Insider Chatter by Donna Bogatin

The Scrabulous Facebook games are heating up.

Last week, I broke the news that Zynga is at Facebook risk too. SEE my January 16, 2008 story: Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette

Is Fred Wilson being too casual with Union Square Ventures’ money I asked? After all, the USV backed Zynga’s all-in bet on Facebook could blow up in smoke! Just ask Scrabulous, I underscored.

Now, six days later, Erick Schonfeld, Michael TechCrunch Arrington’s lieutenant, also wonders “Is Zynga next”? Wonder how he started to wonder that???

While now jumping on the Zynga at risk boat, though, Schonfeld misses the Zynga boat. TechCrunch rattles off some of the high-powered Zynga investors, but neglects to  make the crucial connection as I did last Wednesday: Crossover shareholder dreams!

Zynga believes it is NOT Scrabulous, claiming to have immunized itself from game infringement claims by scrambling its game names. What’s more, though, the high-powered Zynga investors are also Facebook investors: founder Mark Pincus himself, Peter Thiel, Reid Hoffman…

AND, didn’t we learn from the Associated Press yesterday that anything Angel Reid Hoffman touches turns to gold!!! Zynga and $10 million VC team undoubtedly believe they have powerful, incestuous secret Facebook weapons at their disposal, their own lucky Facebook charms.

As Mark Zuckerberg reminded Lesley Stahl, he has plenty of competent lawyers at his $15 billion disposal.

Schonfeld really gets it wrong though when he gives startup “advice” to would be future F8 game developers, hailing that “social networks have been a boon for casual gaming online,” so game on, with a license.

SORRY, Erick, a licensed game only mitigates one of the two double-whammy Facebook risks that a “cool app” such as Scrabulous engenders, as I underscored last Wednesday.

Web 2.0 VC standard bearers are throwing $10 million Zynga Facebook caution to the wind and heeding the “Internet court jester”’s advice to “Throw out your development, go use Facebook.” WHY, though? Because “It doesn’t matter if you are “better,” what matters is that you are “standard,” Esther Dyson gushed about Zuckerberg’s F8 upon its unveiling to the world.

BUT, is piggybacking on someone else’s property REALLY a bankable business model, I asked last week. WELL, who even needs a solid business model after all, at the time of a Web 2.0 investment, as we are repeatedly reminded by blogger VCs.

The Scrabulous team is piggybacking on the businesses of TWO other businesses: Scrabble and Facebook. ANY and ALL F8 third-party games play at the fickle mercy of Mark Zuckerberg, a young man fond of having his high-priced legal tgam whip up some high-powered terms of service:

We do our absolute best to keep Facebook Platform up and bug-free, but you use it at your own risk.

You must get signoff from us before releasing any formal press releases.

We reserve the right to charge a fee for using Facebook Platform and/or any individual features thereof at any time in our sole discretion.

Facebook may be independently creating Applications, content and other products or services that may be similar to your Facebook Platform Applications.

SEE: AP On LinkedIn: Social Networking Gold Mine at $5 per User?

MORE ON ZUCKERBERG’S STAR 60 MINUTES TURN: Mark Zuckerberg Confirms: Facebook is NO Google Killer

ALSO: Facebook Davos PR Blitz: Beware Scoble Hype, Users Still at BIG Risk

CONTACT DONNA BOGATIN

Facebook has been asked to remove the Scrabulous game from its Website by the owners of the Scrabble trademark, Hasbro and Mattel, on the grounds of intellectual property theft.

REALLY? Mark Zuckerberg giddily shared on 60 Minutes Sunday that he plays Scrabble, on Facebook. OOPS! Zuckerberg also confided he couldn’t be bothered worrying about a lawsuit claiming the foundations of Facebook are fraudulent, “The Facebook” lifted from Harvard classmates. Facebook has lawyers to contend with such matters, the 23 year old CEO of a $15 billion valued Facebook scoffed. TWO bad Facebook PR-Zuckerberg 60 minutes moves?

Facebook’s lawyers are busy today, thanks to Zuckerberg playing so much Scrabble on Facebook! Even 60 Minute’s Lesley Stahl got on board the wrong Facebook Scrabble boat!

Stahl’s fawning over “savvy, mogul” Zuckerberg included hailing that he his ”Inviting everyone on the site to create new software” for Facebook. The 60 Minutes - Stahl - Zuckerberg - Facebook problem though is that Stahl herself vilolated Facebook’s own third party software edicts. 

60 Minutes reveled over “Facebook Scrabble, which Zuckerberg demonstrated playing. Zuckerberg is apparently unaware of his own harsh F8 rules! Facebook warns developers, under penalty of immediate expulsion, that the proper terminology for F8 applications is “built on” or “using” Facebook Platform, certainly NOT “Facebook Scrabble.”

