The Social

An example of Brizzly's new tweet translation.

(Credit: Brizzly)

Web-based Twitter client Brizzly made a dual announcement Friday: first, it's opened up into a full public beta mode (previously, an invite code was required); and second, it can now translate tweets into your default language on the site.

To translate a tweet in Brizzly--which already expands links, videos, and photos posted to Twitter, creating a more visual experience--you can click on a question mark for an instant translation. This is interesting, as Twitter has made its first moves recently in launching translated versions of the service (starting with Spanish), meaning that there will potentially be many more non-English tweets flowing through the system. It uses Google Translate, so needless to say, it's not totally perfect.

Brizzly added Facebook Connect support last month.

The simple concept of having virtual-good payments in games sent directly to your cell phone bill has gotten a lot of buzz--and stirred up a lot of rivalry. One of the start-ups looking to pull this off, Boku, announced Monday that it has signed on a dozen new gaming partners, both a few based on the Facebook platform and some others that are either Web-based or desktop downloads.

The partner companies are Waves, Cie Studios, Cyberstep, GameDuell, IGG, King.com, NHN USA, Ntreev, Outspark, PerfectWorld, Snap Interactive, and Zoosk. Most of them aren't household names: they're game manufacturers, not the games themselves, and some of them are most prominent outside the U.S.

There are a handful of companies trying to grab market share in this space, but the two who have been most vocal about making inroads have been Boku and rival Zong, which last month announced that it would allow members to sync credit cards with their phone numbers, allowing for larger payments and putting the company closer to direct competition with the likes of PayPal.

Boku says it's sticking to the mobile-number-only strategy, choosing instead to ink more deals and emphasize its global reach: with the current round of partnerships, the company says it will have 200 million registered users added to its ranks (no word on how active they all are, or how much redundancy there is across games).

Additionally, Boku has made some infrastructure upgrades that it says will improve the user experience, including the ability to detect whether a phone number that has been entered is landline or mobile--and if mobile, what carrier it's coming from.

NEW YORK--You had two options if you wanted to hang out with Digg founder Kevin Rose at the Web 2.0 Expo conference this week: head over to the lobby bar of the trendy Standard Hotel on Monday night, where Digg was picking up the tab for several dozen of the city's blogger elite; or pack into Manhattan Center Studios on Tuesday night along with about a thousand other young, predominantly male New Yorkers for a live taping of Rose and co-host Alex Albrecht's "Diggnation" video show.

Geek heroes: Jay Adelson (left) and Kevin Rose in a screenshot from one of their regular 'Digg Dialogg' videocasts with Digg users.

Those are, after all, the two Diggs. There's Digg the company, the name that first put "social news" into the mouths of New York media both old and new, the BusinessWeek cover story that established the shaggy-haired Rose as digital media's poster boy, the start-up that was once talked about as a huge acquisition target for the likes of Current Media, News Corp., and even Google amid CEO Jay Adelson's coy insistence that it wasn't for sale. But then there's Digg the brand: haven for the wackiest of the Web, with a front page dominated by anything Apple, oddball science, insidery tech and politics news, and the latest YouTube sensations. It's a dual identity that seems to be tough for the industry, or the five-year-old company itself, to reconcile.

At the Web 2.0 Expo, both Diggs--and the tension between them--was on full display in a dual keynote by Adelson and Rose on Tuesday afternoon. And the executives were both vocal about the fact that Digg has got to change.

"We're about 40 million users today, (with) about 20,000 submissions a day going into the Digg system," Adelson said onstage. "It's certainly achieved huge things for us. It's what we've set out to do, but we have a ways to go."

Rose added, "We've pretty much stayed the same over the last couple years."

There's a revamped Digg coming, a complete overhaul using the Cassandra database management system, which was developed and then released as open source by Facebook. In the new version will be "instant Digging" that doesn't require registration or a login, better filtration of topics to fit any number of niche interests, and a "smarter" way to gauge story popularity so that both the number of "diggs" and the number of times a link was submitted in the first place are taken into account.

