Recently, Funzio sold to Japan’s Gree for $210 million, and Zynga acquired OMGPOP for $180 million; not too long before that, Electronic Arts paid $750 million for PopCap.

In an interview, Pocket Gem’s COO Ben Liu said that mobile game companies are hot commodities right now, but to sell is shortsighted.

“We feel like it’s the early days of mobile,” Liu said. “There’s a decade-long shift occurring from PC and the Web to mobile, and games is only the first vertical to take off. There’s so much opportunity. We need all of our attention on that to be successful.”

Liu would not disclose the company’s revenue, but said that it has been growing extremely fast. Over the past year and a half, the company has moved its offices five times to accommodate the growth of its staff — from 10 to 120 employees.

And as of a few months ago, the company recorded 60 million app downloads since its founding in 2009. Its hit title Tap Zoo generated 20 million downloads alone.

Pocket Gems’ games fall into the “casual” genre, and are focused on building products that have fairly addicting play; they attract a predominantly adult female audience. The games normally have “tap” in the name — Tap Zoo, Tap Pet Hotel and Tap Jungle allow players to build, respectively, their own zoo, pet hotel and mystical rain forest.

Last week, Pocket Gems released its first game exclusively for Android, called Tap Dragon Park, which allows players to train dragons to defend their kingdoms.

Pocket Gems has been able to rise in the rankings without having to tap investors too much. (Maybe their next game will be Tap Bank?) It has raised $5 million in capital from Sequoia Capital and a handful of angel investors, and is profitable.

Here are Liu’s thoughts on some of the issues facing the mobile games industry.

On making acquisitions versus being acquired:

Liu says Pocket Gems isn’t entertaining offers at this time, but will consider making acquisitions of its own. “We’ve been completely focused on organic expansion, but I think as we continue to grow, something we’ll look at is acquisitions, as well. We are focused on building a great team organically, and are opportunistic.”

How many games can you release in a year?

“Last year, we launched 10 games total. Some of them are new IP that requires a larger team and can be franchise-sustaining, and others are seasonal titles or extensions.”

Is there an issue with copycats in the space?

“Yes, all of our games have been cloned extensively by most of our competitors. But that’s one of the prices of success. We’ve always prided ourselves on being an innovator. The thing that is difficult to clone is creativity. … We have a saying: Pocket Gems is a leader and not a follower. And many of our competitors have a fast-follower strategy.”

What are your thoughts about third-party distribution platforms, like Gree and DeNA, which are trying to create mobile social networks?

“We haven’t opened our games to third parties. It’s in our interest to develop our own platform. Their businesses are really compelling, but there’s no winning platform yet in the mobile space. We have our own loyal community, which is a powerful game engine. We don’t want to be dependent on someone else’s platform. Our own great platform is a powerful source of marketing, and it is good at letting our users know about the games. That’s the most effective.”

Is summer a good time for people to play and discover new mobile games?

“It’s a good time. People are on vacation and in transit, and it’s a natural device to use during those times. And people have more downtime and free time. We’ve found historically for it to be good. Holidays are another.”

Revenues were $11.6 billion, up 6.6 percent from the year-ago quarter, while per-share earnings on a non-GAAP basis were 48 cents, versus 42 cents a year ago, up 14 percent. That’s essentially right in line with what the consensus of Wall Street analysts had expected Cisco to report: $11.58 billion in sales, and 47 cents in per-share of earnings, with a penny-per-share beat on the EPS front.

I’m going quickly through the numbers, but here’s the announcement in full so you can look for yourselves. I’ll be dialing in to the conference call shortly and will be talking to CEO John Chambers after that.

Cisco shares are headed lower in after-hours trading. As of 4:45 pm ET, shares are down 48 cents to $18.30, or 2.5 percent.

Update: Cisco just issued its guidance on the conference call. CFO Frank Calderoni says that Cisco expects to report revenue to grow 2 percent to 5 percent year over year in the fourth quarter. It also expects to earn a gross margin in the range of 61 percent to 62 percent on a non-GAAP basis. Operating margins should be 26.5 percent to 27.5 percent, up about a point from the year-ago quarter. EPS will be 44 to 46 cents a share. The outlook is lower than the consensus of 49 cents.

On this, the shares have continued to fall after hours. Cisco shares are now, as of 5:02 pm ET, down more than 8 percent, or $1.55, to $17.23. Investors clearly don’t like what they see. Tomorrow looks like it’s going to be a rough day.

SAN JOSE, CA–(Marketwire -05/09/12)- Cisco (CSCO)

Q3 Net Sales: $11.6 billion (increase of 7% year over year)

Q3 Net Income: $2.2 billion GAAP (increase of 20% year over year); $2.6 billion non-GAAP (increase of 11% year over year)

Q3 Earnings per Share: $0.40 GAAP (increase of 21% year over year); $0.48 non-GAAP (increase of 14% year over year)

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 28, 2012. Cisco reported third quarter net sales of $11.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion, or $0.40 per share, and non-GAAP net income of $2.6 billion, or $0.48 per share.

