Check out the top headlines and insights this week from Inside Social Games – tracking all the latest developments at the intersection of games and social platforms.

Monday, September 14, 2009

• Cops & Robbers, Facebook Style
• Play4Iran: A Twitter-Based Iranian Political Action Game
• Finnish Social Games Developer Ironstar Helsinki Continues Expanding
• ToyBots Woozees: SGN’s Secret Project Connects Physical, Online Toys
• Zynga Goes to the Mattresses: 22 Lawsuits Filed This Year, and Counting

Tuesday, September 15, 2009

• Fatfoogoo Expanding into Social Games
• EA Executive Joins Outspark
• Zynga Bringing Offers In House with DoubleDing?
• Come2Play Adds Virtual Currency Monetization Platform

Wednesday, September 16, 2009

• Tapjoy Releases Free Version of its Ad Optimization Platform
• PlaySpan Survey Shows Some Interesting Virtual Goods Stats
• Notes from GDC Austin: Juicy MMO and Virtual World Monetization Numbers
• MySpace Exec Jason Oberfest Joins Gaming Company Ngmoco

Thursday, September 17, 2009

• Conduit Labs Raises $3 Million
• USA Network Continues Social Gaming Expansion with New Deals
• Korean Game Company Nexon Grows in Europe

Friday, September 18, 2009

• A Look at Social Games from Japan
• Forget Those White-Label Games, Check Out LOLApps’ Diva Life
• Social Gaming Roundup: Playfish and Playdom Expand in SF, and more

Facebook Platform Program Manager Josh Elman, who has been with the company since early 2008, has decided to leave Facebook. Elman, who worked on the launch of Facebook Connect and has been focused on helping large developers like the Huffington Post, JibJab, and others launch Connect integrations since, says he is primarily looking to return to a more hands-on product role. Elman’s last day at the company was Friday, and he says he and Facebook are parting on positive terms.

Prior to joining Facebook last year, Elman was head of product management at Zazzle, and before that was a senior product manager at LinkedIn. At Facebook, he has played more of a product marketing role, helping “almost everyone” who has used Connect. While Elman hasn’t finalized his next move yet, he says he is exploring several “exciting opportunities.”

“Josh was a great illustration of an ideal Facebook Platform team member,” says Keith Rabois, VP of Strategy and Business Development at Slide, one of the largest developers on the Facebook Platform, of Elman. “It was obvious that he cares deeply about Facebook succeeding with their Platform and developers succeeding with their businesses. Even when we disagreed with Josh, which could be quite often, he was quite transparent about Facebook’s reasoning and principles, and was willing to genuinely listen to developer feedback and try to accommodate developers’ interests.”

Elman leaves at a time when the Facebook Platform team has stabilized following Ben Ling’s departure last August. After Ling left Facebook to take the Director of Partnerships, Platform, and Syndication role at Google (where he worked previous to joining Facebook), VP of Communications and Public Policy Elliot Schrage took over as interim head of Facebook Platform marketing until Ethan Beard moved into that role in January of this year. Around the same time, Mike Vernal took over for Charlie Cheever as head of Facebook Platform and Connect engineering. Justin Osofsky also joined Beard in Platform marketing after a year in business development in May.

On Tuesday, Facebook said it had become “free cash flow positive” this past quarter — meaning the company is financing its own growth rather than using investor money. But why is revenue growing? Reporters earlier this year have fueled speculation about many different revenue streams, from brand ads to self-serve ads to virtual goods.

Overall, Facebook revenue is “likely going to be above $550 million this year,” we have recently heard from several sources close the company. Last year, the it brought in a total of between $280 million and $300 million, as we and others heard then. The story now is how Facebook has gone beyond traditional social network banner advertising to grow revenue.

Where Facebook was, not too long ago

In our January interview with Facebook Director of Monetization and performance-advertising head Tim Kendall, he told us that “we have tens of thousands of monthly active advertisers” using the company’s self-serve targeted ad system. He added that “we are very pleased with revenue growth” on that front.

At the end of March, the company said it was seeing 70 percent revenue growth over the previous year. Around the same time, a TechCrunch article mentioned a surge in self-serve ads. 70 percent more than $300 million is $510 million. So at that point, it appeared that the big Facebook advertising experiment was starting to work. The company has been trying to develop new forms of ads that rely on user data and behavior — rather than the traditional impression-based model of most social network ads to date.

In early July, Business Insider and investor-blogger Fred Wilson both said they’d heard revenue was growing even faster, to around $550 million. Both reported revenue being broken down along these lines:

•    $125 million from brand ads
•    $150 million from Facebook’s ad deal with Microsoft
•    $75 million from virtual goods
•    $200 million from self-service ads.

What we hear now

Facebook’s sales force has been bringing in more revenue directly, rather than through its long-time ad deal with Microsoft. Some of this money is coming in through large brand advertisers, through their experimentation with Pages, and related social ads.

But, Facebook’s self-serve ad system is a hit with a few new constituencies. “Performance advertisers,” the sorts of businesses like online education company University of Phoenix, are finding that ads on Facebook can be targeted so precisely that they are getting a clear return on investment. The right sorts of people see the ads, click, and sign up for an online course or whatever.

