of any app on the list at 10.9 million; hasn’t been in the top five in over a month and a half. This is almost certainly due to a lot of people getting the iPhone and iPod Touch for Christmas, then downloading the Facebook app when they started using their new devices.

	Name	DAU	Gain	Gain, %
1.	Facebook for iPhone	10,871,557	+1,275,494	+11.73
2.	Blingee Book	722,109	+718,871	+99.55
3.	Pillow Fight	1,201,933	+705,334	+58.68
4.	Mafia Wars	6,054,476	+296,411	+4.90
5.	Entrevista tus Amigos	593,760	+268,046	+45.14
6.	Facebook for BlackBerry® smartphones	7,059,876	+201,511	+2.85
7.	Yearbook	317,885	+195,539	+61.51
8.	Bubble Popp	275,581	+154,437	+56.04
9.	Happy Island	1,447,647	+136,706	+9.44
10.	My Year In Photos	247,779	+132,634	+53.53
11.	Happy New Year 2010 by Kari	124,569	+124,335	+99.81
12.	Ninja Saga	382,658	+96,945	+25.33
13.	Country Life	1,607,873	+94,607	+5.88
14.	Mobile	5,589,943	+82,371	+1.47
15.	Zoosk	573,662	+67,905	+11.84
16.	歡樂癲地 Funland	97,406	+62,903	+64.58
17.	Happy Aquarium Community	93,566	+62,147	+66.42
18.	開心農場	2,659,287	+53,530	+2.01
19.	Texas HoldEm Poker	4,938,461	+37,524	+0.76
20.	Mignon & Sexy ?	34,326	+32,722	+95.33

New Years have pushed custom-card building app Blingee Book to second place, despite not being in the top 20 in two months. Seeing renewed interest after its first year on Facebook, The app saw 4,420 users on Christmas and 341,000 DAU shortly after, growing to 722,000 DAU yesterday. The app was one of two this week to see a 100 percent increase. The other was Happy New Year 2010 by Kari. It’s not clear why both of these apps have shot up so recently and so quickly.

Shikha is seeing their renewing efforts for Pillow Fight pay off. The developer added seasonal awards to the year-old hot-potato-type game and the app has seen a rapid increase in DAU for the past few weeks as a result, rising two spots since last week and gaining 60 percent or 705,000 DAU.

Mafia Wars, one of the first Facebook apps, is back in the top 20 this week after being absent last week. Its gain of 296,000 players this week accounts for five percent of its total DAU, 6.1 million.

Entrevista tus Amigos (“Interview your Friends“) is the highest ranked foreign-language app with 268,000 new players and 594,000 DAU. It is the highest gaining app released this month of any on the top 20. The previous four of the top five were released in 2008. The other foreign language apps this week were 歡樂癲地 Funland and 開心農場

Of the top 20, three apps saw a rise in over 95 percent this week and 11 of the top 20 raised their DAU by 25 percent or more.

Next week should see the final numbers for the year and a potential fresh start for developers and the top 20.

A few big developers have dominated the social gaming headlines this past year: Zynga, Playfish and Playdom. But a range of others having been rising up on our AppData leaderboards, including RockYou, CrowdStar, 6 Waves, to name a few.

Fortunes can change quickly on Facebook’s platform. We should not necessarily assume the companies that have gotten big this past year — or in the past few months — will be dominant next year. Indeed, traffic to almost all social games has dropped in the last couple weeks in a double-whammy of users being distracted by the holidays and new policy changes from Facebook impacting how developers can communicate with users.

The next year should see lots of turbulence on the leaderboards, as talented developers from other parts of the gaming industry move in, and as the spam-laden viral channels that many leaders have relied on continue to get shut down (er, reoptimized).

But here’s an overview of where the current Facebook social gaming leaders are. Note: while some of these companies also have significant presences on MySpace, the iPhone and other gaming platforms, Facebook offers both the largest platform and the most visibility into traffic, so it is what we focus on, below.

Zynga: The company has aggressively developed new games in popular categories, while pushing gifts, notifications and other viral features. To the chagrin of many rivals, the quality of its games has also continued to increase as it churns out a new title every month. This fall, it has had hits with PetVille, FishVille and Café World. Although each hit seems to be a little smaller than the last, the company has also kept developing new features for older titles like Mafia Wars, Zynga Poker and its whale, FarmVille. With a portfolio-summed (and not deduplicated) total of 232 million monthly active users across all of its 37 Facebook games, and around 60 million daily active users — and a big new round of $180 million, including an employee stock sale plan — we can expect the company to be around for a long time to come. At some point, probably as a publicly-traded company.

Playfish: After its seminal sale to Electronic Arts earlier this fall in a deal worth up to $400 million, the company has appeared somewhat distracted as its leaders and teams are integrated into the gaming giant. However, it has still been publishing new titles, namely Poker Rivals, while adding features for its existing hits. The company has hinted at big moves in the coming year, including the possibility of bringing EA franchises on to Facebook. The user numbers for its 11 apps have stayed steady at around 60 million MAU, although its DAU count has fallen slightly over the course of the fall to slightly above 10 million. With the resources of EA backing it up, look for the company to introduce significant new titles this coming year.

Playdom: It originally started on Facebook years ago, but the company found its first successes on MySpace; as Facebook has grown, though, it has been aggressively expanding back on to it over the last year. The company’s purchase of Green Patch, a new $43 million funding round this fall, plus the launch of growing new titles like Mobsters 2: Vendetta and Tiki Farm, suggest it will be a bigger competitor in the coming year. As of today, its MAU count for its 12 apps has been sliding down to around 20 million MAU, with DAU at 2.56 million.

