The Social

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.

Corporate tools take note: You can tell Twitter exactly what you're doing, and it'll tell LinkedIn too.

Chalk one up for the cringe-worthy marketing term "personal branding": there is a new partnership between Twitter, hub for informing the world exactly what you're doing and thinking at all moments of the day, and LinkedIn, the business-networking tool on steroids. In an announcement Monday, the two companies explained that LinkedIn status messages can sync with Twitter.

"The business use case of Twitter is turning out to be very important, and more and more people are finding that the persona they create for themselves on the Web is part of their resume in many ways," Twitter co-founder Biz Stone said in a joint video with LinkedIn founder Reid Hoffman that was posted to the LinkedIn blog.

So, in short, LinkedIn's "status" feature now syncs with Twitter with an optional check box--a feature that the two companies say should be rolling out over the next few days. Likewise, can set your Twitter status as your LinkedIn status by using the hash tag #li or #in, so that you can rest assured that your tweet about "watching Gossip Girl and eating cold pizza" won't immediately show up to potential clients or employers trawling your LinkedIn profile. (Full disclosure: This was my Twitter status tonight. If you believe that it renders me professionally unsound, please feel free to let me know.)

All snark aside, this is probably a very good bet for LinkedIn, which continues to grow fast and make money but which hasn't yet really jumped into the latest social-networking trend of real-time, streaming information. Inking a partnership with Twitter is much easier than launching some other kind of initiative to get members to update their statuses more often. Tweets sent to LinkedIn, presumably, could also be grouped in with LinkedIn status messages to form some kind of business-intelligence live stream. The sort of information that people want to share specifically with colleagues and professional associates could be of interest to high-end advertisers or the market research community.

Twitter, meanwhile, is going to want to stay in the limelight of the business community as it considers a long-term business model--one of the microblogging service's potential moneymakers has been launching a "dashboard" of analytics for people and companies who use it primarily for professional purposes rather than, you know, filling the world in on which beer was just discovered in the back of the fridge.

Also for Twitter, this is yet another potential source of tweets as it attempts to become the world's foremost repository of real-time information. Earlier this year, MySpace announced an official way to sync Twitter and MySpace status, and in a matter of weeks its link-shortening service had become the second most popular on Twitter (trailing Twitter's preferred Bit.ly).

Facebook, meanwhile, appears to have been more reluctant: a Twitter app on its platform has pulled tweets into status messages for some time, and an unofficial app lets members tag selective tweets with the hashtag "#fb" to cross-post them to Facebook, but the only time that Facebook has put out a big, official announcement about syncing with Twitter was when it added an easy-sync feature for "fan pages," profiles for brands and marketers.

Not surprising. Twitter is a hot name in marketing these days, and in order for Facebook to establish fan pages as an ideal spot for brands to build a presence, an easy Twitter sync is a selling point. But in the long run, it's an advantage for Facebook, which once tried to buy Twitter and was snubbed, to keep its treasure trove of what-the-world-is-thinking somewhat to itself. After all, it can get away with it: with well over 300 million active users, Facebook is significantly bigger than Twitter, and could be diluting its own product by openly sourcing status messages out to Twitter. LinkedIn, better known for its networking features than any kind of status updating, isn't running that kind of risk.

Until then: "At SFO airport at bookstore. Deciding between @gladwell and @tferriss. Need real, serious insights. Thoughts? #li."

(Credit: OfficeMax/Elf Yourself)

It's that time of year again, when you trawl the Web for unflattering mugshots of your boss to embed on the bodies of dancing elves with the "Elf Yourself" holiday card promotion, going live for the fourth consecutive year on Tuesday. They're the brainchild of OfficeMax, which teams up annually with online animation shop JibJab to bring forth what might be the most successful social-media marketing campaign that the Web has yet seen.

Last year, a total of 35 million "Elf Yourself" cards were sent, and OfficeMax says that since it launched in 2006, the seasonal site has chalked up 284 million visits. So what's new this year? Well, there are two new elf dances! Yay! You can now, in addition to "Disco Elves," "Country Elves," and "Elf Classic," choose to model your creation off the "Hip-Hop Elves" or "Singing Elves" dances.

More importantly, OfficeMax is playing up how the latest edition of "Elf Yourself" ties into Facebook and Twitter, with an option to tweet out your video creation or to share it on your Facebook profile or a friend's. Additionally, it uses Facebook Connect so that you can source your embarrassing headshots from your photo albums or your friends'--that's clever.

