The Tokyo Game Show wraps up this weekend, and as with many recent industry events, social and mobile games stole a large portion of the spotlight this year. GREE and DeNA, the companies behind two of the leading mobile gaming networks, made very positive showings, outshining many long established gaming companies. The AP reported that interest in GREE's booth rivaled that of gaming stalwart Sony, who itself acknowledged gaming's trend toward social experiences with the integration of new social features for its upcoming PS Vita handheld system.

In addition to the attention it got at the Tokyo Game Show, DeNA also made a couple of noteworthy acquisitions in the last week.  The purchase of Vietnam-based Punch Entertainment will reportedly strengthen DeNA's ability to develop first party titles. Earlier in the week, DeNA subsidiary Ngmoco acquired Lionside, a developer best known for its NBA Legend game, which has been down for and extended period of maintenance. 

While much of last week's focus was on Japan, VentureBeat pointed out a new report released by market research firm Newzoo, which drew attention to the traction that social games are getting in the world's developing markets. The report singles out Brazil in particular, noting that the increased prevalence of free-to-play games has helped expand the gaming market amid the country's rapid growth. Monetizing games through micro-transactions makes especial sense in Brazil, where piracy in rampant and paying $50 for a game is still out of reach for many. Newzoo's website provides a number of infographics from the report, breaking down gaming statistics for the US and handful of other nations.

VentureBeat also drew attention to another notable research report, this time from market research firm DFC Intelligence, which predicts in-game advertising will double to $2 billion by 2014. That figure reportedly includes in-game ads, ads surrounding game canvases, and advergames, which are games developed specifically as advertisements. Michael Goodman, an analyst from DFC Intelligence, is quoted later in the article saying that despite the growth of in-game advertising, games continue to underutilize advertising as a source of revenue when compared to other media.

After weeks of waiting for additional details on Zynga's initial public offering, many are suggesting that the company may be actively delaying its plans. One of the primary reasons provided for the delay is that Zynga may not want to enter the stock market during a time of such instability. Whether part of its IPO strategy or merely coincidence, the delay has given Zynga additional time to reveal and release some new games and offer further evidence of the company's profitability. Adventure World, released today, aims to ratchet up the level of complexity over many of the developer's previous titles. Additionally, information on another as of yet unannounced title, Kingdoms and Quests, was accidentally leaked earlier this week.

Now that Google has officially revealed its plans for games in Google+, Amazon is the latest company to garner speculation about making a push into social gaming. Beyond the hiring of tabletop RPG designer Jonathan Tweet in July, little else is known about Amazon's new social gaming division other than the facts that it exists and that it's actively hiring. With its Amazon Web Services and Android Appstore, Amazon already plays an important part in the social gaming industry, albeit in a somewhat tangential way. Though the company's hiring focus seems to be focused around software and flash developers, it seems unlikely that Amazon's end goal lies in game development rather than in enhancing its considerable retail prowess.

Social gaming developer Guerillapps has attracted some attention recently with its newly released Trash Tycoon. The latest in a line of games intended to raise awareness of environmental issues through social gaming, Trash Tycoon focuses heavily on the concept of upcycling, the practice of reprocessing waste into objects of greater value.  In the course of developing the game, Guerillapps partnered with a number of eco companies, basing the game on the business model of Terracycle and donating 10 percent of the game's virtual goods profits to carbonfund.org.

Brazilian developer Vostu acquired MP Game Studio, a developer best known for a number of Nickelodeon licensed social games. The move may bolster Vostu's appeal beyond its mostly Latin American audience and could also be an opportunity to diversify its catalog of games. Vostu is currently embroiled in a legal battle with Zynga, who has accused them of blatantly copying their games.

