Inside Facebook

It’s a week of international imports and premieres for social startups. We have seen new levels of quality in synchronous games, automated fighting titles, and even some new lessons in tycoon zoology. Here are this week’s headlines from Inside Social Games:

Monday, March 8th, 2010

• CrowdStar Learns Facebook Zoology with Zoo Paradise
• Mochi Media Announces Social API, $10 Million Fund for Flash and Social Games
• Fast Typing, Cities and Growth from MindJolt on This Week’s List of Fast Facebook Growers by Monthly Active Users
• Gravity Bear Weights In to Social Gaming on Facebook with Battle Punks

Tuesday, March 9th, 2010

• Sony Online Entertainment Launches PoxNora on Facebook
• SiXiTs: A New Cross-Platform Startup Founded by Gaming and Visual Effects Veterans
• Super Rewards Brigns Offer Wall Service to Flash Games for the Web

Wednesday, March 10th, 2010

• CyberAgent’s Ameba Pigg Virtual World Comes to Facebook as Ameba Pico
• Slides from Presentation at GDC on the State of the Social Gaming Industry
• Facebook Credits Now the First Payment Option in Zynga’s FarmVille Game
• City Building Games Make a Strong Showing in This Week’s List of Top Facebook Gainers by Daily Active Users
• MySpace Looks for More Social Game Developers with Big Platform Upgrades

Thursday, March 11th, 2010

• Feline Frenzy: Robot Wars is a New Facebook Game from Pakistani Developer White Rabbit
• Hi5 Launches Game Developer Program, Offers Special Access to Users and Monetization
• More Speakers, Venue Set for Inside Social Apps 2010 – April 20th in San Francisco
• Israeli Brewer Uses Facebook Gender Battle Parking App to Promote Beer

Friday, March 12th, 2010

• MyTribe Wants to Be a Complex, Engaging Facebook Game – And Mostly Succeeds
• Playdom’s Social City is the Latest Facebook City Building Game to Get Millions of Users
• Social Gaming Roundup: iPad, Frosmo, Statistics, & More
• Independent Developers Show Strongly on This Week’s List of Emerging Facebook Games

WildTangent is continuing its foray into Facebook and social gaming, now providing brand-advertising offers on developer Playdom’s Facebook app, Tiki Farm. The tropical island farming game is beginning to feature brands that sponsor particular existing virtual goods in the game. Instead of a user paying for the good, they watch a video or somehow engage with an ad to get it. The first available is an orange tree, sponsored by Herbal Essence.

Although WildTangent has been offering a variety of sponsored advertising services for casual games, massively multiplayer online games, and other web-based games, it began focusing on tighter integration of virtual goods recently with the launch of BrandBoost. While some games may want to have an advertiser sponsor an item, the service can provide free access to a subscription-based game in exchange for watching a brand’s video. Popcap’s Bejeweled Blitz is also using the service, during the puzzle-shooter games’ weekly tournaments on Facebook.

We’ve covered a variety of companies beginning to get in to this area. WildTangent’s has an interesting advantage: direct relationships with 75 of the top 100 advertisers in the US, that it has developed over the years it has been running branded ads in games across the web, and through strategic investors like marketing conglomerate WPP. Those ads could be about anything from entertainment like new games and moves, to consumer packaged goods, auto, etc. Many other companies provide engagement-based video advertising provided by other networks, or more general services. WildTangent tells us its brand advertisers are looking for a qualitatively good experience for users, to help increase public perception. Tying a brand to a specific virtual item that a user is already familiar with in a game is one way to make the connection especially clear.

WildTangent charges on a cost-per-engagement basis, using a custom rich media format. On Facebook, it plans to expand to Facebook’s forthcoming 760 pixel width once that becomes available. Although advertisers have sometimes balked at going off an Interactive Advertising Bureau standard format, WildTangent tells us that many of its clients are seeking out these formats, to try to reach users in more meaningful ways. In many cases, the company will initially provide the creative service for an ad, and if it proves to work well, the client will do subsequent ads in-house. The ad format for sponsored items may include an overlay on top of the price the good normally costs, to help show users the virtual value of what they’re getting by watching the ad.

The game has already been in testing sponsored items with FreeRealms; other developers running BrandBoost include Sony Online Entertainment, Outspark and OMGPOP.

While many offer companies are looking for more brand advertising, WildTangent is looking for more inventory — whoever ends up with the most business, more brand ads should mean more revenue for developers. On that note, WildTangent says it is looking at other social platforms besides Facebook, but isn’t saying any more at this point.

