Last week, the developers at NimbleBit (makers of iOS Game of the Year, Tiny Tower) accused Zynga of copying them with its new game, Dream Heights. Now, it’s happening again. This time, the accusation comes from Buffalo Studios, which says that the gaming giant copied its flagship title Bingo Blitz with its launch of Zynga Bingo.

The news, reported first by VentureBeat, involves accusations from Buffalo Studios that Zynga’s newest title involves “striking similarities” in terms of its graphics, layout and game play with its own Bingo Blitz. The company also released an infographic which (sarcastically) began: ”Hello Zynga. We are moved that your new game was so inspired by our innovative product, BINGO Blitz…,” before continuing on with a serious of screenshots showing examples of the similarities in question.

However, unlike the situation with NimbleBit, it doesn’t appear that Zynga first attempted to acquire Buffalo Studios prior to the launch of the new title.

Bingo Blitz claims to have over one million daily active users, according to the infographic, and has been “liked” nearly 2.5 million times.

While it’s notable that the high-profile Zynga is the company being targeted here in terms of stealing its “inspiration,” (especially since Zynga itself once targeted its own copycats via lawsuits), game developers ripping off each others’ work seems to be the new normal for the industry. Lawyers, start your engines. If a company as large as Zynga is playing dirty, there’s bound to be lawsuits aplenty ahead.

Image credit: Buffalo Studios, via VentureBeat

There’s been one trend we’ve been noticing over the past few years when it comes to Zynga’s game development strategy. The social gaming giant likes to re-create classic games like Hangman or hidden puzzles and add social elements for gameplay. We saw this with the release of Hanging With Friends, Scramble With Friends, Hidden Chronicles. And As Zynga revealed in October, next up is Bingo. Today, the company is revealing its social take on Bingo via a Facebook game, which will be joining Zynga Poker in Zynga’s newest franchise, Zynga Casino. Currently, the game is in private beta but will be launching to the public soon.

In terms of actual gameplay, Zynga Bingo works similarly to the way an ordinary bingo game works. And if you’ve played Zynga Poker before, the game mechanics and nuances will feel familiar to you as well. As numbers are called out in the game, you cross off those that match on your card, with the winner being the first person who reaches a consecutive pattern on the card from the drawn numbers.

The main difference is the social aspect of Zynga Bingo. When you start the game, you’ll be promoted to enter themed bingo rooms and compete against friends or other random players on Facebook simultaneously, challenging buddies in a race to get B-I-N-G-O faster. Similar to Zynga Poker, players can chat and see which rooms their friends are in.

Each room has a theme. There’s Vegas Lights, which has a Las Vegas Casino theme; Pirate’s Paradise; and a FarmVille-themed Bounty room. And as you collect more tickets from wins, you’ll be able to unlock secret rooms as well.

As you are considering which room to enter, you can also choose how many Bingo cards you’d like to play. Players can compete with up to six cards at once, and you use your tickets to purchase more cards.

Within the game, you can also use what Zynga calls “power-ups” to progress faster, get coins and win collectibles to level-up. One type of power-up relates to friend help, which enabled a friend to automatically daubs a free square on each of your cards and complete your cards faster.

Nicole Opas, Senior Producer for Zynga Bingo, says the gaming company will be considering extending Zynga Bingo to mobile platforms in the future. Zynga Bingo was created by Zynga’s Austin, Texas and New York studios in collaboration with the Zynga Casino team in San Francisco.

It should be interesting to see how the slew of games released in the fourth quarter helped boost both Zynga’s revenue and usership numbers. The company is expected to deliver Q4 earnings on February 14, and Zynga’s stock rating just got a boost, and could see a traffic boost from some of the newly launches game titles.

The guys from NimbleBit (developers of Tiny Tower, the game handpicked by Apple as iOS Game Of The Year) are on a bit of a tweeting spree tonight, blasting out two big ol’ gems of knowledge in as many hours.

First: Zynga just launched a new iOS game, and it looks a lot like Tiny Tower. Second (and this one makes that first bit all the more interesting): Zynga allegedly tried to buy NimbleBit at some point in the past, but NimbleBit turned them down.

The new game, Dream Heights, seems to only be available in Canada thus far. Perhaps Zynga thought those nice folk north of the Border somehow hadn’t heard of Tiny Tower yet? It’s not like it’s a hugely popular game with a massive fan base or anything, right?

As word of Zynga’s latest release got back to them, NimbleBit’s David Marsh hinted at the refused buy-out:

Even when you refuse to go work for Zynga, sometimes you end up doing work for Zynga anyway.

A few minutes later, co-founder Ian Marsh swooped in and nailed out the confirmation:

They did go the honest route and try to acquire us first.

Bringing it all together, the NimbleBit guys blasted out the image below comparing the two.

Inspiration is one thing — but this… is pretty friggin’ blatant. One could argue that Tiny Tower is itself influenced by past games like SimTower, but seriously, just look:

We’ve reached out to Zynga for a comment, but haven’t heard anything back on the matter just yet.

Like all of y’all I just read Paul Graham’s SOPA-soaked call for a tech startup that would kill Hollywood.  You would have to be a complete idiot to think Hollywood (or at least some part of Hollywood) isn’t ripe for disruption BUT …

“The people who run it are so mean and so politically connected that they could do a lot of damage to civil liberties and the world economy on the way down. It would therefore be a good thing if competitors hastened their demise.”

Damn. What I’m getting from this post is that Hollywood should die, because people are mean. I don’t know about you, but I’ve met plenty of mean people right here in SF Silicon Valley.

Graham recommends, “The best way to approach this problem is to ask yourself: what are people going to do for fun in 20 years instead of what they do now?”  After asking a bunch of smart people in the tech industry where they thought the industry would be in 20 years and hearing the same answer from most of them (“Something like Zynga …”) I finally asked Graham and YCombinator partner Harjeet Taggar what they thought people would be doing in 20 years, for fun.

Their answer:

“I’d guess a lot more games. Zynga type games are likely only the start. Console video games are already essentially interactive movies.  Smartphones and tablets are making games more accessible than ever, in the future it’ll be bizarre to think that people ever purchased devices with the single function of loading games from a disc.