RockYou: While the developer has been obsessed with virality since the inception of the Facebook platform in 2007, it has been expanding — into the ad network business in the past year or so, and into social gaming this fall, with the launch of Zoo World. That game, which the company has interestingly both launched as an app and as an app within its various gifting and poking apps, has been seeing strong growth. It also raised a big $50 round recently. The company has seen a big jump to 65.5 million MAU among its 16 apps this past fall, while its DAU count has stayed much lower, currently at 3.53 million — this is likely due to the fact that most of its apps are not games, that do not entice users to use them every day.

CrowdStar: This one came out of nowhere with its genre-defining Happy Aquarium game this fall. It has since pumped out new titles including Happy Pets and Happy Island. The company has actually been around since the early days of Facebook’s platform, and has spent a long time fine-tuning its growth and monetization strategies. After playing its cards close to its chest for so long, it is now clearly aiming to be a social gaming leader, with the intention to be the “most profitable” company by matching a small head-count with lots of successes. It now has 47.5 million MAU with 10.8 million DAU. It notably has the most DAU after Zynga and Facebook’s own apps, according to AppData.

6 waves: Perhaps the most intriguing of the many intriguing Asian developers getting into Facebook apps, this company has stayed pretty quiet as it has launched 114 apps to date, that we know of, in a wide variety of languages. Some of the apps are games, some are of the simpler gifting and poking variety — in any case, the company’s plan seems to include using its reach to promote games and apps from other developers. It currently has around 36 million MAU and 6.77 million DAU.

Slide, Inc.: After engaging in a viral-app battle with RockYou when Facebook first launched, the company has changed focus in the past year and a half to make more social games. It has played clean, neither engaging in many of the spammy tactics that lots of rivals have relied on, nor using the often-scammy offers that others have used to monetize. It has also been coming out with a range of original and genre-driven games, or “social entertainment” apps, as the company has described them, some of which have been seeing decent traction. Its MAU count has dipped down to 23.1 million and its DAU to 1.09 million. However, given the many platform changes hitting spammed-up channels, Slide’s strategic shift to quality could pay off in bigger ways this coming year.

Lolapps: After getting big via quiz and gift creator apps, this company has transitioned to creating quality role-playing games intended to promote off-Facebook products like Console games. It has already cut deals with companies like Atari and EA. While we don’t have a lot of visibility into all of the white-label apps it has running, titles like Champions Online and Dante’s Inferno have been climbing up our charts.

There are also quite a few other social game developers that are seeing significant, if still relatively small numbers. Slashkey had a notable hit with Farm Town: the virtual farming app preceded FarmVille, and while it has not kept up with Zynga’s version, the user base has stayed strong. Casual game developer Popcap Games has managed to bring its classic Bejeweled puzzle game on to Facebook — a positive sign for other casual game developers looking to get more social. SGN, a long-time Facebook developer, has been busy focusing on the iPhone, but it has also maintained its games on Facebook. Serious Business has been working to follow up on its successful Friends for Sale game with others, like The Hierarchy. China-based Rekoo also has a couple solid hits. Other notables include MindJolt, Meteor Games, TallTree Games, Country Life, Kobojo, Five Minutes, IGG Inc., Metrogames, GameHouse and GameDuell.

“Have you ever lost your cell phone?” is the question Motorola is asking its fans in a contest to win one of 5 of their CLIQ smartphones. To enter the contest, here’s what Motorola is asking fans to do:

“Tell us your craziest story about how it happened and enter to win a new Motorola CLIQ with MOTOBLUR! We’re giving away 5 phones and will also feature some of the creative stories on our Facebook page…”

As per Facebook’s promotion rules, users do not have to become fans to enter the contest.

While the contest page itself is hosted off of Facebook and on Motorola’s website, we couldn’t find the promotion after a quick check around motorola.com; and, the page is titled “Facebook Contest Phone Giveaway.” So this seems to be an exclusive offer for Facebook users. As well as filling out contact information, entrants must tell the “craziest thing that has happened to your phone” in less than 1000 characters.

Other promotions that Motorola has run this month include their “12 Days of CLIQmas” which they promoted on their Facebook Page but which was run on Twitter, and another giveaway of NFL tickets to a Cincinnati versus Detroit game (which didn’t get much of a response from Motorola’s fans).

Motorola has also been running ads lately to get people to their fan Page, and has gained 97,165 fans since December 18.

Hitwise has an interesting data point out today about Facebook traffic: On Christmas Even and Christmas day, Facebook was for the first time ever the most visited site in the United States.

Today’s stats aren’t too surprising.

The web measurement firm reported a massive Christmas spike in Facebook traffic a year ago, as well, although Facebook was not the number one site then. However, it has grown from 42 million monthly active US users to 100 million in the past year, according to the numbers the company reports in its advertising tools. And, earlier this month, Hitwise also reported that Facebook had become the number one search term in the US in the past year.

And, while Facebook has grown from less than 150 million to 350 million monthly active users in the past year, worldwide, Hitwise is reporting that in the UK, Google is still number one. Check out the graph below for more on that.

We’ve asked Hitwise for a graph to illustrate its latest US numbers. In the meantime, judging from the one the company published last year, as well as the UK one this year, the site probably saw a massive spike in US traffic for the holiday — which is how it reached number one over Google et al.

Anyway, clearly a broad swath of people are checking Facebook during Christmas. Given the rapid growth the service has seen among all demographics in the past year, Facebook is becoming more than ever a key way for friends and family to stay in touch with each other if they could not be together in person.

Another, quite interesting piece of data about that: many popular social games and other applications actually saw their numbers drop on Christmas. It may be that users preferred to use photo albums, status updates, notes and other utility-based features for sharing with each other, rather than playing games together.