“We delivered solid results this quarter with record revenue and non-GAAP earnings per share,” said John Chambers, Cisco chairman and CEO. “We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors.”

Chambers continued, “In a world of clouds, video and mobile device proliferations, the role of the intelligent network has never been greater and our value proposition with our customers is the strongest it has ever been. Our vision and strategy is focused on the right market transitions, and I want to thank our shareholders, employees, customers and partners for their ongoing commitment to Cisco.”

GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
—————- —————- —————
Net Sales $ 11.6 billion $ 10.9 billion 6.6%
Net Income $ 2.2 billion $ 1.8 billion 19.8%
Earnings per Share $ 0.40 $ 0.33 21.2%

Non-GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
————— ————— —————
Net Income $ 2.6 billion $ 2.3 billion 10.9%
Earnings per Share $ 0.48 $ 0.42 14.3%

Net sales for the first nine months of fiscal 2012 were $34.4 billion, compared with $32.0 billion for the first nine months of fiscal 2011. Net income for the first nine months of fiscal 2012, on a GAAP basis, was $6.1 billion, or $1.13 per share, compared with $5.3 billion, or $0.94 per share, for the first nine months of fiscal 2011. Non-GAAP net income for the first nine months of fiscal 2012 was $7.5 billion, or $1.38 per share, compared with $6.8 billion, or $1.22 per share, for the first nine months of fiscal 2011.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.

Cisco will discuss third quarter results and business outlook in a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Other Financial Highlights

Cash flows from operations were $3.0 billion for the third quarter of fiscal 2012, compared with $3.1 billion for the second quarter of fiscal 2012, and compared with $3.0 billion for the third quarter of fiscal 2011.

Cash and cash equivalents and investments totaled $48.4 billion at the end of the third quarter of fiscal 2012, compared with $46.7 billion at the end of the second quarter of fiscal 2012, and compared with $44.6 billion at the end of fiscal 2011.

During the third quarter of fiscal 2012, Cisco repurchased 27 million shares of common stock under its stock repurchase program at an average price of $20.28 per share for an aggregate purchase price of $550 million. As of April 28, 2012, Cisco had repurchased and retired 3.6 billion shares of Cisco common stock at an average price of $20.47 per share for an aggregate purchase price of approximately $74.3 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $7.7 billion with no termination date. During the third quarter of fiscal 2012, Cisco also paid a cash dividend of $0.08, or $432 million.

Days sales outstanding in accounts receivable (DSO) at the end of the third quarter of fiscal 2012 were 31 days, compared with 31 days at the end of the second quarter of fiscal 2012, and compared with 37 days at the end of the third quarter of fiscal 2011.

Inventory turns on a GAAP basis were 11.5 in the third quarter of fiscal 2012, compared with 11.1 in each of the second quarter of fiscal 2012 and the third quarter of fiscal 2011. Non-GAAP inventory turns were 11.1 in the third quarter of fiscal 2012, compared with 10.8 in the second quarter of fiscal 2012, and compared with 10.3 in the third quarter of fiscal 2011.

Select Global Business Highlights

Cisco announced its intent to acquire NDS Group Ltd., a provider of video software and content security solutions. The acquisition is expected to help Cisco’s ability to transform how service providers and media companies deliver next-generation video experiences to subscribers.
Cisco completed the acquisition of privately held Lightwire, Inc. Lightwire develops advanced optical interconnect technology for high-speed networking applications. The acquisition is expected to allow Cisco to deliver cost-effective, high-speed networks with the next generation of optical connectivity.
Cisco acquired privately held ClearAccess, Inc. The acquisition enhances Cisco’s network management capabilities and enables service providers to better deliver, manage and monetize their services.
Cisco announced strategic investments in Brazil to foster innovation, transformation and socio-economic development.

Cisco Innovation

Cisco announced it has updated its cloud-ready switching portfolio to enhance network virtualization with simplicity and scale.
Cisco announced a successful demonstration and validation of its coherent 100G dense wavelength division multiplexing solution, exceeding 3,000 km in reach without the need for regeneration. This distance is 50 percent farther than any non-Raman alternative solution on the market today.
Cisco introduced the industry’s first carrier-grade, end-to-end Wi-Fi infrastructure to deliver next-generation hotspots. The technology is designed to deliver seamless mobile experiences and enables operators to support a continuing expansion of mobile traffic, devices and new services.
Cisco announced innovations across the Cisco Unified Computing System® (UCS) that quadruple memory capacity, double switching capacity and simplify management for large-scale Cisco UCS® deployments.
Cisco introduced new Linksys Smart Wi-Fi Routers with app-enabled capabilities for new home experiences. The three new routers offer wireless performance and support for Cisco Connect® Cloud.
Cisco announced it expanded its small business product portfolio with new wireless access points, routers, switches, unified communications and partner-managed service offerings.
Cisco and NetApp announced FlexPod was the first data center infrastructure solution to be validated by Microsoft for the updated Microsoft Private Cloud Fast Track 2.0 program.