It’s probably impossible to predict *what* exactly people will be doing in 20 years but it’s likely a safe bet to say that the current model of going to a physical place where the only content available has been selected for me by a group of money men somewhere, won’t be around.”*

What I’ve never understood is this, it is some function of Hollywood, Silicon Valley and the New York media industry to tell human stories and distribute them — they are all symbiotic. If this is the case then why can’t we all just get along?

At the end of the day all three industries feed each other, one provides the content, one (increasingly) provides the distribution and the other covers it all, with some interchange of roles between all three. What is happening now (and what Graham might be conflating) is that there is a conflict between who controls the platform, and therefore distribution, versus who controls production. And the only reason Hollywood has more power here is that it’s been around the longest — the tech industry’s got nothing, so it’s got nothing to lose.

Sure there are some people in the content industry who refuse to admit that their old models don’t work (just like how there are people in the tech industry who work on Bing). But to kill the whole thing off would get rid of a wealth of creative talent skilled in the cinematic portrayal of the human narrative, and replace it with what? A souped up Farmville?

The truth is that both Hollywood and Silicon Valley have valid arguments with regards to digital rights and neither can put itself in the other’s shoes.  If Hollywood spends $50 million dollars on a film, it can’t pivot while YCombinator can invest $50K in startups and have 2/3rds of them fail. And even if they do succeed it doesn’t matter, as the tech industry reinvents itself every five years! Hollywood on the other hand …

The real moral to this story is we all should dream, and we should dream like Hollywood but we should invent the future build like Silicon Valley. There’s no YCombinator for film because that kind of business behavior doesn’t work  in traditional media. And even the most genius tech people haven’t yet solved the problem of piracy. (If someone has the answer please raise your hand, because you’re going to be the richest person on the planet.)

Please, raise your hand. Anyone? Bueller?

* For the record, I’d rather watch my Instagram feed than watch a movie.

Zynga is starting off 2012 with a bang. After launching its newest Facebook title Hidden Chronicles yesterday, the social gaming giant is debuting its latest mobile game, ‘Scramble With Friends,’ which is an iOS game that combines word scramble and formation with the social features of the ‘With Friends’ gaming suite.

As you may know, via the Newtoy acquisition in 2010, Zynga has helped develop a suite of ‘With Friends’ mobile titles including the popular Scrabble-like game ‘Words With Friends’ and the recently launched mobile take on Hangman, ‘Hanging With Friends.’

Scramble With Friends is actually very similar to Zynga’s ‘Word Scramble’ iOS app, but packaged in a sleek new app with more interactive, and social gameplay. Basically players compete against opponents to beat the clock and find as many words as possible on a game board.

Here’s how the game works. Each match consists of three rounds of two-minutes, and the player with the highest point total at the end wins. When you open the app, you’ll see existing games in play with your friends, or you can start a new game. When the clock starts in a new game, the goal is to find and create as many words.

Using the touch interface, you simply create words via connected letters, meaning in order to form a word, the letters need to be connected diagonally, horizontally or vertically. Each letter has a point value and based on the total value of the word, you’ll receive points.

Within each match, players have 3 rounds. In round 1, you engage in what Zynga calls ‘classic play’ with standard point values for each letter. In round two, called ‘Double Down’, gameplay includes double letter and word values strewn throughout the game board. In round three (a.k.a.’Triple Crown’), you’ll encounter with triple letter and word scores.

Of course, it wouldn’t be a Zynga game without virtual currency and in-app purchases. This game uses a token system to allow users to by ‘Power Ups,’ to help give them a leg up during gameplay. Players start each match with tokens that are replenished over a period of 20-minutes, and users can purchase additional tokens as well. Freeze allows you to temporarily stop the clock to find more words. Inspiration highlights up to three words you haven’t found yet. And Scramble gives you a new view of the game board and can be used five times per match.

The actual gameplay and interface is most like that of Words With Friends, with similar scoring and the same dictionary and match-making engine in both apps. Users can also participate in in-game chat, connect their Scramble With Friends with their existing ‘Words With Friends’ account and use Facebook Connect to find new friends to challenge.

Zynga’s GM of Words With Friends and Scramble With Friends, Ya-Bing Chu, tells us that while the initial launch is focused on the iPhone, the gaming company will also have native iPad and Android versions coming soon.

Zynga says that the original Scramble in the App Store is still available to play for existing players who have already downloaded the game. However, first-time players will only be able to download the Scramble With Friends version going forward.

The ‘With Friends’ family of games has been one of Zynga’s most popular suite of titles on the mobile front. In fact, Words With Friends recently saw a spike in usage after actor Alec Baldwin was kicked off an American Airlines flight for playing the game. Baldwin Tweeted about the incident, mentioning Words With Friends, and even mocked the altercation on a Saturday Night Live episode. And it’s clear tat Zynga has high hopes for Scramble With Friends, especially as mobile is a frontier where the gaming giant is looking to make a lot of headway in 2012. Zynga launched seven mobile games in Q4 of 2010, and I’m sure we can expect this to ramp up this year.

Hidden object games, such as Where’s Waldo, have been popular in all mediums with a variety of ages of game players. But it’s a genre that social gaming giant Zynga has left untouched, until now. Today, Zynga is launching its first hidden object Facebook game with a social twist, Hidden Chronicles. The game, which will roll out to the public this morning, allows players to find hidden objects, solve puzzles, and unlock mysteries, combining memory, skill, and social gameplay.

In a nutshell, players unlock new locations by completing quests, mastering scenes, solving puzzles, and restoring an estate, Ramsey Manor. Players will earn coins, experience points, and unique items to help them customize their estate.

As you begin Hidden Chronicles, you’ll receive a letter from your ‘Uncle Geoffrey.’ who has died and said in the letter that he’s left something for you at his estate, Ramsay Manor. At the estate, you’ll be greeted by his assistant who tell you that Geoffrey died under suspicious circumstances, and that you will need to solve mysteries in order to uncover the reason why he died.

You’ll then enter a parlor, where you need to find hidden items in the scene. Once you’ve completed the task, the fire place opens to reveal a secret room where you will take on your next quest. As you progress through the game, it becomes more difficult to uncover the hidden objects.

Many of the hidden object scenes include mini-games, from jigsaw puzzles to concentration games, where players can unlock and solve these puzzles and be rewarded with coins and points. In total, there are 50 scenes within the game.