It's not actually clear whether "Elf Yourself" drives up OfficeMax sales at all, but it does make some money on its own: you can pay to download the video, which normally expires once the holiday season has ended, or to order a hard copy.

Now go forth and tick off your human resources department.

Well, this hacker has quite the sense of humor.

Reports started spreading this weekend that iPhone users in Australia had been falling victim to "ikee," a worm that replaces default wallpaper with a picture of Rick Astley, the British pop singer whose song "Never Gonna Give You Up" has gained eternal infamy thanks to the mainstreaming of the "Rickrolling" prank craze. The photo is accompanied by the message "ikee is never gonna give you up," and it's apparently quite difficult to remove. According to security firm Sophos, this is the first worm detected that targets the iPhone.

The vulnerability is pretty specific: the phones must be jailbroken in order to be affected, and it appears to spread by searching an infected phone's contacts to find other jailbroken-phone users who have installed the Unix software SSH (secure shell) but haven't yet changed their passwords from Apple's default root password, "alpine."

Sophos says that it has not heard of any occurrences of the worm outside Australia, and that while it doesn't appear to do anything worse than irritate and embarrass affected users, that it highlights the vulnerabilities that jailbroken phones face.

Former Alaska Gov. Sarah Palin is a lightning rod for controversy, but a recent attempt to keep a low profile might just result in, well, more press. The onetime vice presidential hopeful Palin, who stepped down from the governorship this summer, will be speaking at a Right to Life event in Milwaukee, Wis., on Friday evening, and her team has mandated that there are no reporters allowed--or gadgets.

According to CNN, laptops, cell phones, cameras, and anything else that could potentially be used as a recording device will not be allowed into the auditorium. Tickets to the event were $30.

It's not an unprecedented move by any means. Advance screenings of movies, for instance, regularly have a no-cell-phones policy now that just about any phone can be used as a recording device. And Palin is hardly the only high-profile politician to put a no-press, no-recording rule in place for a speech: Former Vice President Al Gore did just that for a keynote address at the RSA security conference in early 2008.

But the funny part is that banning the press will generally do very little good, since anyone with a notebook or a good memory could easily post quotes or a synopsis to a blog or Twitter account within minutes of the event ending. In this case, as with Gore's press ban at RSA, it's likely that Palin's move will just end up stirring up more buzz.

Considering her book "Going Rogue: An American Life" is coming out in a matter of days, that might ultimately turn out well--or not.

The industry P.R. frenzy over scams in ads and offers on social networks goes on: Facebook announced on Thursday evening in a post on its developer blog that since it updated its developer platform terms of service this summer, it has disabled two ad networks that it says were running deceptive advertisements.

This comes in the wake of allegations that some companies that power offer- and survey-related moneymaking operations for social-gaming applications on platforms like Facebook's have effectively been scamming users into paying for services without disclosing those costs. One of them, Offerpal Media, has been particularly visible in the crosshairs.

"This battle is not new and it's far from over," the post by Facebook's Nick Giano wrote. "We faced stimulus scam ads on our own system earlier this year and pushed them off the site with rigorous enforcement. We did the same months later when deceptive ads from third-party ad networks appeared in applications. We're doing that again now as we see them appear in the form of offers."

Additionally, Facebook--which has said for quite some time that many of the activities highlighted in the "app scam" controversy are already banned by its terms of service--included in the post that more than 100 developer applications have been either "suspended or brought into compliance" over advertising issues, and that more than half of them were used by at least 1 million Facebook members per month. It's not clear whether these were all related to scams, or to other advertising-related infringements like the Burger King marketing campaign that encouraged users to "unfriend" their contacts in exchange for a free cheeseburger.

Facebook representatives declined to name which ad networks or applications it has banned. But the company did ban two companies in June, Social Hour and Social Reach, citing ad network policy violations. It's possible that the two ad networks mentioned in Facebook's blog post were banned months ago, given the "since July" language.

Earlier this week, MySpace--another big destination for social-network apps--announced that it had updated its terms of service to ban app scams. Prior to that, several prominent application manufacturers announced that they had banned potentially deceptive offers, despite the fact that they are responsible for a big chunk of virtual-goods revenues.

An update was made to this post at 7:51 a.m. PT on November 6 to note that Facebook banned two ad networks in June.

It looks like the brouhaha surrounding social-app moneymaker Offerpal Media is bigger than founder Anu Shukla's "sh*t, double sh*t, and bullsh*t" response to the accusation that its business is built on scamming consumers. It's got upcoming developments in two lawsuits, one in which it's the plaintiff and one in which Shukla is a defendant.