Select Customer Announcements

TELUS announced it has deployed key components of the Cisco Videoscape™ platform to extend its Optik TV services to mobile devices.
Cisco announced it has been chosen by Fastway Transmissions Private Ltd. to facilitate cable digitization deployment across its customer base in India. Fastway is expected to deploy more than two million next-generation digital set-top boxes from Cisco during the next two years.
Magyar Telekom rolled out 4G LTE services with Cisco mobile internet solutions. Magyar Telekom is Hungary’s largest telecommunications company.
IPLAN chose Cisco technology for its newest data center which is expected to be launched in June 2012. IPLAN is a leader in telecommunications and cloud computing services for small and medium-sized businesses in Argentina.
Videotron launched its enhanced illico digital TV service with Cisco’s HD set-top box platform. Videotron is a leading Canadian telecommunications operator providing communications and broadband entertainment services.
Peru Credit Bank implemented the Cisco Unified Communications system to increase business flexibility and reduce costs.
Kabel Deutschland (KD) selected Cisco CRS-3 routers for its Internet Protocol Next-Generation Network core to meet demand for video and broadband services. KD is Germany’s largest cable operator.
Netelligent announced that it will collaborate with Desktone, Inc. to offer cloud-hosted virtual desktops. These cloud-based solutions will include Cisco UCS, the Desktone desktops-as-a-service (DaaS) platform and NetApp storage systems.

Editor’s Note:

Q3 FY 2012 conference call to discuss Cisco’s results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, May 9, 2012. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).
Conference call replay will be available from 4:30 p.m. Pacific Time, May 9, 2012 to 4:30 p.m. Pacific Time, May 16, 2012 at 866-493-8039 (United States) or 203-369-1749 (international). The replay also will be available via webcast from May 9, 2012 through July 20, 2012 on the Cisco Investor Relations website at http://investor.cisco.com.
Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 9, 2012. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

The El Segundo, Calif.-based online retailer, which sells purses, shoes and other accessories to members for a $39.95 a month subscription, said it has six million members and is adding about 500,000 more each month.

In an interview, CEO Adam Goldenberg also confirmed that JustFab is on track to hit $100 million in revenue this year, up from $25 million in 2010.

Its growth is being fueled by new members and international expansion, including launching in Canada and Germany.

The company, which raised $33 million in capital last September, also said it was opening up its membership club to a pay-as-you-go option that allows non-members to buy products at slightly higher prices without the monthly commitment. Otherwise, members must visit the site within the first five days of the month to either buy an item or say they want to skip a month.

JustFab, which has 320 employees, is not the only subscription company that has recently tweaked its business model. Last month, ShoeDazzle said its 10 million members will be charged only if and when they make a purchase — no matter if it is once a month or once every six months.

Goldenberg said the changes by two of the leading membership services are coincidental, and not a sign that the membership model isn’t working. In fact, he says, the business opportunity in front of the company, and other membership services like it, is huge.

“We are the largest or one of the largest in the space, but we are all really small. If you look at apparel, this opportunity is bigger than $100 billion. We’ll take market share from traditional retailers and others will, too,” Goldenberg said. “It’s going to be a big category in three to four years.”

Before you get too excited, Facebook didn’t disclose Zynga’s actual results, but it did provide an update on how much Zynga is contributing to its overall revenues.

Over the next three days, analysts will do their best to extrapolate what these numbers mean for Zynga.

In late afternoon trading, the market reacted somewhat positively. Earlier this morning, Zynga’s shares were down as much as 6.9 percent. But, after the filing was released, Zynga closed down only 2.4 percent and was trading at $9 a share.

In the first quarter, Facebook said Zynga made up 15 percent of the social network’s revenue, from both advertising and the sale of virtual goods. In comparison, Facebook estimated Zynga contributed 19 percent of its revenues for all of 2011.

As it stands today, the two companies are an inseparable pair. Zynga is Facebook’s largest partner and Facebook is where Zynga attracts most of its user base.

Facebook is able to generate revenue from Zynga three ways: Processing fees generated from the sale of virtual goods using Facebook Credits; third-party advertising on pages generated by Zynga’s games; and direct advertising from Zynga.

On the surface, it looks like Facebook is becoming less reliant upon Zynga. But Facebook did not explain why Zynga’s portion of the pie fell this quarter, and it’s hard to compare one quarter to a full year of results.