In terms of social, Zynga says that while hidden object games are largely single-player experiences, Hidden Chronicle has been developed with a multi-player, social layer. You can visit your friends’ in-game estate to hide gifts and challenge them to play ‘FastFind’ scenes and find the most hidden objects within 60 seconds. You can also use your friends’ help to unlock various scenes and areas where hidden objects are concealed.

Cara Ely, Creative Director of Hidden Chronicles, compares the social game play to that of its Scrabble-like social game Words With Friends, in which players can challenge each other.

Another distinction you’ll find in the game, says Ely, is the distinct art style of the imagery in the games. Scenes are designed in a soft photorealism that’s much more realistic and visually engaging than some of Zynga’s previous games. Zynga’s also worked on improving animations as well as the game soundtrack to convey a more realistic game experience.

The creative team behind Hidden Chronicles includes co-creator Ely, former creator of the popular Dream Day Wedding series of hidden object games, narrative designer Jane Jensen, creator of the Gabriel Knight series of PC games, and art director Margaret Foley-Mouvais, former art director for titles such as “The Lord of the Rings” and “The Godfather,” and lead product manager Nancy Hang.

Hidden Chronicles will be available in 15 languages: English, French, Italian, German, Spanish, Portuguese, Turkish, Swedish, Thai, Dutch, Norwegian, Korean, Traditional Chinese, Japanese and Danish.

Ely also explains that Zynga structured the game more like a season of TV show. “You have a story written and an outline of where it will go, and new characters will be introduced as you play,” she says.

In terms of mobile, she adds that there could be potential for the game to live interactively in tablet devices, but there are no current plans to bring Hidden Chronicle to Android or iOS yet.

Zynga, which debuted the largest technology IPO since Google on Friday, saw shares drop in early morning trading on the second day listed on the Nasdaq. On Friday, Zynga closed 10 percent below its opening trade of $11 per share, after pricing on Thursday evening at $10 per share. This morning, Zynga opened at $9.36 but dropped as much as 5 percent in morning trading. Update: Zynga shares closed at $9.05, down 4.75 percent. During daytime trading, shares fell as low as $8.75.

Unlike some of the other tech IPOs that have listed this year, Zynga didn’t see a huge pop in the first day of trading. The company offered 100,000,000 shares of Class A common stock in the offering, raising $1 billion.

A number of recently public tech companies have dropped below their opening price over the past few months. As The New York Times cites, macroeconomic conditions and “jittery investors” are contributing to these stumbles. What makes Zynga so surprising is the that the company’s valuation is about half of where early reports were speculated it would be.

Zynga’s drop could also be influenced by the conditions of the market, which seems to be down today.

Of course, it is still only the second day of trading and the company’s shares could rebound. As Zynga chief operating officer John Schappert told our own Eric Eldon last week, Zynga is here for the long-term and its investors should be thinking that way, too.

Zynga is still in its quiet period for another 24 days after going public yesterday, so chief operating officer John Schappert wouldn’t answer my more specific questions about the company’s future plans when I talked to him last night.

After opening up at an aggressively priced $10 per share, the company had a slight pop before closing down 5% yesterday. But as Schappert emphasizes to me in the interview below, ZNGA is here for the long-term and its investors should be thinking that way, too.

He adds some color to the roadshow video the company has been showing investors over the last couple weeks, discussing the company’s expansion plans across social and mobile platforms, and internationally.

TechCrunch: Now you’re public — congrats. What’s changed now? How do you plan on spending the new money?

John Schappert: Like we talked about on the roadshow, we have a larger bank account to invest in future of gaming, notably social gaming, which we think is where play is headed.

When we think of growth, there are a few different areas. We’re investing in existing games to drive bookings [revenue-generating events like the purchase of a virtual good]. We’re also working to create new franchises and genres, like Castleville, which we recently launched on Facebook.

That also means more international expansion. We’ve just started localizing a year ago with CityVille.

TechCrunch: Can you tell me more about your specific approach to localizing by language, country or region?

John Schappert: I can’t go down to country. But CityVille launched a year ago, and it was our first game that was localized into five languages at launch.

Now, we launch in a dozen languages, and we continue to add more. We’ve built it into the engine.

Related to that, we’re making progress with localizing payments. Two months ago, if you were in Europe and purchasing virtual goods in games, you were still buying in US dollars. Now you can buy in the euro and the pound.

International is an area we’re going to continue to invest in.

TechCrunch: What about your plans for other platforms — mobile, Google Plus? You’re now at 13 million mobile daily actives?

John Schappert: We’ve invested heavily. We’ve already talked about growing mobile by ten times to more than 11 million DAUs.

It’s still early on Google Plus, we still have hopes that Google will continue to invest there. Hopefully it’ll turn into a nice platform.

We’re also on Tencent [a leading web copmany] in China. And they’re like Google. They’re very dedicated to it.

They’re both big players with lots of audience, who we’ve built great social games for.

TechCrunch: Can you tell me any more about how Tencent is going — what are the early results, since it launched a few months ago?

John Schappert: I can’t give much detail on Tencent. It’s still very early for us. We’ve spent a lot of time on localizing localize. even more with content. very early going for us.

But we’re very proud about mobile. If you look at AppData, and at our Facebook DAU, and compare our mobile stats to our closest competitor on Facebook, you’ll see that we compare quite favorably. We have new game engines on mobile coming out now for CityVille Hometown, FarmVille Express, Words With Friends….

I would say when we look at mobile, we don’t separate by saying they’re mobile not social. We create social games on every device, so you can play anywhere and everywhere.

TechCrunch: How do you expect ad revenue to grow versus virtual goods, which is currently the core of your business?

John Schappert: We can’t provide any forward projections, but in the roadshow we talked about ads, how they’ve grown 160% — very fast. We do see it as a nice area of opportunity. engagement… all our s-1 stuff. We’re reaching 227 million monthly active users. Big brands love that. We’re partnered with Dreamworks for Kung Fu Panda, and lots of others.

We offer unique ways to integrate advertisers into games. Best Buy in Cityville was interacted with 110 million times.

TechCrunch: How do you feel about Google’s efforts with Android, lately? It’s not getting the same results for developers as iOS, even though it is getting bought like crazy.