Adelson told CNET later on Tuesday, just outside the auditorium where hundreds of rowdy young Diggers were awaiting Rose and Albrecht to walk onstage for the live Diggnation taping (a co-production of Revision3, the video outlet that Rose and Adelson also co-founded), that this will arrive in the first half of next year. "I can't say with certainty when, because there are so many infrastructure components that have to come first," he said.

This talk of change and versatility is exactly the message that the San Francisco-based Adelson and Rose want to convey while they're visiting New York, the center of the global publishing industry. This is Digg the media company on parade, the Digg that picked up the tab for the cocktail-swilling media insiders at the Standard on Monday night; and this is the Digg that's taken a bit of a beating recently. True, its traffic isn't plummeting, and by most measures continues to grow at a decent pace, but as a news-sharing destination it's been eclipsed by both Facebook and Twitter.

Digg's once-gossiped-about valuation may have taken a hit simply because the market for social news has grown so saturated, and as a result the company is no longer a novelty. Take third-party Twitter app TweetMeme, for example, which takes the links shared all over Twitter in "retweets," and compiles them into something that looks an awful lot like Digg. Or the likes of Yahoo Buzz, which haven't proven to be as popular or ubiquitous as Digg but which proved that it's not particularly difficult to build your own social news service.

"It makes me very proud," Jay Adelson said of the Digg influence evident in TweetMeme buttons and, now, Facebook sharing buttons. He added, "I think that the sophisticated publisher understands the difference between sharing within a social network, sharing on Twitter, and sharing on Digg."

Influential, sure. But when it comes to making a lasting footprint in the media world, Digg hasn't yet been able to get past the common wisdom that the footprint in question will be from a beer-soaked Converse All-Star. And that's the Digg that was showcased on Tuesday night as Rose and Albrecht, both in trendy fitted plaid shirts, received a rock-star welcome for Diggnation.

More than a thousand people had showed up at the Manhattan Center Studios venue, a smaller crowd than the show's last taping in New York, but a company rep pointed out that the previous taping had been in the summer, and this one was on a school night. Someone in the audience excitedly waved a sign that said "WINDOWS 7 FTW!" (That's "for the win," in case you stepped in late.) Another sign read "I SKIPPED CLASS FOR THIS!" and still another, which Rose and Albrecht seemed especially proud of, was a green sign that read "GO HIPPIE!" with a massive, hand-drawn marijuana leaf.

Adelson says that the company's merry band of fanboys--yes, most of them are male--doesn't get in the way, strategy- or image-wise.

"Our core Digg enthusiasts frankly provide a tremendous amount of our feature ideas and feedback, and are the ones that we can count on to be there even when we screw up," Adelson told CNET on Tuesday night. "I don't think they hold us back. I think that's the power of the product."

Kevin Rose's essential Diggnation props: Mac laptop, open bottle of beer

(Credit: Revision3)

There have been some good signs. Adelson says that Digg's experimental advertising system, in which unpopular ads are penalized with higher costs ("We charge the advertisers more money when their ads start sucking," Rose explained in the Web 2.0 Expo keynote) have been a runaway success. The company also absorbed a Rose side project, Twitter directory WeFollow, which could have interesting implications.

Their mission is still precarious. The hordes of Digg loyalists propelled the company to fame, but they're known to be volatile: if they hate something, they'll make it obvious. In 2007, when Digg pulled down a number of news links in response to a cease-and-desist complaint (the links directed to instructions for cracking a digital rights management code in the now-defunct HD DVD format), avid users flooded its system with even more links to the code. Digg admitted defeat, and restored the censored links. Earlier this year, when a new URL-shortening feature called the DiggBar garnered a negative reaction, the company made some significant modifications. If they don't like the yet-to-be-unveiled Digg revamp, it could get really ugly.

But perhaps the most difficult part of Digg's dual-identity wrangling is the fact that the company's executives and figureheads really do seem to have an affinity for its mischievous roots. Take Tuesday night, when a few excited audience members at the Diggnation taping started waving around the pink tickets they'd received from local cops for downing booze while waiting in line outside to see the show.

"Open container in line? That is awesome!" Rose exclaimed, reaching for one of the tickets and displaying it in front of the crowd.

Co-host Alex Albrecht chimed in. "You should get that framed!"