Jambool, the payments startup that offers in-game payments on Facebook through a product called Social Gold, recently announced that it has begun offering international currencies for players in other countries. Localized currencies are becoming more important for payments in social gaming, especially with the ever more international audience on Facebook.

The first nine currencies Social Gold is supporting, including the US dollar, are all from either English-speaking countries like Australia or Western European countries like Sweden. But the end plan for Jambool, along with its rivals, is to allow payments from many more of the world’s 150+ currencies.

Vikas Gupta, the co-founder of Jambool, says that offering local currencies is important for selling virtual goods in markets beyond the US. “People will pay more in their local currencies because it’s more clear to them what they’re getting,” Gupta told us earlier this week.

However, he recommended against also trying to tailor the prices to local markets. “If you change prices for different geographies, you’re encouraging fraud,” Gupta said. “I don’t think there’s any need to. You see people paying 50 percent more of their disposable income in a country like China, on games, than they do in the US. That speaks volumes, I think.” What Gupta does recommend is localizing the language and features of games that have large international audiences.

We spoke to Gupta after his panel at that Flash Gaming Summit in San Francisco, where he also gave out some recent statistics from the games his company works with. Purchasing rates are still low, with often times  only couple percent of players making a purchase at all, but a growing number of people that make an initial purchase will buy more.

Following the first purchase 56 percent will buy again, according to Jambool, while another 25 percent will make two or more purchases. The average amount purchased across all these groups is $60, while there’s a significant group of “whales” who spend over $1,000.

Social Gold takes an average 7-10 percent cut from the developers it works with, which includes any fees charged by the end payment companies it works with, like PayPal, Visa or the recently-launched “virtual debt” company, Kwedit. By comparison, the in-house Credits that Facebook pushes take about 30 percent, although apps that use Credits get special promotion in Facebook’s Games Dashboard, and other benefits, like Facebook’s brand.

Along with the increased likelihood of a purchase from international users if they can pay in their own currency, Gupta also says that having an in-game option for a single-click purchase triples the likelihood of a user buying a virtual item. In general, streamlining payments is key for attracting impulsive purchases.

Besides offering advice and design support to game developers, Gupta says that fraud prevention is also growing in importance. More fraud is tied in part to having a more international audience, but it will also be more of a problem if social games become more like MMOs, a trend Gupta expects to take place.

Today, fraud still isn’t much a risk to developers, because virtual currency is usually only good for a single player. But games with more direct interaction between players and second-hand markets for goods quickly find fraud to be a real problem. “As the ecosystem developers, it’ll be a bigger challenge,” Gupta says.

While RockYou already provides offers, banners, and other forms of advertising to application developers, it’s added another: a form of engagement advertising, that it’s calling “Deal of the Day.”

The company provides advertisers — especially big brand advertisers — with banner ads that cost based on different engagement actions. These might include a user downloading a coupon, taking a poll, becoming a fan of a Facebook Page, and more. The ads appear within applications from RockYou and developer partners on Facebook and other sites.

Facebook itself offers engagement ads directly linked to Facebook products like events, Pages, and videos.

The ads will be part of RockYou’s various monetization services; earlier this week, it announced others, including virtual currency and local ads.

The number of big social applications that use Facebook’s virtual currency, Credits, continues to rise. The latest is Zynga’s smash hit farming game, FarmVille, the largest application on Facebook with nearly 84 million users a month.

The integration is pretty straightforward, as you can see from the screenshot below. Credits is shown as the first of several payment options — others include direct credit card payments, PayPal, and a variety of other payment services, including prepaid cards and offers.

Zynga has previously been running Credits in some of its smaller Facebook apps, like role-playing game Pirates: Rule the Caribbean. Credits is now also appearing on some of its other big applications, like pet-caring title PetVille. However, it’s not on others, including Café World.

However, Zynga, like Playfish, Playdom and most other social gaming companies on Facebook, is not running Credits exclusively. But another big developer is: CrowdStar.

Clearly, many developers are reluctant to make Credits the exclusive way that companies monetize through virtual goods on Facebook. Facebook takes a 30% cut of all transactions on Credits, whereas third party payments companies typically take far less. Credits could play a meaningful role in Facebook’s revenue growth over the coming quarter – we recently reported that Facebook revenues were $600-$700 million in 2009, and could hit $1.1 billion in 2010.

However, the more users who use Credits, the more it will become the de facto way that they buy virtual currency on the site — which could bring in a lot more money for Facebook. The company is going out of its way to promote this, doing things like featuring games that use Credits within its suggested games list within its Games Dashboard. Fine-tuning apps to include Credits may also make the currency more valuable. CrowdStar’s Peter Relan has previously told us that “once you get over the hump, it’s great, and just as profitable.”