John Schappert: Google is continuing to improve marketplace, continuing to invest and further develop it. There are also a lot of new devices, and more coming this holiday season with Kindle Fires and iPads and other tablets and phones showing up under Christmas trees.

The activation on all of this is pretty spectacular. I can’t break out how Words With Friends is doing on the Kindle but it’s a top mobile game. I mean, people play it even when they shouldn’t on airplanes….

TechCrunch: What message do you have to investors after seeing how they reacted to your initial offering today?

John Schappert: Our message to investors one day in is the same as on the road. We look at this for the long-term, we’re not making short-term decisions. It’s not single day or single hour. We’re looking at the long-term of play, the long-term of Zynga and connecting the world through games, and that’s hopefully what people are investing in — the future of social gaming and play.

TechCrunch: How should people expect you to go about acquisitions and hiring now that you have all this new money in the bank? Are you looking at bigger companies to buy, for example?

John Schappert: People who are thinking about working at Zynga should go to our web site and apply. With respect to M&A, it remains the same — we’re actively looking for great teams, studios, IP…. when we find those, it’s a great add to our company. Conduit Labs built Adventure World, CastleVille is from Bonfire.

In terms of larger acquisitions? We’re looking at a lot of different companies of all different sizes, and we’ll see what makes sense.

TechCrunch: Any parting thoughts about what people should understand about Zynga today?

John Schappert: A lot of people watch things and don’t watch follow-up. But what we’re most proud of is follow-up. Our users stay engaged — we have five out of the five top games on Facebook today, and some of the titles are not new — and that’s something very few people can say.

[Schappert avatar via Zynga.]

With its initial public offering coming up later this week, Zynga is making a few notable traffic gains on Facebook and mobile. Older games like FarmVille are growing, not just new ones like CastleVille. The obvious reasons include it doing more advertising and cross-promotion — and getting some extra publicity out of new launches and media events.

But it looks like there’s more going. Facebook appears to have made a few adjustments to how users see app activity within the last month or so.

One way is that stories from apps are now appearing as individual items within the news feed. They’d previously appeared as bundles, with one story from the app at the top and the rest threaded underneath. Facebook had moved apps into this format more than a year ago in reaction to the spammy feeling that over-sharing apps had created. But it had a secret whitelist to let some apps from Facebook page service providers through. The unbundling could mean the company feels more comfortable with the current design and how news feed spam is handled within it. It could also be because Facebook is trying to increase growth for third party developers.

Zynga benefits from this type of change, because it’s so big that it receives a disproportional share of the results — and because it has built its organization around being able to react and optimize these types of changes quickly.

There could be another platform benefit happening, too. Facebook has also been showing a much higher number of notifications about individual apps in the past month, too. Anecdotally, I’ve noticed at least a couple invites a day from friends playing social games recently, whereas I’d had fewer in past months. The reason, my former Inside Network colleague and serious social-game-playing journalist AJ Glasser observes, is that Facebook has ungrouped these notifications. They’d previously appeared bundled up, which had decreased their visibility to players and non-playing friends.

Facebook has also adjusted how requests appear in the left-hand navigation bar, she notes. Individual app requests are now ordered by recency, with the generic “Game Requests” tab moved from the top of the requests section to the bottom.

While these changes appear to be helping Zynga, that’s not the whole story. Facebook app growth has been relatively weak in the past year or so, and many developers have been looking to mobile platforms instead. All of the changes above could help Facebook keep developers more focused on its platform.

[Update: Facebook spokesperson Malorie Lucich told me the following about the changes: "These communication channel updates are part of ongoing tests we're conducting to drive traffic to apps and surface the right apps to the right people. Growth for apps of all sizes is an important focus for us and we will continue to test how to make Platform most effective for both developers and users."]

Here are the Zynga games seeing big gains, from AppData. The company has overall grown by nearly 1.5 million DAU in the past couple weeks to nearly 51 million. It has also gained around 20 million more monthly active users, to reach 223 million. The numbers below are for DAU, as they more closely indicate engagement and revenue as well.

CastleVille, which has been growing fairly slowly since launching earlier.

FarmVille, which has been coming back up (possibly helped by its first video short):

Words With Friends, which has also gotten a big boost from the Alec Baldwin airplane incident over the last week.

Adventure World, which just had an expansion launch in the last couple weeks.

Back in August, social game developer Kixeye raised $18 million in series C financing, and added Zynga Andrew Trader to its Board of Directors. And today the self-proclaimed “largest maker of online strategy combat games” has announced the addition of another ex-Zynga exec into the fold.

Brandon Barber will be joining Kixeye as the SVP of Marketing, where he will report directly to Chairman and CEO Will Harbin. Barber brings significant gaming experience to Kixeye, as he previously co-founded online sports game developer Lionside, which was acquired by ngmoco (qua DeNA) in June of this year. Behind Barber (who was also VP of Marketing and Production), Lionside brought sports games to Facebook, and created titles like NBA Legend and Lionside Football.

Before founding Lionside, Barber was the first VP of Marketing at Zynga, establishing the company’s initial communication, brand, and product marketing strategies. Zynga created that role specifically for him and, considering that he reported directly to Andrew Trader, it seems that the former Zynga duo is linked up again.

Prior to Zynga, Barber served as the Director of Global Marketing at EA, where he was “responsible for the concept, design, deployment and profitability of EA’s web services based business model”, among other things.

Kixeye has had a great year, picking up a few key staffers, as well as becoming profitable and cash-flow positive. Look for more big moves in 2012.

This is a big week for Zynga, as the gaming giant readies for its debut on the public markets at the end of the week. The company’s offering is expected to price this week and will raise around $1 billion in the IPO. Interestingly, Zynga passed a pretty major milestone this week, according to Inside Network’s AppData.

Currently, Zynga has the top five games on Facebook using daily active user numbers, with Words With Friends edging out EA’s Sims Social. CityVille took the top spot with 10.1 million DAU, followed by CastleVille (8.1 million DAU); FarmVille (7.2 million DAU); Texas HoldEm Poker (6.3 million DAU) and Words With Friends (5.7 million DAU).

Of course, Words With Friends got a big push last week after actor Alec Baldwin was kicked off an American Airlines flight for playing the game. Baldwin Tweeted about the incident, mentioning Words With Friends, and even mocked the altercation on Saturday Night Live over the weekend.