I wrote way back in September, 2007: Why Facebook Platform is Risky Business and Startups: Why Facebook Platform is a Wolf in Sheep’s Clothing 

I also warned: Facebook: The Web’s Golden Handcuffs

Nevertheless, Web 2.0 VC standard bearers are throwing $10 million caution to the wind and heeding the “Internet court jester”’s advice to “Throw out your development, go use Facebook.” WHY, though? Because “It doesn’t matter if you are “better,” what matters is that you are “standard,” Esther Dyson gushed about Zuckerberg’s F8 upon its unveiling to the world.

BUT, is piggybacking on someone else’s property REALLY a bankable business model. HEY, who even needs a solid business model at the time of a Web 2.0 investment, as we are repeatedly reminded by blogger VCs.

The Scrabulous team is piggybacking on the businesses of TWO other businesses: Scrabble and Facebook.

How about the newly $10 million funded Zynga? Investor Fred Wilson, Union Square Ventures, boasts “When you take a casual game and stick it inside a social network, it becomes way more exciting. This is like pouring gasoline on fire.”

BUT, is Wilson being too casual with Union Square Ventures’ money? After all, Zynga’s all-in bet on Facebook could blow up in smoke!

The Mark Pincus founded Zynga claims it is “the largerst social gaming network on the Web.” REALLY? All nine games it soilicits people to play at the Zynga website have another social network’s URL on them: Facebook.

Want to play Zynga Scramble? Go to apps.facebook.com/scramblegame. How about Zynga Blackjack? Go to apps.facebook.com/black-jack. Etc, etc…

Zynga believies it has immunized itself from game infringement claims by scrambling its game names. Perhaps. Zynga’s Facebook dependency looms large, however. Just ask Facebook:

We do our absolute best to keep Facebook Platform up and bug-free, but you use it at your own risk.

You must get signoff from us before releasing any formal press releases.

We reserve the right to charge a fee for using Facebook Platform and/or any individual features thereof at any time in our sole discretion.

Facebook may be independently creating Applications, content and other products or services that may be similar to your Facebook Platform Applications.

Zynga and $10 million VC team undoubtedly believe they have a powerful, incestuous secret Facebook weapon at their disposal: Cross shareholders Pincus, Peter Thiel, Reid Hoffman.

Facebook ownership may very well change, however, as well as F8 terms of service.

MORE ON ZUCKERBERG’S STAR 60 MINUTES TURN: Mark Zuckerberg Confirms: Facebook is NO Google Killer

PLUS:  2008 Social Media Warning: Beware Google AND Facebook 
Twitter and Facebook: The BIG Illusions of Friendship and Influence and
YAY? Weblo Cheapens Facebook ‘Friendship,’ Whales Rejoice! and
Reid Hoffman: LinkedIn About Face (book) and
Does LinkedIn Have a Connections Fraud Problem?

ALSO:  Henry Blodget Braces For ‘Harder Times’: Silicon Alley Insider ‘Screwed’? and MySpace, Facebook Rule: Does Multiply.com Want To ‘Sell Out’? and AP On LinkedIn: Social Networking Gold Mine at $5 per User? and Why Zynga, NOT Scrabulous, Has a Lucky Facebook Charm

CONTACT DONNA BOGATIN

The GigaOm derivative blogging weekend hype machine carries on.

Last holiday weekend, the Om himself misleading headlined “Five Facts on Google Phone,” to regurigate third-party rumors previously published elsewhere AND pile on with his own “sources say” conjecture.

This weekend, GigaOm staffer Wagner James Au presents “The How of Habbo Hotel.” A cutting edge, GigaOm original exculsive? Not quite.

Christian Nutt, Gamasutra, was on the Austin Game Developers Conference scene last week for extensive, direct coverage of Sulka Haro’s keynote on Sulake Labs’ Habbo Hotel. GigaOm’s Au subsequently piggybacks off of Nutt to announce a gaming “crime.”

The GigaOm Weekend piece notes “last week, Sulka Haro of Sulake Labs flew all the way to the GDC to explain how the teen-oriented, Shockwave-driven Habbo Hotel has grown from a tiny 2.5D space of two rooms into a masive place that last year made an estimated $77 million in revenue.”

Au goes on to say, “Gamasutra was on hand to take great notes, which is a good thing, because very few developers reportedly attended Haro’s talk.”