Perhaps in a sign of how the plague of social media has numbed us all to the value of legitimate human connections, the New Oxford American Dictionary has picked the verb "unfriend," or "to remove someone as a 'friend' on a social networking site such as Facebook," as its 2009 Word of the Year.

At the very least, it's a testament to the ubiquity of Facebook, which now has well over 300 million members around the world.

Facebook itself takes the process of "friending" and "unfriending" very seriously. It once sent warning notes to players of a third-party game called PackRat because it encouraged players to amass huge friends lists (good heavens! they're polluting the social graph!), banned a Burger King ad campaign that let members "sacrifice" their friends to get a free cheeseburger ("Friendship is strong, but the Whopper is stronger"), and still puts a cap of 5,000 on personal profiles' friends lists.

Last year's Oxford word of the year was the decidedly less mainstream "hypermiling."

A correction was made at 9:25 a.m. PT on November 21. It was players of PackRat, not PackRat itself, that were threatened with account suspension.

For Madison Avenue, Facebook just got a little less free.

Last week, the massive social network announced that brands, advertisers, and marketers that want to run contests or sweepstakes on its platform have to go through an approval process first.

Getting that approval could be a new revenue stream for Facebook: according to multiple sources in the marketing industry, they're being told that running a promotion in a Facebook application or "fan page" requires buying ad space too.

It's pricey. The minimum ad buy is $10,000 for 30 days, using Facebook's self-service advertising system, according to documents seen by CNET, or $30,000 for 30 days of Facebook home page ads. Priority in the approval process will be scaled, based on how much advertising space has been purchased. It's a move that one marketing industry professional called, in perhaps a bit of hyperbole, "a little Death Star-ish."

A Facebook representative declined to confirm and said the company did not have any comment beyond official documents released on its Facebook Marketing Solutions page.

Let's step back. Cracking down on contests and promotions might seem draconian, but it's actually important for Facebook: the U.S. state and federal laws that govern sweepstakes are extremely complicated, and by allowing only approved contests, Facebook is making sure that its bases are covered.

"Any promotion that any brand, product, or company would run has to have a terms of service against it," said Gunter Pfau, CEO of the Stuzo Group, an agency that has developed numerous Facebook contests and sweepstakes for clients. "Also, depending on the prize value, they need to be filed with various state regulatory agencies."

What, exactly, is new for contests? If a brand is running a contest on its fan page, it has to be handled through an embedded, separately developed application--not, for example, in the page's "wall." Promotions also can't involve Facebook users manipulating their user photos or status messages specifically for the contest.

Legal experts agree that this is necessary. "The (new Facebook) guidelines really cover only a narrow subset of promotions, specifically sweepstakes, contests, and similar competitions," explained Thomas Williams, a partner at the Chicago law firm Howrey, who specializes in trademark law. "That type of contest or promotion is governed by a myriad of state and federal regulations, so what I think Facebook is attempting to do here is merely shield itself from liability that arises out of its users' potential violations of these laws."

Williams continued: "I think it's a prudent and reasonable step on Facebook's part. There are lawyers who specialize in sweepstakes law, and there really are a lot of twists and turns to it."

One thing it'll also do, Stuzo Group's Gunter Pfau explained, is keep dishonest campaigns and promotions off the Facebook platform. "I think it's great news for consumers," he said. "I think what Facebook is doing is really laying these guidelines in place for companies to protect consumers more."

But what about the new ad spend requirements? Facebook has historically pitched its developer platform and fan pages as a free way for advertisers and marketers to tap into the power of "the social graph"--its 300 million-plus active users and their connections to one another. And while it's clear that the company sees these free pages and applications as a stepping stone for ad dollars--Chief Operating Officer Sheryl Sandberg, for example, regularly gives Madison Avenue talks about the company's "engagement ads"--it doesn't have a long track record of requiring advertisers to pay for something that used to be free.

"It makes sense for Facebook, but (it's) a little discouraging to advertisers," commented Alisa Leonard-Hansen, who holds the title of social-media evangelist at digital-marketing firm iCrossing. "Facebook is continually trying to discover new ways to monetize, and they picked up on the trend that advertisers were using their pages to run contests and other promotions. I think Facebook was looking to be able to benefit from this marketing trend."