This extra publicity could have definitely given Words With Friends the boost it needed to move past EA’s Sims, which has been ahead of Zynga’s Scrabble-like game for some time now (Sims is still ahead of the game when it comes to monthly active users).

The company has seen some games flattening in growth, and others declining in traffic, so this slight surge in usage comes at an opportune time. Considering the importance of Facebook as a platform for Zynga’s games, having the top five games on the social network the week prior to the company’s much awaited IPO certainly helps the company put a nice growth spin on its dominance in the social gaming market. We’ll see if investors agree.

Zynga and Vostu has settled their copyright lawsuits, according to a representative for Vostu. Vostu has paid Zynga an undisclosed sum as part of the settlement and made changes to its games.

Here is the joint statement the companies issued: “Zynga and Vostu have settled the copyright lawsuits and counterclaims against each other in the United States and Brazil. As part of the settlement, Vostu made a monetary payment to Zynga and made some changes to four of its games. The parties are pleased to have settled their disputes and to now put these matters behind them.”

For background, Zynga hit Brazilian gaming startup Vostu with a massive lawsuit in June, alleging that the company was copying Zynga’s games. In fact, Zynga alleged that Vostu was copying Zynga’s games so closely that they even inadvertently included the bugs.

In return, Vostu claimed that Zynga has copied other games repeatedly over the years, including Zynga’s hit game Cityville.

Zynga then sued shareholder Google over the Vostu dispute, because Orkut, which is popular in Brazil, was hosting the Vostu games that Zynga says are ripoffs.

Lawsuits were filed in California and in Brazil. Vostu has a fairly large userbase in the Latin American country. In fact, 25% of internet users in Brazil play Vostu games.

Clearly this is ugly, but Zynga won this battle. And it’s not surprising that the companies reached an agreement at this time. As Zynga is about to go public, the social gaming giant is surely trying to get some of these legal issues resolved in the next few weeks. Vostu has raised a total of $46 million from Intel Capital, Accel Partners, General Catalyst, and Tiger Technology Global Management.

Social gaming giant Zynga has just filed its updated S-1 with pricing information ahead of its roadshow. The price range, according to the filing, will be between $8.50 and $10 per share.

Offering 100 million shares, the company plans to raise over $1 billion. Zynga plans to list on the Nasdaq under the symbol ‘ZNGA.’ At the high end of the range, Zynga would be valued at around $7 billion.

In the offering, CEO Mark Pincus won’t be selling any shares, but investors Kleiner Perkins, IVP, Union Square Ventures, Foundry, DST, Avalon, Google, SilverLake, Tiger Global and others will be selling.

As we reported a few weeks ago, Zynga’s Q3 Revenue came in at $306.8 million for the quarter, which is up 80 percent from Q3 2010. Net income was $12.5 million, down 50 percent from the third quarter 2010 ($27.2 million). Revenue only grew 10 percent from the second quarter, compared to and 15 percent increase from Q1 to Q2.

Daily active users also dropped quarter over quarter to 54 million from 59 million in the second quarter. Average monthly active users dropped to 227 million from 228 million in the second quarter.

The company initially was speculated to debut on the public markets at a valuation of between $15 billion and $20 billion. We reported this week that Zynga dropped its price range (and valuation) amid concerns over larger economic issues, such as fallout out from Europe’s financial crisis, and the poor reception that other tech IPOs have had recently.

As my colleague Eric Eldon wrote recently, the lower price could also be aimed at addressing specific investor concerns about Zynga, the company — like declines in its Facebook traffic numbers, and reports about its intense company culture.

Of course, this is just the initial pricing range set by Zynga and the company could up this depending on the response from the roadshow. And most tech IPOs have seen a jump in final pricing prior to the IPO.

Social game developer Zynga will start talking to potential public investors this Monday ahead of a mid-December IPO, according to reports earlier this week. The question is: how much will it be selling its stock for? That information has been expected to surface in an amended filing on Monday, but Reuters has some early details, that we’ve confirmed with a source close to the company.

Zynga is seeking to raise around $900 million by selling 10% of its stock at a range between $8 and $10 per share, for a valuation of around $10 billion, according to the report. Speculation had previously been that it would go for between $15 billion and $20 billion, and a third-party valuation analysis that Zynga had provided in a recent filing amendment indicated it was worth $14.05 billion.

Our source says Reuter’s range is correct, and attributes the decrease to Zynga’s concerns over larger economic issues, like any fallout out from Europe’s financial crisis, and the poor reception that other tech IPOs have had recently. The example everyone’s looking at is deals site group Groupon, which went public at $17.8 billion, but has dropped towards $10 billion recently (although it’s been climbing back up in the last couple days).

The lower price, of course, could also be aimed at addressing specific investor concerns about Zynga, the company — like declines in its Facebook traffic numbers, and reports about its intense company culture.

Zynga’s bankers, some of whom apparently didn’t wait for the roadshow to begin talking to the press, could also still adjust the amount it seeks to above $900 million. The company had said it was looking to raise $1 billion when it had first filed in June.

After Zynga’s wild ride to success over the past several years, the conservative pricing could also help set a new tone for it on the public stage.

[Image via BetaBeat.]

Top social game developer Zynga has been widely expected to go public anytime… for months. But now we have a date range — mid-December, according to DealBook. That follows up on an earlier report today by Fortune that Zynga is starting a “road show” to prospective public investors on Monday to stir up interest ahead of the offering. An amended S-1 is also expected that day detailing the number and price of shares, as Inside Mobile Apps also hears.

Finally, after months of media scrutiny about Zynga’s business and traffic (that the company has been legally prevented from responding to), and many a cancelled conference appearance by Zynga executives, public investors will get to decide what they really think.

If Zynga is going to go public as it had said it intended to in its original S-1 filing this past June, the time is now. Macroeconomic conditions are especially uncertain due to big questions around how Europe is going to get out of its ongoing financial crisis. If the eurozone falls apart within the next few weeks or months (or days), investors are likely to have even less interest in a new-fangled type of tech company. Larger fears could be contributing to the poor recent performance of other recent tech IPOs, like Groupon, and Zynga now has to convince the world that it’s different in a good way. And obviously, how Zynga does could shape the perception around the forthcoming IPO of its main platform provider, Facebook.