Really? Apparently ”very few” blogging network ‘reporters’ attended Haro’s talk as well. Which is undoubtedly a “good thing” for the GigaOm network because it can now “scoop” in to scoop “The How of Habbo Hotel” without the fuss, bother, expense, or first-hand origination required of journalism.

YAY for derivative blogging!

Au, however, sells “Gamasutra’s coverage” short. First off, Au never once directly credits the reporter that was actually on Austin scene to yield all the “great notes” for him to use free of charge (FYI Wagner, Chrisitan Nutt is his name). Moreover, the Nutt piece is not accurately defined as “great notes”; Nutt’s work is an in-depth, first-hand, case study report of a business model presented by a CEO. So in-depth, that Nutt’s original work is the foundation of Au’s “own” weekend story.

What’s more, Au declares a “phenomenal success of Habbo Hotel” as being “criminally under-appeciated by the game industry.”

Where is the purported crime, though? To back up his assertion, Au says Sulake Labs’ Habbo Hotel is a “massive place” that “last year made an estimated $77 million in annual revenue” with a staff of 300.

Using Au’s figures, the “criminal” Sulake game industry success story is a $250,000 revenue per employee one.

The Nintendo success story may be even more criminal then, as analyzed by Fortune magazine’s Jeffrey O’Brien:

The company’s 3,4000 employees generated $8.26 billion in revenue last year, or $2.5 million each. Over roughly the same time frame, Microsoft employees generated $624,000 each; Google’s peformed 50% better, at $994,000, though still less than half as well as Nintendo employees.

In other “criminal” Nintendo words, ten times the amount of revenue per Sulake employee.

ALSO: Poor Misunderstood Facebook: NOT the White Pages, NOT Google Poking Heaven 

PLUS: Twitter: Lifelogging Platform or Self Promotional Tool? and Jaiku Rules: Facebook Addict Kicks the Zuckerberg Habit

CONTACT DONNA BOGATIN

Why did Rho Ventures lead a $10.6 million funding round on behalf of NowPublic? To “change the media landscape,” is the PR explanation.

The reality of NowPublic though is that it is exploiting the existing media landscape to its own advantage.

In touting the deal today, NowPublic founder and CEO Leonard Brody went out of his way to assert that not only is he not a proponent of “citizen journalism,” NowPublic itself is no citizen journalism effort.

REALLY? Then why does Brody extol the citizen journalism he says is taking place at NowPublic in his own press release!:

Brody: On a daily basis, NowPublic’s model of citizen journalism is increasingly being embraced by major media.

Not only does Brody contradict himself in spinning the NowPublic VC investment, NowPublic’s publicy stated ”news values” are not being upheld, as I analyzed earlier this morning in FLASH! NowPublic Digg Clone Preps Global ‘News’ Domination.

NowPublic’s interpretaion of “crowd powered media” is strikingly similar to Digg’s “user powered content” philosophy. NowPublic is actually functioning as a Digg like site, aggregating crowd-pleasing soft news stories taken from other Websites.

NowPublic is not being “embraced by major media,” it is iteself embracing the original content of major media, by piggybacking on the professional work done by professional news organizations, amazingly cost free to NowPublic!

If “smart money” is backing the regurgitation of the content of others as a smart media play, who will pay for the production of the news that is being poached?

I asked the same question at the beginning of the year, when Time magazine announced its online news “made simple,” The Ag; A recylcing of the news produced by others:

Now you can start your day by checking our news blog, The Ag, which smartly aggregates and summarizes the most important stories from daily newspapers and blogs around the world.

Time says  “The Ag is the work of Time’s Matthew Yeomans, an early-rising journalist based in Cardiff, Wales”:

Yeomans scours his bookmarks and RSS feeds every weekday morning and writes a digested version of the best stories from hundreds of the world’s great newspapers and blogs, giving you all the news you need to read without reading all the news.

Yeomans’ scouring at dawn conveniently provides the Times’ audience with the breaking news produced by the world’s great newspapers, without the inconvenience of having to visit the producing news organizations to read their original content, or view the ads that support such competitors’ news production.

In the “democratic” news tradition of the Web, Yeomans’ better versions of the best stories of others are sprinkled with new media’s online currency: links.

Typically, Yeomans’ “breaking news” stories are standalone “reports” created from the content of various (competing) news organizations. Yeoman attributes his source content, including links, while Time nevertheless underscores to its readers that there is no need to be “reading all the news” appropriated from those that paid to produce it.:

The BBC says,
Reuters quotes,
AP quoting,
CBS news reports,
According to CNN Asia,
According to the WSJ…

Time may be making shrewd Time-centric business decisions, but what if the producing news organizations Yeomans scours for his “news” follow suit? Ditto for the business model of not quite citizen journalism site NowPublic.