The ad spend requirements, too, could be considered partial compensation for the new human resources required in Facebook's approval process. Each company running contests on Facebook now has a designated advertising sales representative, and fan pages will continue to have to be policed for potential violations of both advertiser regulations and sweepstakes law.

There might not be a lot of friction as the new regulations go into effect. Companies that don't run contests on their Facebook fan pages or applications won't be affected. Even some that do, especially small-scale fan pages that could easily go unnoticed by Facebook, won't have to change much. "Of course, there are going to be savvy marketers who skirt this and run (contests) under the radar," Alisa Leonard-Hansen said.

It really goes without saying the obvious: this is Facebook's service, and it can do what it wants with it. That doesn't mean marketers will stop grumbling. As one put it in a phone call to CNET, "This is another example of Facebook saying, 'Sorry, eat it, you've got no choice.'"

If social gaming is Hollywood, the people aren't as pretty. Well, maybe the avatars are.

Yes, yes, we know that social games are taking over the bloody world: earlier this week, gamemaker Playfish announced its $300 million sale to Electronic Arts, and on Thursday, rival Playdom retorted with the announcement of $43 million in venture funding at a $260 million valuation, and the acquisitions of smaller gaming companies Green Patch (manufacturer of Facebook-based games like Lil Green Patch and Farm Life) and Trippert Labs. Green Patch's games will up Playdom's reach on Facebook by 30 percent, the company said.

Expect to see more of these sales, as smaller developers find they're having trouble treading water in an industry where the big guys--Zynga, Playfish, Playdom--have chomped up most of the market share, and where Facebook, the biggest destination for these games, has shown that it can change the rules at whim. And the big companies, too, want to scramble to get bigger.

Plus, as Playdom co-founder and chairman Rick Thompson explained to CNET News: When gaming companies grow large, they have to deal with a lot of stuff that can get in the way of producing new games and staying on top of consumer trends. That's one reason to keep investing in new talent through acqusitions.

"The hitmakers start spending all their time on operations, and on things that don't improve or enhance the games, and so they become essentially owners and operators," he said. And likewise, "people who can create things shouldn't necessarily be operating a gaming company."

He drew the evolution of a social gaming company parallel to an entertainment studio: "a lot more like Hollywood or the traditional gaming industry" than a Web start-up.

But here's the catch when it comes to acquisitions in this space: Gaming, especially social gaming, is a hit-driven business. If a parent company buys up a hot Facebook game, that game could already be running out of shelf life: which is, indeed, sort of like a Hollywood establishment signing a contract with an actor who's had five hit films in a row, as he could easily be over the hill before long. (Hello, Rob Lowe.)

"I think we're getting pretty good at really looking at their data now, and modeling how these games will evolve over time," Thompson said. "But I think there's essentially a life cycle of growth and then decay. What we really look at in acquisitions is not just daily active users, but bringing on additional team members that can really help create new games in the future."

It was a controversial new addition: Twitter had just started rolling out a new feature that built "retweets," a user-created way to quote other tweets, into the main Twitter application. But on Wednesday, plagued by errors, Twitter appears to have pulled the feature for further maintenance.

A post on the Twitter status blog late on Wednesday morning reads that it was "working on (a) high number of errors." The Next Web dug up some discussion from Twitter's developer IRC channel and found that "retweet is temporarily unavailable while we deploy a bug fix." There is not yet word on when it will be back.

The feature was so new that some Twitter users, myself included, never had it in the first place. But it promises to significantly change one part of the Twitter experience: with official, integrated retweets, gone is the signature "RT" in front of a quoted tweet. Instead, a retweet button pushes the original tweets into the retweeter's followers' streams of messages. Like so many Facebook redesigns and restructurings, that hasn't gone over so well with existing users. The blog Twitter Watch called integrated retweeting "the worst ever."

"While current users may get used to the feature, it's going to alienate new users," the Twitter Watch blog asserted. "Twitter isn't like Facebook; it can't boast the same network effect that makes Facebook indispensable. So it needs to keep things simple for new users. But now each new user will need to understand why much of their early friend feed will consist of messages they didn't subscribe to."