There’s another group also getting in on these self-serve ads now: Local advertisers. These small businesses are finding that they can bring in new customers by targeting people who live nearby.

Note: Some likely substantial portion of self-serve advertisers is from social gaming companies on the platform, especially Zynga. We hear that company might make up to $200 million in revenue this year, driving new users and revenue through spending tens of millions on Facebook’s self-serve system. This spending is obvious, as countless Facebook users have reported seeing ads for games like “Mafia Wars.”

There is a lot of churn among first-time advertisers, sources say. But, those advertisers with initial success tend to continue pumping money in, if not upping their Facebook ad budgets, these sources add.

Facebook advertising, in other words, hasn’t been working for everyone, but it’s working for some key groups. Performance marketers, for example, were some of the earliest users of Google’s search and keyword advertising products. Facebook, through its own profile and activity-based methods of targeting, is creating new value for these people.

In terms of how what we hear versus what the July reports said, we believe that brand ads and especially self-service ads are driving almost all new growth. As one source put it, the advertising team is “beating the shit out of its numbers.”

Advertising is the Strategy, For Now

Facebook’s leadership is almost entirely focused on ads for the time being, from what we hear. There has been a lot of speculation about its efforts to create some sort of virtual goods or payment system. Internally, it is seen as something to keep on the back burner. Virtual gifts, which the July reports heard accounted for up to $75 million in revenue this year, is a “tiny fraction” of revenue, says one of our sources. The caveat here is that Facebook may be accounting for gift store revenue as advertising, as one way it monetizes this feature is through selling “sponsored gifts” to advertisers.

In general, from what we understand, any sort of large-scale payments system or virtual goods expansion is likely a year or two off, if not longer. Facebook has no doubt been watching the explosion of this revenue stream among developers on its platform — we have separately heard virtual goods revenues could account for more than $300 million in platform revenue this year, money Facebook isn’t seeing any of.

Certainly, we expect Facebook to keep experimenting with its young “Credits” virtual currency system. But, for now, the company appears happy to let the ecosystem of social gaming companies, mobile payments services, offer-based advertisers, and others in the emerging ecosystem handle application monetization on their own.

Advertising is Paying the Bills

The other angle here is that Facebook is now financing its own growth, and through this new advertising revenue. Last year, for example, the company was apparently both losing money and taking out debt to fund capital expansion projects like a new data center in Silicon Valley.

Earlier this week, Data Center Knowledge reported that Facebook is making a big new investment in its existing Virginia facility. The publication cited analysts who estimated that the center could cost up to $125 million over the course of several years. It’s not clear how Facebook is accounting for that expenditure, but the term “free cash flow positive” signifies that the company is able to cover its own capital expenses. It appears that the company’s new revenue growth is paying for at least a portion of the new data center investment.

The conclusion? Facebook, more than ever before, is competing on its own terms.

TVGuide.com is using Facebook Connect to allow users to share their favorite television shows and check out what their friends are watching. Perhaps most striking is the ability to log in with a couple clicks and see which shows all of your friends on Facebook like — it’s a quick way for people to get a lot more value out of the site’s TV show listings.

The Connect application also allows Facebook users to add favorite TV shows to their TVGuide.com accounts. Crucially, it automatically pulls in people’s favorite shows from their Facebook profiles. This way, your friends don’t even need to be using TV Guide for you to see what shows they like. Users can keep tabs on their friends’ favorites, as well as the most popular shows among all their friends. There’s also the ability to add those shows to your favorites list and post the addition to your newsfeed.

A sidebar gives you the chance to add TV Guide as one of your favorites with some information on the Fan page’s total number of Fans. There’s also a link to news stories on the TV Guide site that have been linked through the Fan page. TV Guide’s Facebook Fan page currently has close to 11,000 fans, and it will be interesting to see if the cross promotion through Connect brings a lot more.

Dawn is using RockYou’s Pieces of Flair application to promote its Dawn Saves Wildlife campaign and the Everyday Wildlife Champions Facebook page. Users can spread word of the education and wildlife rescue initiative by sharing the Pieces of Flair — the app features some of the animals that Dawn dishwashing soap has helped clean after the wildlife has been caught in oil spills.

The campaign gives users a chance to learn more about the programs that are helping wildlife, as well as offering information on where people can visit the animals or start their own efforts to help the cause. Dawn is also currently running a promotion that donates $1 from the sale of special edition bottles of their dish soap to the Marine Mammal Center and the International Bird Rescue Research Center. The total potential donation is $500,000.

“Dawn has been focused on keeping the line between branding and cause clear. While Dawn is the driving factor behind the program’s success, it is ultimately the passion for wildlife conservation that drives the consumer,” said Susan Baba, external relations manager, Procter & Gamble. “Working with RockYou has helped Dawn raise awareness of this wildlife conservation effort and invite consumers to join the Everyday Wildlife Champions movement. In two months, 11,000 fans have joined the page and are actively discussing wildlife issues and events across the country. In addition, over $50,000 in donations has been activated online at www.dawnsaveswildlife.com.”

Dawn and RockYou launched the campaign in July, and more than 1.3 million Pieces of Flair were shared among Facebook users in the first three weeks.