Also, rumors have circulated for months suggesting that Facebook wants to somehow make Credits the only virtual currency available on the site, but we have not been able to confirm anything along these lines.

While Facebook has been widely testing it with app developers since last year, we expect to see new announcements coming about it relatively soon. The company is potentially planning to launch a couple other big initiatives at its f8 developer conference in April, including location services and the  “Open Graph” API. It’s possible that Facebook will use the event to further promote Credits — moving it from a now-huge closed beta test to an open one, for example.

Note: The future of payments in Facebook apps and social games will be a central topic at our upcoming Inside Social Apps 2010 conference on April 20th, the day before f8, in San Francisco. For more details, click here.

Facebook is going to launch its location-based features “next month,” according to a report today from the New York Times — a confirmation of many months of rumors that we and other publications have been hearing. Sources close to the company shared specific knowledge of the tightly-wrapped project, including a clear message for developers: Get ready for location at f8, Facebook’s developer conference.

That’s where the new service will be unveiled, according to the report. Facebook will launch a way for users to check in at physical locations and share the information back with their friends on the site (possibly by attaching location data to status updates, for example). Crucially, there will also be a set of APIs so developers can access Facebook’s location service in their own applications.

Developer Impact

But certainly, by providing a location-based service itself, Facebook is making it harder for smaller companies to differentiate themselves through location alone. Foursquare, Gowalla and increasing number of other startups have been building services where users win “badges” or other virtual goods if they use their phones to “check in” at a physical place more regularly than other users. Given the details of Facebook’s plan, it seems the company wants to funnel consumer interest in these types of location-based games through its platform.

Facebook’s social graph likely reflects who many people would want to share their locations with, and for this reason some startups, including Foursquare, Gowalla and the FriendSpin iPhone app, among others, already offer ways to share locations with Facebook  friends — although the effort hasn’t converted to lots of users, that we’ve seen.

The promise is that Facebook’s own service would make location more popular, and so any company that relied on Facebook’s service might somehow ride that wave. On a related note, while Facebook may not be trying to build a location-based game, but game developers and other application companies on its platform could use the features to more directly compete with existing startups. For more, check out our panel on monetizing mobile social applications, happening at our Inside Social Apps conference a day before f8.

Location’s Long Time Coming

Facebook has been looking at location for a long time. But it has delayed launching the service, as many have previously heard, because the company has been concerned about privacy issues. It was also waiting for the concept to become somewhat popularized before launching anything, according to today’s report, something that is not yet clearly happening. But big web rivals have been testing their own location services, and startups are getting in to the fray.

As we covered last fall, the company updated its terms of service to reflect its interest in location:

Location Information. When you share your location with others or add a location to something you post, we treat that like any other content you post (for example, it is subject to your privacy settings). If we offer a service that supports this type of location sharing we will present you with an opt-in choice of whether you want to participate.

More recently, it has been rumored to be looking at acquiring location-based social network Loopt. And VentureBeat today notes, as we’ve heard, that Facebook has been working on a variety of location-related projects internally recently.

Given the lineup of location-based services launching at South by Southwest, a popular media and technology culture conference starting in Austin next week, we expect location — as a concept — to get even more buzz this spring than it has already. In fact, Facebook’s design team will have a location-related presence there, via a partnership with Gowalla. The team made a special set of drink coasters, it’s going to scatter them around the conference, and anyone can redeem the coaster for a free drink from the team; Gowalla is providing digital versions of the coasters, with the same reward.

In any case, f8 is looking like an especially opportune time for a launch.

Bigger competitors are also looming. Google and Twitter, in some sense Facebook’s main competition, both have location-based services already. Google’s Latitude has been out for many months, but it doesn’t seem to have caught on, partly because the interface is always on in the background, trasmitting your location. Changing Latitude to the “check-in” model and making it a more central part of Buzz, its new activity feed aggregator, could be a good way for Google to get in on the location action, as TechCrunch details — but now Buzz is out of the gate, with issues. But expect Google to work hard in this area, especially with its larger push into mobile with Android and the Nexus One. Twitter, meanwhile, has been testing a way for users to show the locations of their tweets for months, and that feature appears to going live for all users soon.

Location and Facebook’s Business

Getting into location will likely help Facebook accelerate into more local advertising. It has already been making location a part of its advertising services, in some sense. Advertisers can target ads on the site based on country, region or cities — as of today, thousands of cities. And Page owners can share news feed items with fans who identify themselves as being in certain geographic locations. Local businesses now have half of the 3 billion Pages on the site, according to Facebook statistics, and make up an increasingly large portion of spending on Facebook’s fast-growing performance advertising service.