But there are advantages, too: with built-in retweets, it gets much easier to track exactly how popular or influential a given message or user is.

Unsurprisingly, at least one research company agrees that valuing a company at $1.1 billion before it's unveiled a long-term revenue strategy is a little bit premature.

A firm called Next Up Research released a study this week that estimates Twitter's actual value as somewhere between $526 million and $674 million--or somewhere between 47 and 61 percent of what its valuation was in September when Insight Venture Partners, T. Rowe Price, and other investors pumped nearly $100 million into the company..

The positives for Twitter? It's been able to scale to approximately 70 million users while maintaining a single office in San Francisco and about 80 employees--well, sure, but the fail whale does tend to rear its head--and the fact that you can use it almost exclusively as a low-end mobile application means a whole lot of potential for global reach.

Next Up's concerns are pretty predictable: It's not sure how Twitter will keep up its momentum as it prepares to roll out a revenue model. It spelled out a few options that have been tossed around over the past few years--ads on Twitter.com, ads in tweets, charging for access to its application program interface (API), premium accounts, selling data and analytics--but noted that "most revenue generation options available to the company have the potential to alienate at least some of cult-like Twitter's user base."

Regardless, the research firm is guessing that revenues will come. It's projecting $134 million in revenues in 2013, "in an optimistic scenario." Now let's sit back and see how Twitter does it.

The tractors, fuzzy pets, and mobster ambushes might be virtual, but the past few weeks have shown that the battle for social-gaming market share is very, very real.

Monday saw the long-rumored announcement of gamemaker Playfish's big-ticket sale to Electronic Arts, a big win for a product niche some had dismissed early on as faddish and silly. But it comes at a time when there's ongoing press blitz over how much social-gaming companies rely on lucrative but potentially misleading means of advertising in the form of lead-generating offers.

Both of these developments have changed the course of an industry moving at hyperspeed--but was anybody really sure where it was going in the first place? Playfish, arguably, was the safest buy in the space. Headquartered in the U.K., its revenues were solid--one analyst estimates it'll pull in $100 million this year--and it was less reliant on controversial third-party offer companies than many of its competitors.

Social-game manufacturer Playfish announced its acquisition by Electronic Arts on Monday.

(Credit: Playfish)

"I'd say hats off to EA," said Jeremy Liew of Lightspeed Venture Partners, which has invested in social-gaming firms like Serious Business and RockYou. "It's a much lower-fidelity product (meaning cheaper to produce) that appeals to a much simpler consumer (than the traditional gamer), but they recognized the risk that it poses to their business and they were willing to take a decisive action."

Playfish had a great exit, as they say in the venture capital world. Things might not go quite as smoothly for other social-gaming companies.

Here's some background. The social gaming craze grew out of an array of new time-wasters that involved neither a significant commitment nor a complicated set of rules. Companies like Zynga, Playdom, and SGN attracted millions of investor dollars, and word has it that former MySpace CEO Chris DeWolfe wants to roll up a bunch of smaller companies into another powerhouse. And now that EA has a big social-gaming company in its arsenal, other older video game manufacturers might push fast-forward on investments or acquisitions in the space.

Playfish, manufacturer of games like Pet Society and Restaurant City, was at the time of its buy either the second or third biggest company in the space--behind Zynga, but neck-and-neck with Playdom. Like most of its competitors, it makes money through a combination of advertising and the sale of virtual goods, which players can either purchase with real-world cash or can earn by completing offers and surveys from third-party companies like Offerpal Media or Super Rewards.

The industry common wisdom is that Playfish's revenue is less reliant on those offer companies than some other social-network gamemakers. That's a good thing, considering the bad press the likes of Offerpal have been pulling in recently. In a highly-publicized confrontation with Offerpal CEO Anu Shukla (who resigned from her post in a matter of days), TechCrunch blogger Michael Arrington launched a full-on assault against the business of social-game offers. They're no more than scams, he alleged, since many offers actually have hidden costs attached for consumers: entering your cell phone number to receive the results of a quiz you took, for example, may actually tack a charge onto your phone bill.