VentureBeat's Dean Takahashi reported Thursday that a lawsuit was filed in an Alameda County, Calif., superior court against Shukla and co-founder Michael Liu on behalf of Kevin Halpern, who alleges that he helped found the company and was then shut out. In a court complaint, Halpert says that in exchange for offering his social-networking expertise to what would become Offerpal, Shukla promised him a 15 to 20 percent stake in the company that never came to fruition.

The defendant's motion to dismiss the breach-of-contract suit is scheduled for November 24, according to public court documents. On Wednesday, Offerpal had announced that Shukla would be leaving her post as CEO and would be replaced by digital-ad veteran George Garrick.

But that's not the only legal dispute that Offerpal is in. There's a judicial settlement conference scheduled for Friday in the trademark infringement lawsuit that Offerpal filed against Kickflip, a former customer that went on to create a competing business, called Gambit, according to a person familiar with the court details. The suit was originally filed in April, and the status of a potential settlement is currently unclear because most of the events thus far, as well as Friday's scheduled meeting, have been behind closed doors.

But the reason why Offerpal has been in the news so much as of late has been because of Shukla's public altercation with TechCrunch's Michael Arrington at last month's Virtual Goods Summit in San Francisco. In response to Arrington's allegations that Offerpal's profitable business, used by many social-gaming companies as a way for users to earn virtual goods in-game, actually misleads players into signing up for paid offers and subscriptions.

Following the Arrington-Shukla spat, a number of high-profile names in the gaming and social-networking world came out against developer-app scams and misleading ads. Offerpal maintains that it runs a legitimate business. But it's clear that this company's issues run quite a bit deeper than a single PR fiasco.

Offerpal Media, a company that helps social-network app creators make money from offers and surveys, on Tuesday announced that it had replaced its CEO in the wake of a high-profile onstage argument at a conference and subsequent press over whether it's scamming consumers who fill out offers in order to earn virtual goods in social games.

Anu Shukla, who founded the company and had been serving as CEO since its 2007 launch, will be replaced by George Garrick, who has served as the CEO of Flycast Communications, Wine.com, Jingle Networks, and Mochi Media. Shukla "will still be involved and help guide the company," an Offerpal representative told CNET News.

A statement from Shukla makes it sound like the company's been CEO-hunting for months ("I have known George for a long time...After many months of searching, I believe that George is the best CEO to scale the company to new heights. I am looking forward to working with him closely"). But the timing is a little too good to be coincidental: a firestorm erupted over Offerpal and other companies in its niche after TechCrunch's Michael Arrington confronted Shukla while she was on a panel at the Virtual Goods Summit in San Francisco last month. Arrington accused Shukla of running a scam operation that tricks consumers into unwittingly spending money--and of course, he then blogged about it.

Shukla's response to Arrington was "sh*t, double sh*t, and bullsh*t."

But the industry has taken the controversy seriously. Social game makers like the massive Zynga have come out and said that they would ban potentially shady and misleading offers, even though those might make up a sizeable chunk of revenue, and on Tuesday social network MySpace joined the debate and said that it had modified its terms of service to outlaw "app scams."

Shukla was interviewed by VentureBeat's Dean Takahashi in a lengthy article published on Tuesday.

This post was expanded at 4:55 p.m. PT.

(Credit: The Beatles)

No, the digitally remastered Beatles catalog hasn't come to Apple's iTunes. But it has come to an apple-shaped USB device.

Retailing for $279.99, the collection will be released December 8 in North America, three months after the September 9 release of the remastered set of the band's albums (as well as The Beatles: Rock Band video game). The apple shape is in reference to Apple Corps, the Beatles music publisher--which in the past, you may recall, sued tech giant Apple in a trademark dispute.

(Credit: The Official Beatles Shop)

When the release of the remastered Beatles catalog and Rock Band game were announced for September 9, 2009 (the band has a song called "Revolution 9"), speculation arose that a concurrently scheduled Apple Inc. announcement might bring the catalog, still unavailable for digital download on the Web, to iTunes. That didn't happen. But with the release of the USB collection, the albums are available in non-CD digital form for the first time.

In addition to MP3 and FLAC versions of 14 stereo titles, according to a release, the 16GB device contains "all of the remastered CDs' visual elements, including 13 mini-documentary films about the studio albums, replicated original UK album art, rare photos and expanded liner notes."

Correction 10:45 a.m. PST: This story initially misstated the release date. It is December 8 in North America. Also, the type of lawsuit Apple Corps filed against Apple Inc. has been corrected. It was a trademark dispute.