A location-based service that allows users to specify where they are down to the building, for example, would provide data to Facebook and advertisers about the places they frequent. This could help Page owners and advertisers target ads to be more relevant.

Facebook has other reasons to want to try its hand at location now. It has quickly grown to 400 million monthly active users (it announced in early February, so the number is likely a bit  higher today). And around the same time it said that 100 million of these people access the service every month via their mobile phones, up from 65 million in September. Meanwhile, more and more mobile devices offer some way to share location. That’s a lot of people who can start quickly sharing their location with Facebook friends.

Facebook has expanded its list of “preferred” developers who help brands, celebrities and a wide variety of organizations build applications, Facebook Connect integrations, or custom features for Facebook Pages. This means more visibility for the 36 newly added developer-consultants, so maybe some new clients for them. There are now 50 companies listed, more than half are operating internationally, and in a total of 15 countries.

Facebook created the Preferred Developer Consultant Program last December, and is continuing to accept applications from prospective companies, more here. Our Facebook Marketing Bible also contains a list of service providers that we recommend.

Here are the new companies in alphabetical order, followed by a list of the existing ones. Note the addition of Techlightenment and 77Agency, two companies that provide automation services for bulk purchases of Facebook’s performance ads.

New firms on Facebook’s list:

• 77Agency Ltd.
• Always Be Social by Blueye Creative
• Brand Networks
• Candytech.biz
• Carrot Creative
• Fan Appz, Inc.
• Fission Strategy
• Fluid
• Friend2Friend
• Gamaroff Digital
• GroupCard Apps
• Hearsay Labs
• i2we, inc
• Inigral, Inc.
• Kitoks.com
• Komfo
• KRDS
• Large Animal Games
• Nudge Social Media
• Plexipixel Inc.
• Promoqube
• Ralph
• Resource Interactive
• Sociabliz
• SocialAmp
• Syncapse
• T3 (The Think Tank)
• Techlightenment
• theKBuzz
• Thuzi
• Transpond, Inc.
• VaynerMedia
• Votigo, Inc.
• Wishpot
• Xihit Solutions GmbH
• Zibaba

They’re joining these firms, already on the list:

Boomerang Networks has spent the last year quietly building an advertising offers service designed to take on established players like Offerpal and Super Rewards. Now, it’s taking the covers off.

Every offers company is busy trying to optimize which ads appear to which users. Boomerang’s offer wall includes thumbs-up and thumbs-down buttons so users can vote on which ones they like. That’s the beginning: the company combines this user feedback with user comments, profile data — as Facebook’s and others’ terms of service allow — as well as number of clicks. Then, it analyzes the data to figure out which types of offers make the best fit between the user base (by country, age and sex), the category of application, and the price the users are typically willing to pay for the offers relative to the game. When users interact with the resulting offers, Boomerang gathers more information on their behavior and further optimizes the offers. It also has a customer service team pre-screen for deceptive offers, it says, and won’t repeatedly show offers to users who take them or vote them down.

The company has made internationalization a priority. Chief executive Honor Gunday tells us it has deals with more than 130 advertising networks around the world, so it is able to filter offers to be relevant to users in specific places. He provides a rough breakdown of what this looks like. For medium to high-engagement games in the US, offers can bring in from $1.00 to $1.50 per user; in southeast Asian countries, $0.50 to $0.80; in Latin America, $0.10 to $0.20.

The offer wall includes some other notable features. It has direct payments from more than 60 providers around the world. Although some are available through payment aggregators like PayByCash, Gunday also says that it has brought in some options not available through most rivals, such as Cherry Credits in Southeast Asia. The wall also provides categories of offers by content type and popularity, and shows banner ads. To make the experience easier for users, it also provides a detailed customer feedback form about each offer, and provides a window showing pending payouts and past offer votes.

Users also can click to view a full “customer relationship management” interface showing them the following information about each completed offer: title, date taken, status, earned or expected amount of virtual currency, payout timeframe, and user-generated quality ranking.

Boomerang’s current publicly-named clients include TheBroth and Hitgrab, and is in talks with more. The service is now live for apps on Facebook, MySpace, Hi5 and Bebo. Boomerang has raised a round of funding from angel investors, but the amount has not been disclosed.

RockYou has been running advertising for other applications on Facebook and social networks for years, but the social application developer is increasing its effort in this direction. It’s launching a monetization platform that includes its existing advertising and offers features, along with virtual currency options, local advertising, and more.