Having been tight-lipped so far about its social gaming plans, Venturebeat quotes Activision Blizzard's CFO Thomas Tippl as saying that the company is "methodically investing in mobile and social gaming." While the company hasn't yet revealed any plans regarding traditional social gaming titles, many expect the company t do so in the future. Activision Blizzard did, however, reveal details on its Call of Duty Elite social network at this weekend's Call of Duty XP event. At a cost of $50 per year, the service gives Call of Duty fans access to a variety of social features and extra content, which can be accessed from PCs, consoles, and smartphones. The service is in line with the company's plans to explore alternative revenue streams from its most popular properties.

In an era of difficult budgetary decisions, Mashable reports that NASA has found creative ways to tap the private sector for help in developing an MMO aimed at increasing young people's interest in astrophysics. NASA solicited proposals from game developers, eventually settling on Canadian developer Project Whitecard. To fund the project, the developer turned to crowdsourcing, surpassing its goal of $25,000 in only two weeks. The game, entitled Astronaut: Moon, Mars, and Beyond, hopes to hit upon a satisfying blend between education and fun when released next year.   

Lastly, Gamasutra reported that research firm SuperData Research became the latest company to predict rapid growth in the social gaming industry, projecting that North America's social gaming revenue will grow to $1.4 billion this year. If that projection holds, it will be a 35% increase over the $1 billion that the industry brought in last year.

Earlier this week, Sony announced that it will be revamping its PlayStation Home social networking service as a social gaming platform. The console maker's new version of Home will revolve around a centralized area called the Hub. Sony intends the Hub to be the center of a user's virtual identity, a place where they can socialize with other users, shop for new items, and participate in a new meta game, which features quests, awards, and special events. From the Hub, users can jump directly into a number of games or can travel to one of many Districts, areas featuring games of a particular genre and themed accordingly.

EA's The Sims Social, the recently released social version of its immensely popular franchise, made a successful showing during the first week of its launch. After a little over a week of being live, the game has already garnered 4.6 million daily users, making it the web's 6^th most popular social game at the moment. So far, is seems as though The Sims Social has done a successful job of differentiating itself from its PC predecessors by allowing users to interact in-game with their real-life friends, albeit not in real time. It remains to be seen whether the franchise will have the same staying power in the social gaming sphere as it's has on PC, though it's undeniably off to a good start.

Mobile gaming network OpenFeint announced plans to capitalize on Apple's gradual phasing out its user identification system (UDID) from its iPhone and iPad devices. While the move is a positive development for those concerned about privacy, UDID's elimination poses a potential problem for game developers who have relied on that data to serve ads among other thing. In order to appease those developers, OpenFeint is releasing a product entitled OpenFeint user identification (OPUID), which fulfills many of the same purposes in games that incorporate OpenFeint.

Another pair of companies focused on social games for mobile devices, iSwifter and PapayaMobile, also posted positive news this week.  PapayaMobile, a Chinese social gaming network for Android devices, announced among other things that it recently passed 25 million users and has facilitated over 11 million paid transactions. iSwifter, who has built a niche on the iPad by streaming flash-based social games to users, also announced positive news last week when it revealed that it had made over $10 million dollars in revenue for 2011 and has plans to expand its business.

Finally, Google recently shut down social gaming developer Slide, which it had acquired last year for $182 million. While it appears that most of Slide's employees will remain employed, working at Google in other capacities, the closing of the studio will also be the end of its games including SuperPoke Pets!, SPP Ranch, and Top Fish among others.

Russian developer i-Jet Media, makers of Airport and Farm Frenzy Neighbor, announced that it will soon be launching a development platform dubbed i-jet Connect, intended to ease  the process of publishing games across multiple social networks. As i-jet observes, there are a number of viable social networks worldwide, most of which are underserving their demand for social games. i-Jet aims to remedy this problem by making the process of publishing social games across a variety of networks essentially a one-step process. The platform also integrates an external advertising delivery system called AdRiver, which helps developers stream advertisements to their games. The new platform is currently in closed beta.