At the end of the new media, citizen journalism day, who will pay to produce the news that everyone seeks to aggregate without paying for? Will there continue to be news to aggregate? News may be a commodity, but valuable commodities cost dearly. 

ALSO: How Pegasus News Fuels Local Media Business Model for Fisher Communications: INTERVIEW

CONTACT DONNA BOGATIN

Is digital gaming really “solving” the world’s problems? Unlikely, but the world’s gamers are serving to bolster Microsoft’s advertising fortunes, not those of arch rival Google.

Suzanne Seggerman, president, Games for Change (G4C):

The current generation of gamers is among the most socially conscious in history. We know from experience that young people are looking for ways to help make the world a better place, and who better to support this effort than an industry leader like Microsoft?

G4C describes itself as: The primary community of practice for those interested in making digital games about the most pressing issues of our day.

Where does Microsoft fit in the G4C game? Microsoft and G4C are jointly “exploring new ways to bring together the world of digital gaming with the world of social change,” as announced at the fourth annual Games for Change Festival underway at Parsons The New School for Design in New York City.

Specifically: Microsoft is sponsoring a “socially minded” global gaming competition, dubbed the Xbox 360 Games for Change Challenge. The worldwide competition will kick-off this summer with college students invited to come up with the best game based on the theme of global warming.

The students are to develop games based on global warming using Microsoft XNA Game Studio Express software.

Prizes include cash to be applied towards college education expenses winner’s education and the opportunity for winners to visit Microsoft to present their entries to the Microsoft games management team for possible inclusion as a download in the Xbox LIVE Arcade service. The first-place team or individual will also be able to apprentice at Microsoft’s Interactive Entertainment Business as part of its internship program.

What about Google’s “Interactive Entertainment Business”? It is apaprently still MIA, despite the Google purchase of AdScape, touted as Google’s “massive” in-game advertising play.

Google vs. Microsoft in digital gaming advertising? How Microsoft’s Massive and Google’s AdScape stack-up:

Google: Recent acquisition of AdScape, described as a San Francisco-based “small in-game advertising company” offering technology to dynamically deliver advertising with plot and storyline integration.

Business Outlook: Does Google already have deals signed with game developers?

Google in announcing the acquisition: “We have been in discussions with many in the game development community and hope to partner with both large and small game publishing companies.”

Price tag? Rumored at $25 million.

Microsoft: Acquisition of Massive a year ago, described as a “world-leading network for video game advertising” to help deliver dynamic, relevant ads across Microsoft’s online services, starting with Xbox Live and MSN Games.

Headquartered in New York with offices in London, Los Angeles, Chicago, San Francisco, Paris, Sydney, Cologne and Toronto.

Business outlook: Katherine Hays, Senior Director of Operations at Microsoft, and a co-founder of Massive, reporting to Microsoft investors recently:

Massive is the leading in-game advertising company. Our experience to date spans over 200 advertiser campaigns which we have aired across the network for more than 100 blue chip advertisers.  Robust technology and operations, the Massive Network has been live and serving campaigns to the gaming audience for over two years, and a large network of game publisher and partners.  Massive has over 50 game titles live in the network today. 

Massive aggregates the gaming audience to enable advertisers to, for the first time, broadcast real-time advertising simultaneously across multiple video games, whether played on the console or PC.  This is made possible through our technology, and back end operations which were built from day one to be platform agnostic, and therefore have the capability to aggregate the single largest gaming audience worldwide.  

Massive is a thought leader in the industry, driving measurement standards and accountability, and working with industry players, such as the IAB to help set standards and grow the end game advertising market overall, for example, by working towards providing third party audited data in the coming year.

Connectivity is driving, for example, Xbox 360 has six times the connectivity rate of prior platforms, which drives a very sticky experience for audiences.  As of March 2007 there were more than 6 million users connected through Xbox, representing over 2.3 billion hours of game play. 

Price tag? Rumored at $300 million.

How do Massive and AdScape fit in the overall Microsoft vs. Google ad game?

Google CEO Eric Schmidt has a fantasy, a world wide advertising domination fantasy: “The long-term fantasy is we walk up to you and you give us, say, $10 million and we’ll completely allocate it for you’ across different media and ad types.” Microsoft CEO Steve Ballmer aims to have a $6 billion advertising agency reality, however: aQuantive.

Why does Ballmer trump Schmidt? Avenue A | Razorfish product beats a Google “advertising dashboard” spin.

Massive has a solid (Microsoft) track record with real business traction; AdScape has a (Googley) start-up dream.

ALSO: Google vs. Microsoft the Monopolist: 0 for 2

CONTACT DONNA BOGATIN