It has a lot of advertising inventory, with more than 121 million monthly users in the United States — spread across its own ad partner applications on Facebook, MySpace and other social networks — and 13 billion monthly global impressions. While most companies on Facebook have chosen to either focus on building applications or providing services, RockYou’s strategy is to do both.

Called the “RockYou Monetization Platform,” the features intended to include something for everyone — and they should be pretty familiar, as much of what the platform includes, like offers, have been available since at least last year. Developers with simple quiz apps, for example, tend to make their money through banner ads; developers with social games tend to make money on virtual currency. So RockYou is making it clearer than ever that it intends to take on the wide range of other companies also trying to serve applications.

We should also note that RockYou is quite active on Facebook, this platform is intended for developers across the web, around the world. For example, the first item below, RockYou game ads, is focused on Flash game developers — the company is running rotating banner ads within these widgets. The suite’s ad inventory mostly monetizes based on cost-per-impression (CPM). More, from the company:

Display advertising

• RockYou Game Ads: Rotating ads ideal for flash games provide increased revenue by up to 50 percent
• RockYou Video Ads: High eCPM video and flash ads
• RockYou Banners: Standard IAB/Facebook compliant banner ads

Virtual currency marketplace:

• RockYou Surveys: Anonymous, spam-free surveys sourced from select brands and research firms
• RockYou Local: Purchasable discounts sourced from over 2,500 trusted brands, retailers, and local merchants
• RockYou Offers: Safe and Facebook-compliant free samples and subscription offers
• RockYou Payments: Trusted and top-performing payment providers

Note that RockYou Offers, as a company spokesperson tells us, is actually a white-labeled version of Peanut Labs’ online local advertising service, Cherry Deals, which just launched last month. Peanut Labs’ sales team has gone out and sold what are essentially group-discounted local offers, so people can earn currency in an online game in exchange for receiving a coupon to a local business. Cherry Deals is the name of the product one the rest of the web. Through the partnership, RockYou will run these local ads as part of the platform on Facebook and other social networks, a company spokesperson tells us.

There’s also another feature, set to be announced later this week: in-game engagement ads. These ads will let a user do something like watch a video in exchange for virtual currency, similar to how offers work but focused on taking particular actions rather than buying something or taking a survey. We’ve been seeing more and more examples of these sorts of ads lately — Facebook has been running its own for a long time, but others, like SocialVibe, are starting to experiment with their own engagement ads for developers.

RockYou raised a $50 million fourth funding round last fall, and is rumored to have annual revenues of between $30 million and $40 million. It has also been busy building social games in the past few months, like Zoo World; today’s announcement shows that it is getting even more serious about monetization services.

In the past week, the social gaming space has seen quite a stir. Not only has there been a handful of significant acquisitions and new numbers from this month’s Top 25 lists for both MySpace and Facebook, but there may be a new social genre boom on the horizon: city building. Big players such as Playdom and Digital Chocolate released their own SimCity-like titles. Here are the headlines for this past week from Inside Social Games.

Monday, March 1st, 2010

• Four for Slide and the ABCs of This Week’s Top Gaining Facebook Games by Monthly Active Users
• Facebook Blocked in China, But Chinese Game Developers Coming to Facebook
• Digital Chocoltate Jumps into Facebook City Building with NanoTowns
• King of KungFu Battles for Facebook Users
• Content-Sharing, Virtual Goods Helped Slide Double its User Base in February

Tuesday, March 2nd, 2010

• The Top 25 MySpace Games for February, 2010
• The Top 25 Facebook Games for February, 2010
• Hi5 Announces Support for Facebook Platform APIs, Targeting Social Game Developers
• Social Games Plant the Seeds for Growing Online Communities

Wednesday, March 3rd, 2010

• Big Developers Make Faltering Gains on This Week’s List of Top Growing Facebook Games by Daily Active Users
• Playdom Constructs Its Own Facebook City Builder: Social City
• Playdom Continues Acquisitions with OffBeat Creations Purchase
• Former MySpace CEO DeWolfe Makes Social Gaming Move with MindJolt Purchase

Thursday, March 4th, 2010

• German Developer Plinga Makes Turtle Soup Out of Worms for Facebook Users
• Enter into MMO Ninja Action Against Facebook Friends with Nindou International
• MindJolt’s Value to Buyer: A Whole Lot of Games, and a Platform for Many More

Friday, March 5th, 2010

• Tencent Localizes QQ Ranch to Facebook with Ranch Life
• Virtual Cities and Casinos Top This Week’s List of Emerging Facebook Games
• Zynga, Pladom, Other Big Social Game Developers Getting the Most Trademarks
• Social Gaming Roundup: Free Games, the iPad, Assassin’s Creed, and More