Facebook covertly made a couple changes to their platform policies which could significantly impact game developers. As TechCrunch reports, Facebook is essentially saying that "any app that runs on its platform is prohibited from integrating, mentioning, or in any way linking to any app on any competing social platform." In an increasingly social web, what is defined as a "competing social platform" seems open to interpretation and has the potential to severely limit developers' ability to build integrated communities for their games across multiple platforms. Facebook later clarified their terms by declaring cross-platform support with iOS and Android devices acceptable. While that announcement is likely to calm many concerned developers, it reinforces the notion that the language in Facebook's platform policies is vague and subject to change on a whim. Earlier this week, Facebook booted Netlog, a popular European social network, off of its service for a violation of terms.

Social games developer KlickNation and the Syfy Channel announced a new partnership to release a number of SyFy branded social games over the next couple years. The move seems like a natural fit for KlickNation, who has a number of sci-fi themed games under its belt such as Superhero City and Starship Command: Battle for Earth. There is no word yet on whether any of the games will integrate SyFy properties.

Lastly, the constant stream of social gaming acquisitions continued this week as Digital Chocolate, developer of Millionaire City and number of other hit social games, purchased Sandlot Games, best known for the game Cake Mania. The acquisition appears to be a continuation of a Digital Chocolate's push toward more cross-platform development. Like a gargantuan gaming amoeba, EA continues to gobble up casual social gaming studios with the purchase of mobile and social developer Bight Games. Bight Games has been a notable frontrunner in adapting the micro-transaction business model to mobile games. Finally, Zynga, another notoriously acquisition hungry company, reportedly purchased Astro Ape, makers of mobile games such as Monsterz Revenge and Office Heroes.

Google made its previously rumored entrance into the games market official on Thursday by launching a games service for its fledgling Google+ social networking platform.  While more details about the service will likely come to light in the coming months, the service's primary point of distinction at this point is integration with the new social network's Circles feature, segregating game updates from other social interactions. Another interesting revelation is that Google aims to undercut Facebook's 30 percent revenue share with developers by taking a 5 percent commission during its initial phase. For now, the service's crop of games is relatively small, though it includes at least one selection from many of social gaming's top developers including EA, Playdom, Wooga, Kabam, and Zynga among others.

The recently combined forces of 6waves and Lolapps garnered $35 million in a new wave of investment from Nexon, the South Korean company behind MapleStory, Vindictus, and many other free-to-play games.  The aforementioned merger of 6waves and Lolapps has already made the company one of the social gaming's top publishers, a fact which Nexon may see as an opportunity to make launching its games on social networks easier. Nexon launched a social version of MapleStory in July.

Social gaming developer Kixeye also recently raised an additional round of funding, bringing the total in recent investments to $23.5 million, according to Tech Crunch's Rip Empson. Kixeye's ever engaging CEO, Will Harbin, told Tech Crunch that the company plans to use the funds to facilitate an increasingly frequent release cycle of new games, many of which will explore genres often ignored in social gaming.

Games publisher THQ recently announced that it laid off over 200 employees. He move comes amid struggling sales MX vs. ATV and Red Faction: Guerilla, two of the publisher's core-gaming franchises. The layoffs were accompanied by a press release, which detailed the company's future digital strategies and indicated a renewed commitment to social gaming. The first release from that renewed effort is likely to be the Jimmy Buffet themed Margaritaville.

Electronic Arts recently disclosed its first quarter earnings for financial year 2012, and of particular note was the disclosure that the publisher is now making close to half of its revenue from digital products. Though the report didn't directly say how much of that revenue came from its social gaming divisions, it stands as a notable landmark as the publisher acknowledges increased platform diversification within the industry and shifts its focus away from brick and mortar retail products. Another note of interest was EA's revelation that the average lifetime value for paying users of its EA Sports social games was $56, surpassing the net revenue for the sale of a console game. While the number of paying users is still vastly surpassed by non-paying users, it serves as further evidence of core-gamers' willingness to embrace microtransaction models.