"The industry hasn't done, in general, as good a job as it could have of maintaining the offers' integrity to users," Jason Oberfest, a former MySpace executive who recently joined the executive team of iPhone and social-network gaming company Ngmoco. "(Playfish was) way more conservative in how they've used offers, and I'm sure, frankly, that their revenue per user has probably suffered a little as a result, but it's clearly played out well for them."

Even without the offers controversy, social gaming is a volatile industry: few if any of the companies in the space are older than five years. It's a hit-driven business, with companies needing to work around the clock to keep audiences playing and push out new games lest the current sensations grow stale. There's already a history of lawsuits and legal threats, often over rival gamemakers' extremely similar products. When bloggers started their keyboard assault on the likes of Offerpal, it was only adding to the sector's reputation for fast money, cutthroat competition, and occasionally shady business practices.

Playfish may have exited just in time. Some of the small to medium-size social-gaming companies are undoubtedly hunting for buyers, and Zynga has gotten so big that rumors suggest it may be looking to file for an IPO. With all the controversy over offers and whether social-gaming companies' revenues were inflated by misleading ads, there's a chance that their profits--and hence, their valuations to prospective investors or buyers--may take a significant hit.

Still, venture capitalist Liew doesn't think that will make a huge difference. "Zynga said 30 percent of their revenue comes from offers, and I think that's pretty representative of the industry," he estimated. "Let's say 20 percent of the offers are scammy, so that's 6 percent of the revenue of these companies that's at risk. It doesn't change the answer as to whether this is a valuable company."

Maybe so, but there are other complications. Facebook, the biggest destination for social games, continues to make alterations to its developer platform. Most recently, the massive social network announced some changes that limit games' and other applications' appearance in members' news feeds, a move that may make it more difficult for start-ups to enter the space as well as drive already-big companies to purchase more advertising space in order to get the word out about their latest games and keep acquiring new customers.

Social-gaming companies are already some of the biggest advertisers on Facebook, with the biggest one, Zynga, spending as much as $50 million this year on Facebook ads alone, according to estimates from industry insiders. If revenues are potentially going to decline (and no one can quite agree on how much) as a result of a crackdown on offers, but advertising costs may go up as companies attempt to increase their reach on Facebook, that makes their balance sheets look less sunny.

For all the ugliness of the Offerpal mess, it could have been much less pleasant if the scrutiny was coming from lawmakers rather than industry bloggers--like the several state attorneys general who were particularly vocal about stamping out misleading offers in display ads, but haven't yet targeted social networks. And changes appear to be imminent. Zynga CEO Mark Pincus announced Sunday that the company has blocked all cost-per-action offers until the situation calms down and it's easier to weed out scams. Playdom, too, says it is continuing to make its business less reliant on offers.

"Offers are an important industry issue, and particularly important for our players," CEO John Pleasants, a former high-ranking EA exec who left for the fast-growing company this summer, said of Playdom in an e-mail to CNET News. "When I joined as CEO, Playdom began a company-wide effort to deliver a quality user experience on our offer walls...We've dropped more than 1,500 offers that don't meet our standards. In tandem with these efforts, we have actively grown the direct payment portion of our business; offers, otherwise known as CPA advertising, currently account for less than 20 percent of our revenue and continue to shrink."

Social-gaming companies don't want to look like criminal operations, nor do they want to look like they're turning a blind eye to questionable third-party activity. While Zynga and Playdom are big enough to sacrifice that revenue, some other companies that are likely hunting for buyers might not fare so well. As a result, future acquisitions in the space could easily be much smaller. Price tags could be lower if revenues deflate, and now that EA's made its buy, the list of potential buyers who could actually pay $300 million is now one company shorter. There's a legitimate question as to who would actually be buying; even optimistic insiders say that this could get in the way of another Playfish-like exit.

"I think the more important question is who can pay. Because if you want to buy Zynga, it's way more than Playfish. If you want to buy Playdom, I think it's going to be equivalent, if not a little bit more than Playfish," Liew said. "There are a lot of people who want to get into social gaming that don't have the ability to write a check of that size, and so they are going to be looking at the next tier of companies. That's where I think we're going to see some action."

In other words, we still don't know who the next real winner will be.