The good news for Zynga, on the revenue front, is that entertainment businesses (like video games) have tended to do well during tough economic times. People are willing to spend in part to get their mind off of employment problems, even if if doing so doesn’t make financial sense. As a significant proof point, the company can already demonstrate its massive growth across the span of The Great Recession. It also already shown increasing revenues in its S-1.

At the same time, the company has shown declining traffic across many of its titles, and it needs to make sure new launches like CastleVille and the latest edition of Adventure World can bring it back up. Check out my story from Sunday for more on that. It’s also getting nailed for its aggressive culture, with a couple recent articles reviewing long-standing employee issues, and its struggles to land big-name acquisitions.

[Image via The Farmer's Daughter. In case it wasn't clear, an IPO "road show" is also sometimes called a "dog and pony show."]

Zynga’s newest Facebook game, CastleVille, has crossed five million daily active users. To put this in perspective, the social gaming giant’s fastest growing (and most popular) game CityVille, only reached 3.2 million daily active users six days after its launch.

The newest title from the social gaming giant allows players to build mini-empires from castles, craft art and armour and trade, and defend your kingdom in a medieval world. The game was created by the Zynga Dallas team, which was part of the social gaming giant’s acquisition of Bonfire Studios.

With this new game, Zynga took key elements of each ‘Ville’ title and brought the best into CastleVille. CastleVille combines with elements of self-expression from FarmVille, the ability to build the fantasy city of your dreams with CityVille, and the rich narrative and storytelling features from FrontierVille.

The game is also experimenting with new ways of being social, and self-expression. The basis of the game is around building the castle of your dreams and transforming the unexplored land into your very own kingdom. Along the way, you’ll encounter a number of characters, who are all involved in the storyline of the game; and can complete quests.

For background, FrontierVille has 2.6 million daily active users six days after launch. Currently CityVille and FarmVille are seeing 11 million and 7 million daily active users, respectively according to AppData.

And 68 percent of CastleVille players are already playing at least twice a day. So far, 135,176,035 quests have been completed, there have been 4,594,750 expansions into the Gloom; 23,845,983 beasties have been banished from the kingdom, 182,360 Bubbly Grogs have been crafted and 8,262,768 baby cows were raised.

Other recently launched games Adventure World and Empires & Allies don’t seem to have grown quite as fast as CastleVille. And CastleVille’s early success could be good news for the gaming company’s top line. Hits are a big revenue-maker for Zynga, who reported that profits were down in Q2 of this year because of the lack of any new game launches in the first half of 2011. In the third quarter, Zynga’s revenue was up by 80 percent but net income dropped.

Of course, it should be interesting to see if CastleVille can sustain the same growth that CityVille did over the next few months. Stay tuned.

Rovio’s hit game Angry Birds has made a business out of offering plush toys, and it was only a matter of time before social gaming giant Zynga would get into the market as well. Today, Zynga is announcing a partnership with electronics retailer Best Buy to sell limited-edition toys from the company’s popular game FarmVille at Best Buy locations (and on its retail site) in the U.S. You can order the toys here.

Best Buy will offer eight exclusive FarmVille collectible plush toys, including a pig, goat, cow, sheep, chicken, duck, horse and rabbit, all dressed in seasonal winter garb, to customers. Pre-orders for the toys begin today with availability in-store beginning November 25.

Each FarmVille plush toy will be available for $9.99, and come with ten free Farm Cash tokens and a digital code that can be used in FarmVille to collect a limited-edition, in-game version of the plush toy. The toys also will be available as part of a game card bundle; you can purchase a $25 Zynga game card and receive one plush toy for for $0.99 cents. Players who collect all eight animals will receive an in-game Super Orchard in FarmVille.

Zynga business development director says that players have been demanding real toys for FarmVille animals for some time now. These are season items of course, so it should be interesting to see if Zynga actually makes this a broader business post-holidays. Rovio is selling 1 million t-shirts and plush toys a month, so this could be a big business for Zynga.

If you want a FarmVille plus toy, you better pre-order one soon. Zynga only made 250,000 toys in all.

Zynga just filed a new S-1 today in its upcoming IPO, reporting new revenue, income, and usage stats. Revenue came in at $306.8 million for the quarter, which is up 80 percent from Q3 2010. Net income was $12.5 million, down 50 percent from the third quarter 2010 ($27.2 million).

Growth in revenue quarter over quarter also appears to be slowing. Revenue only grew 10 percent from the second quarter, compared to and 15 percent increase from Q1 to Q2.

Daily active users also dropped quarter over quarter to 54 million from 59 million in the second quarter. Average monthly active users dropped to 227 million from 228 million in the second quarter.

Founder Mark Pincus writes in the letter to shareholders that Zynga’s players create and store more than 35,000 virtual items every second and spend 2 billion minutes a day using Zynga’s games. In over four years, the company has generated over $1.5 billion in revenue and over $2.0 billion in bookings.

In the filing, the company said research and development expenses increased in the third quarter due to an increase in headcount-related expenses, which included $5.4 million in stock-based compensation expense related to the acceleration of vesting of stock held by a former employee. As of As of September 30, 2011, Zynga has cash, cash equivalents and marketable securities of $926.3 million.

Zynga now has 2,789 full-time employees.

These results are better, however, than second quarter’s results, when the gaming giant just made a little over $1 million in profit.

‘Tis the season of the IPO. So far, 2011 has seen companies like LinkedIn, Pandora, Yandex, Zillow, and RenRen come to market. As you’ve heard, Groupon and Zynga are next up in the IPO pipeline, with both companies arriving on public markets within weeks of each other. Groupon, barring some catastrophic event, will begin trading publicly on NASDAQ November 4th, with shares set at $20 a pop at a valuation of $12.7 billion.

Zynga, too, is expected to trade on NASDAQ beginning the week before Thanksgiving, and according to its revised S-1 filing with the SEC, a “third party” has valued the company at approximately $14 billion.  In the same ballpark as Groupon.

So, the question becomes this: Notwithstanding their potential overvaluations at the time they go public, which of the two companies stands to be the most successful and the most valuable in the long run, post-IPO?

Both Zynga and Groupon have become lightning rods of late for criticism over their inflated valuations (among other things), especially as being representative of the high valuations across the industry. (Some attach the dreaded “bubble” label, some don’t, but there is anxiety brewing here no matter what you call it.) There are a lot of questions that need to be answered in short order if the public markets are to become comfortable with the $10+ billion valuations of Zynga and Groupon.