While on the subject of high-spending whales, mobile analytics company Flurry released a study suggesting that revenue from users in freemium-based mobile games breaks down in a similar fashion to that of web-based freemium games. While most users in the study spent under a dollar, the majority of revenue came from the small number of players who spent over $20, making the average amount spent around $14. While the study seems to portend good things for mobile games using the freemium business model, Journalist Dan Frommer, founder of SplatF, notes that mobile platforms still have a number of hurdles to overcome if they are to be adopted as readily as web-based gaming networks, primarily in terms of distribution, discovery, and payment methods.

One company attempting to overcome these limitations is DeNA, who acquired mobile gaming company ngmoco in 2010. DeNA/ngmoco recently released the English version of their mobile gaming platform Mobage for Android phones. The service builds upon DeNA's Mobage-town, which was previously available on feature-phones in Japan. Mobage hopes to emulate the social gaming experience on mobile phones by bringing community features and a unified currency to mobile gaming.

Lastly, Social Games Today recently spoke to hi5's VP of Engineering John Szeder for their podcast at this year's Casual Connect. Those interested in listening to the interview can download the podcast from Social Games Today's Website or at iTunes.

The big story of last week was the finalization of EA's rumored acquisition of PopCap. The deal reportedly includes $650 million in cash, another $100 million in stock, and the potential for $550 million more, provided PopCap meets certain profitability criteria. The purchase is the biggest social-gaming acquisition yet for EA, who has been steadily buying its way into the space, most notably by acquiring Playfish in late 2009. With hits such as Plants vs. Zombies, Zuma Blitz, and the perpetually popular Bejeweled, PopCap has consistently proven to be one of the strongest cross-platform developers in the casual gaming market. Already the second largest social gaming developer, EA indicated in a recent investor meeting that it may have plans to release even more social gaming versions of PopCap's titles.

The acquisition kicked off a couple weeks full of social gaming news, which was later facilitated by two significant social gaming conventions, GamesBeat and Casual Connect Seattle. Venturebeat's GamesBeat conference, which was held in San Francisco last week, kept with the publication's focus on investment and innovation. The event focused heavily on mobile and featured a number of insightful discussions with social gaming luminaries and investors.

Casual Connect Seattle, sponsored in part by hi5, took place earlier this week, and news from the conference continues to filter out. Among the conference's speakers was John Szeder, hi5's VP of Engineering, who led a panel entitled "Games Without Borders," which discussed how to successfully monetize games across multiple social networks. Notable announcements from the conference included Wooga's arrival among the top 3 social game developers and Microsoft's release development tools for designing games to be hosted on its Windows Azure cloud development platform.

Following up on Zynga's looming IPO, the company released a significant amount of supplemental information not originally included in their S-1 filing. The new information makes the company's codependent relationship with Facebook even more apparent. The biggest revelation from the release is that any game Zynga makes which "includes Facebook integration or Facebook data will be exclusive to the Facebook platform for the duration of the agreement," as All Things D reports.  The report makes it clear that Zynga has very closely tied its success to Facebook, and in turn Facebook has agreed to provide disproportionate promotion to Zynga's games, making the prospects of success for smaller developers seem even more difficult.

Research firm Gartner recently released a report forecasting that the games industry will grow 10% this year, reaching $74 billion. Gartner also sees the industry continuing to grow in the long term, estimating $112 billion in spending by 2015. While gaming as a whole is participating in the growth, the firm predicts that fastest growing segments of the games market will by far be mobile and online games, gaining shares of the gaming market at the expense of the traditional console gaming experience.

 

Other takeaways from the report include increased diversification of gaming platforms and payment models. As mobile and social gaming grow, the freemium and advertising supported payment models that they often employ also appear to be gaining traction. Games such as League of Legends, Team Fortress 2, and Lord of the Rings Online are just a few games appealing to hardcore audiences that have successfully transitioned to free-to-play business models. Additionally, notable gaming franchises like Civilization are beginning to debut as social games, showcasing publishers' increasing trend toward platform diversification.

