The Social

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.

Maybe it hasn't worked so well to mesh the short-video-clip culture of the Web with traditional cable news: Current Media, the edgy cable company co-founded by former Vice President Al Gore, announced Wednesday it has laid off 80 employees in conjunction with a programming shakeup.

According to a release from the company, this shift involves canceling a number of programs, including "Current Tonight," "Current Takeover" and "Current Exposed." Most of the layoffs are in conjunction with those programs.

Additionally, per Wednesday's release: "Current will be shifting away from short-form programming and daily in-house production and towards proven 30-60 minute formats from a multitude of sources, including acquisitions, co-productions, outside studios, as well as Current developed and produced content." So it sounds like there will be a significant amount of new focus on outsourced material rather than more expensive in-house production--and perhaps less of an attempt to compete with well-established, live cable news networks.

Exactly one year ago, Current--headquartered in San Francisco but with many of its production operations in Los Angeles--laid off about 60 people but said that it was also creating about 30 new positions, which left its head count around 410 employees. Current chief operating officer Joanna Drake Earl told CNET News that this year's cuts leave its employee numbers at around 300.

The release said that the cuts were "not the result of a need to cut costs" and that the company would be hiring in areas like talent management, licensing, marketing, and ad sales. It'll also be consolidating its two L.A. facilities into a single new one.

"We've been an extremely innovative company doing lots and lots of different things," Earl said, "but (we've had to ask) what are we doing for our audience, and what shouldn't we be doing."

The company had filed for a $100 million IPO about two years ago but then retracted it amid concerns about the economy. It's repeatedly had to deflect rumors about its viability, like a report early this year that it would be closing its San Francisco headquarters to focus on L.A.

This post was updated at 2:10 p.m. PT with comment from Current's COO.

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.