That being said, both companies have waited out the stumbling IPO market and remain (far and away) the market leaders in their respective neighborhoods. In spite of the naysayers, these companies are going to go on to make a lot of money and will be around for the foreseeable future.

The Big Picture (i.e. The Spin)

Zynga is arguably the most popular social/casual game developer in the world, with 232 million average monthly active users in 166 countries and it’s generated over $1.25 billion in cumulative revenue since its inception in 2007. Groupon is running ahead of Zynga in revenues, but not on profits.

For those bullish on group buying, Groupon owns 54 percent of the daily deal market, is the largest local commerce platform with scale effects, counts 143+ million email subscribers in its ranks, and is building on its lead in daily deals by moving into complementary markets, like events, goods, travel, and is attempting to close the redemption loop by merging daily deals, instant mobile offers, and loyalty rewards.

Of course, everything sounds picture perfect if you put a full stop there. Hell, give ‘em $30 billion! But there are some downsides. Oh yes, there are some downsides.

Who Has The Tech?

For starters, both Groupon and Zynga count themselves as technology companies. But, in the case of Groupon, if you’re in Rocky’s camp, then the company may not even be worthy of the title, in spite of CEO Andrew Mason’s repeated assertions during the roadshow to the contrary. As Agrawal points out, only 5 percent of Groupon’s more than 10,000 employees are in technology. That’s probably less than some of the local merchants it “represents”.

Groupon’s growth is indeed decelerating, cutting back on marketing and sales expenses to become more profitable (or to dress up its financials for the IPO). Blodget was quick to identify a precedent in Amazon, comparing Groupon’s current status to Amazon’s painful transition from growth to profits between 1997 and 2001.

Both companies waited three years to go public, and while Groupon is generating lower revenue per employee and has been spending more on marketing than Amazon did, the e-commerce giant continued to grow over its first four years as a public company, even though its growth rate slowed. Much like Groupon in the present. As to the technology comparison, in juxtaposition today, Amazon has a far more diverse set of traditional “tech assets” with its innovation in cloud computing with EC2, S3, and other Web services, some of which support the ever-improving Kindle.

Groupon’s lofty IPO (and sale of $700 million worth of stock) brings up comparisons with Google. But Groupon is a sales and marketing (or services) company. The 5 percent of its employees involved in technology are there mostly to maintain the infrastructure. Groupon’s on the Web, but that doesn’t make it a tech company.

If you want to use Google as a comparison, the search giant spends 14 percent of its revenues on R&D. It has Google Labs. Apple’s the same way. Tech companies spend money on R&D, they hire as many engineers as possible (see Facebook), there are barriers to entry, and they develop intellectual properties. Groupon not so much.

As for Zynga, the gaming company’s R&D spend (in Q1) was up 158 percent from the same time last year, and it spends an enormous amount (proportionally) of its revenues on servers. In comparison to Groupon the “sales company” (it has over 4,800 employees in sales), Zynga proudly calls itself an “analytics company masquerading as a games company”.

What that means is that Zynga believes that it will beat traditional gaming companies by taking an alternative route to customer acquisition and retention. It releases free games on Facebook and then obsessively studies the data it collects on how users are playing the game, leveraging that data to tweak the game’s formula to make the gameplay more addictive, increase playability, etc.

Using Facebook as a sharing and marketing platform to tell friends about the game and get them to buy more virtual goods is one thing, but Facebook also provides Zynga with a more robust picture of who their users are and what they’re doing online. This allows the company to take advantage of the platform’s ready-made ability to invite new users to try the game, something offline gaming companies have to work much harder to accomplish.

Zynga just smells more like a tech company.

The Upsides

In spite of all that’s being said, I’m still optimistic about Groupon because of its redemption loop trifecta. The company has long been criticized for not providing merchants with the necessary tools to retain the new customers they see when offering Groupon discounts. But with Groupon Now, the mobile app that lets local merchants offer deals when business is slow to yield retention, and Groupon Rewards, the tool that will allow businesses that offer discounts to later follow-up with another reward after a customer spends a certain amount of money — Groupon is showing that it can offer valuable products to close the gap. (And, hey, with high-end deals of Groupon Reserve, discounts on electronics in Groupon Goods, these could all add up to something retailers can’t ignore.)

Considering the fact that merchants can set the spending level required to achieve the new deal with Groupon Rewards, it should put their collective minds at ease. And for the daily deal behemoth, which already has millions of credit cards on file, it enables them to essentially turn these credit cards into the buy 10 get one free punchcards, and with each visit to a local coffee shop, Groupon can push them mobile or email notifications telling them that they’re just $10 away from the reward. Its new rewards program can actually track what customers are spending at their local merchants, giving them better insight into the success of their core business, daily deals. And merchants will get a dashboard so that they, too, can track customer spending.

Zynga’s true value, on the other hand, comes from its innovation around in-game rewards. Adding virtual enhancements to its games to convince people to spend real money on virtual play money is what has turned it into a multi-billion dollar company. A few years ago, that was a far more difficult proposition than it sounds today.

If Zynga can develop full control over the virtual money supply, it can be huge. There is a bright future around virtual currency, and if Zynga could use its self-controlled platform to institute a virtual currency that is widely circulated and has real inherent value, it could be a serious game changer.

Their Valuations

Groupon may be valued at $12.7 billion at its IPO, but Trefis currently estimates Groupon fair value at about $7.9 billion, 54 percent of which emanates from North American featured deals. Trefis arrived at this valuation by collecting the sum of the values of its divisions, plus cash, minus debt.

Blodget’s formula has similar results. Taking the fact that Groupon’s North American business had a 12% operating profit margin in Q3, he projects that it could see a 10% operating profit margin in 2012 and a 15% operating margin in 2013, with earnings of about $300 million in 2013, giving Groupon a $6 to $9 billion valuation, with an average of about $7.5 billion. Comparable to Trefis.

While I do believe Groupon will be a profitable company with a big market cap, its valuation is seriously inflated.

The fact is that Google Offers, Amazon Local, and LivingSocial all pose significant threats. Without a single patent and little to no significant barriers to entry in the space, Groupon has a ways to go before it convinces investors (and now the public) that there’s enough differentiation and value in its model to warrant a high market cap.