 

It is worth noting that in the buildup toward Zynga's IPO, many are taking notice of the benefits and potential pitfalls of the free-to-play model, which Zynga is heavily reliant upon. A recent Businessweek article, which included quotations from hi5's President and CTO Alex St. John, noted that fewer than 10% of Zynga's customers pay for anything at all and that fewer than 1% of users account for half of the company's sales. St. John notes that reliance on "whales," the 1% of users that buy a disproportionate number of goods, misses other opportunities that might exist to monetize the other 99% of users.

 

Further evidence of this diversification comes from Nielsen's recent report which shows that games are the most frequently used category of app among mobile phone users. Furthermore, Nielsen's report shows that 93% of mobile phone users are willing to pay for games, making them the apps that mobile users are most willing to pay for.

 

hi5 has two upcoming speaking engagements which should not be missed. Bill Gossman, hi5's CEO, will be speaking at UBS's Global TMT Crossroads Conference on Thursday July 14. hi5 is also sponsoring and speaking at this year's Casual Connect in Seattle, WA.  John Szeder, VP of engineering, will be leading a panel entitled "Games Without Borders," on July 20 at 4:30 pm. John and others will discuss issues surrounding in-game currency in cross-platform social games. If you have plans to attend either of these events or would like to schedule an opportunity to speak with either Bill or John, please email pr@hi5.com.

After weeks of speculation, behemoth social gaming developer Zynga filed a $1 Billion IPO today with the Securities and Exchange Commission. Zynga's filing is the largest so far in a string of tech company IPOs. Accompanying the filing is the disclosure of a variety of interesting financial information regarding Zynga. TechCruch's initial analysis of the filing indicates that the company has, "60 million daily active users in 138 countries. 38,000 virtual items are created every second and game players spend 2 billion minutes a day on Zynga games. The company had $597 million in revenue in 2010, and posted revenue of $235 million in the first quarter of 2011."

According to Reuters, Zynga's filing readily acknowledges the company's dependence on Facebook as a platform. While investors may see the relationship as mutually beneficial for the time being, the interconnectedness of the two companies holds potential hazards for both companies in the long-term. Reuters reports that the filing says, "Any deterioration in our relationship with Facebook would harm our business and adversely affect the value of our Class A common stock."

Coincidentally, Zynga's IPO overshadowed the conclusion of Facebook's slow, deliberate march toward requiring all applications on the social network to use Facebook Credits as their sole payment option, which the company announced in January 2011. Today is the first day on which all developers will be required to have made the switch. There are a number of reasons for the switch, though chief among them is the fact that Facebook will receive a 30% cut of the revenue from the new currency. Inside Social Gaming observes that most large and mid-sized developers have made the switch to the new currency, with only a few, mostly regional, developers struggling to meet the deadline. 

 

While the long lead time seems to have given developers sufficient time to implement changes, outlook of the program remains in question. The Washington Post reports, "The non-partisan group Consumer Watchdog sent a complaint to the Federal Trade Commission on Tuesday, claiming the company is abusing its power as a popular site for online games by requiring all game developers to exclusively use Facebook's virtual currency."

hi5 partner AltEgo spoke with Inside Social Games last week, discussing future plans for their cross-platform avatar technology. AltEgo's avatar system allows game developers to easily integrate avatars into their games and deploy customizable items to those avatars. Avatars can then follow users as they move between various spots in their digital life. Those looking to see a preview of what AltEgo is up to can check out AltEgo's Golden Nugget Vegas Casino on hi5 right now.

Lastly, the pioneering social networking site Friendster relaunched this week after announcing that it was deleting user data and shifting its focus toward entertainment and social gaming. The new site allows new users to login using Facebook Connect, though there is limited ability to interact with others through Facebook's viral channels.