As for Zynga, unlike Groupon, the social games giant is already profitable. However, the company saw its net income fall to $1.4 million in the second quarter, down from $13.9 million over the same period last year. It, too, has some serious downsides. The company’s filings show that its revenues come from less than 5 percent of its users and from a small group of games. While the company is working on deploying games on other platforms, most of the company’s business is still generated on Facebook, and it still heavily relies on the social network for sales and the delivery of its major services. (Facebook also takes a significant chunk of the sale of virtual goods.)

In the land of social gaming, Zynga must continuously churn out new games to keep users interested, as casual games have the tendency to become stale quickly. As Industry Gamers points out, Zynga’s new titles are hitting peak daily active users inside of three weeks of launch and the majority aren’t sustaining that activity (with Words With Friends being the one exception). Instead, the new releases have only succeeded in cannibalizing gamers from other Zynga titles, rather than attracting new customers.

Relying on in-game purchases and rewards to encourage gamers to keep users engaged with its titles has been successful thus far, and while investors aren’t happy about its reliance on Facebook, the public perception that its fate is largely tied to Facebook isn’t all bad. Zynga has been receiving lofty valuations in part because it is basically seen as a proxy investment for Facebook. Even Zynga’s Project Z, which is supposed to be the company’s big play at cutting its umbilical cord, will require users to have a Facebook account to log on.

But I think there is huge opportunity for Zynga on mobile and tablets, and if it can keep game development costs low while drawing new users in with Project Z and some new, original titles, profit margins could grow significantly with scale. Some (optimistic) analysts have even put its long-term operating margins at 50 percent.

Zynga expects to see about $1 billion in revenue for 2011, compared to Groupon’s expected revenue of $1.6 billion for the year, but it’s profitable with net incomes north of $19 million for the first nine months of 2011. Zynga is nowhere near its original target of a $20 billion valuation with its revised S-1 and SEC scrutiny over Zyngametrics, but it deserves to be priced above Groupon.

Although EA’s market cap is currently around $7.8 billion, if one is comfortable saying that Zynga can hit $4 billion in revenues by 2014 with 40 percent operating margins, we would have to be generous to give them a 13 to 16 multiple on operating profits, but this could easily justify a $15 billion valuation.

In the end, both Groupon and Zynga are currently valued at prices that are far higher than what I think they’re reasonably worth. I have no stake in either company, but if I were buying, I would choose Zynga over Groupon. I think there’s a greater upside to Zynga and as gamification is poised to seep into everything we do, Zynga is poised to be at the forefront of this transformation. Groupon is here to stay, but there’s just way too much to be concerned about.

But I’m just one blogger. I want to know what you think. Weigh in below.

Thanks to BGN Entrepreneur for the excerpt image

As Zynga announced at an event a few weeks ago, the newest title in the “Ville” franchise, which includes FarmVille, FrontierVille, and CityVille, is CastleVille. The newest title from the social gaming giant allows players to build mini-empires from castles, craft art and armour and trade, and defend your kingdom in a medieval world. The game was created by the Zynga Dallas team, which was part of the social gaming giant’s acquisition of Bonfire Studios.

Zynga Dallas director Bill Jackson explains that the studio took key elements of each ‘Ville’ title and brought the best into CastleVille. He explains that CastleVille combines with elements of self-expression from FarmVille, the ability to build the fantasy city of your dreams with CityVille, and the rich narrative and storytelling features from FrontierVille. The game is also experimenting with new ways of being social, and self-expression.

When first beginning the game, you’ll need to choose your character and build your look. Jackson says this is the most expansive character building features to date, with dozens of looks to choose from. Once immersed in CastleVille’s medieval world, peasants, princesses, pirates (and players) will choose their own path in the game by meeting new and different characters, completing quests and exploring mysterious areas.

The basis of the game is around building the castle of your dreams and transforming the unexplored land into your very own kingdom. Along the way, you’ll encounter a number of characters, who are all involved in the storyline of the game. You’ll first see Duke, who will help you build your castle and is from a neighboring kingdom. There’s Yvette (the beautiful songstress), Giselle (the lovely maiden) George (the friendly village Viking), Sonja (a sexy pirate), Rafael (a playboy woodsman) and Tom (the rough dragon slayer).

As Jackson says, this game has the most intensive storyline, which is why there are so many characters. Zynga also wants you to feel like you are immersed fully in the world, bringing in elements of fantasy and adventure. “You have to do work yourself and be part of the adventure to success at the game,” he explains. You choose your own path to discover mysterious locations, find rare items and reveal hidden characters within the game.

Another feature that makes the kingdom more real is that this is the most graphic-rich, expressive game to date. You’ll see actions like fish-hopping in the pond, trees shaking, and other sound effects tied to actions from within the game,

In terms of social interactions, you can visit your friends’ kingdoms and gift them art, armor and potions to help complete quests and challenge the forces of the Gloom. There is also a reputation system that gives you more points by how social you are in the game. Basically, the more social you are, the more reputation points you earn, and the faster you progress in the game. Obviously, this gives you more of an incentive to interact with friends and buy virtual goods. Jackson says this streamlined social experience makes it easier and more fun to play the game with friends.

CastleVille will be available to play for free in the next few weeks in 17 languages (English, French, Italian, German, Spanish, Portuguese, Indonesian, Turkish, Traditional Chinese, Korean, Malay, Norwegian, Swedish, Danish, Dutch, Japanese and Thai).

Zynga has been churning out games over the past week months. The company launched Mafia Wars 2, Adventure World, The Pioneer Trail, Empires & Allies, and Hanging with Friends.

we know that developing new hits is a big part of Zynga’s business model and that profits were down in Q2 of this year because of the lack of any new game launches in the first half of 2011. We haven’t seen Q3 numbers yet, so it’s hard to tell whether these new launches are actually making a meaningful difference in Zynga’s top line.

According to Inside Network’s AppData leaderboard, Empires & Allies seems to be doing the best out of all the new titles with 19.8 million monthly active users. This is followed by Mafia Wars 2, with 13.7 million users. Of course, CityVille and FarmVille are the top games for Zynga, with 54.2 million and 28.2 million monthly active users, respectively. Perhaps the next Ville to top the list will be CastleVille.