Facebook did warn that Zynga recently launched games on its own Web site, and that it could choose to try to migrate users from Facebook to its own platform. “We may fail to maintain good relations with Zynga or Zynga may decide to reduce or cease its investments in games on the Facebook Platform. If the use of Zynga games on our Platform declines for these or other reasons, our financial results may be adversely affected,” Facebook wrote in its update IPO filing.

Zynga is also investing more heavily in mobile, including its recent acquisition of OMGPOP, which leverages Facebook’s social graph, but does not profit from when companies only use the network for credentials on the mobile phone.

In addition to revealing how much revenue comes from Zynga, Facebook also broke down how much revenue came directly from the game maker compared to third-party advertisers. Facebook said direct revenues, including payments and advertising, made up 11 percent of its revenues in the first quarter, and an additional four percent of its revenues came from third-party advertisers displaying ads on Zynga’s pages. As previously disclosed, the same results from the year ended 2011 were 12 percent and seven percent, respectively.

But because Facebook lumps together both advertising and payment revenue when disclosing Zynga’s contribution to the company’s revenues, it’s nearly impossible to back-out Zynga’s revenues.

If the company is successful, it will have quadrupled its worth since raising $100 million at a $1 billion valuation only 10 months ago.

While that would be astonishing for a three-year-old company, it’s important to note that negotiations continue, and that investors could ultimately value the company at a slightly more modest number (hmm, like $3 billion?!).

A Square spokesman declined to comment.

Square, which was founded by Twitter inventor Jack Dorsey, has quickly made accepting credit cards via a mobile phone into a mainstream and affordable concept for small merchants.

Over the past year, it has quickly expanded beyond handing out magnetic-swipe readers to offer more robust experiences for both consumers and merchants, including software on the Apple iPad that acts like a register, and software on the iPhone that is a virtual wallet.

The payments method has received a warm reception from mostly small businesses, including taxicabs, food trucks, coffee shops and even lawyers and accountants.

The rumors of Square looking to raise more capital started spreading after Owen Thomas, formerly of the Daily Dot, noticed that Dorsey and Square’s COO Keith Rabois were in Boston and Baltimore, where many institutional investors are based. Thomas called Legg Mason, which confirmed it was looking at the San Francisco company.

Previous investors in Square’s three rounds, totaling roughly $137 million, include Kleiner Perkins Caufield & Byers, Tiger Global Management, Sequoia Capital, Khosla Ventures, Visa and well-known entrepreneur Richard Branson.

The big question is whether Square will be able to demand such a hefty valuation.

To determine that, based on what is known about the company, I did some back-of-the napkin calculations to come up with its annual revenue.

Last month, the company said it is now processing $4 billion in annual transactions. Since we know that Square charges 2.75 percent per swiped transaction, and 3.5 percent plus 15 cents per keyed-in transaction, we can start to get a better picture of its finances.

Let’s assume that a quarter of the company’s transactions are keyed in — which demands the higher rate. That would mean the company’s revenue would total nearly $83 million for swiped transactions, and $35 million for keyed-in transactions. Because of the additional 15-cent fee per transaction, let’s add another $15 million (which might be generous, but would break down to 100 million transactions at $10 apiece).

In all, the company’s annual revenue would then be close to $122 million.

Most, but not all of that revenue, is then handed over to the credit card companies for processing fees.

To be sure, the company has grown quickly since its inception, and has its eyes set on the very large point-of-sales market. This year, Square said it had plans to expand internationally, and has just hired a new executive from PayPal to take the lead on the effort. In the future it could also generate revenue from advertising or other loyalty programs, although it does not today.

But, by at least one historical measure, the valuation is rich beyond belief.

PayPal, which was also looking to disrupt the banking industry by enabling peer-to-peer payments online, was sold for $1.5 billion to eBay in 2002, just months after going public at a valuation of nearly $800 million.

At the time it went public, the company was roughly doubling year over year and had generated $103.7 million in 2001, its first full year of operations — or slightly less than Square’s estimated revenues.

Much like PayPal back then, Square faces intense competition, making alliances with much larger companies or raising big war chests critically important.

Square faces stiff competition and pricing pressure from Intuit, eBay’s PayPal, Google and other upstarts, like Pay Anywhere.

Still, it has made a splash that is seeing major reverberations around the sector, which a big valuation will make larger still.

The revision, which is not the company’s first, sent the stock tumbling by around 7 percent to $17.05 a share in after-hours trading.

In a release filed with the Securities and Exchange Commission, the company said it lowered its fourth-quarter revenue by $14.3 million, and its net income by $22.6 million. The daily deals giant is now reporting a wider net loss of $64.9 million on revenue totaling $492 million.

Groupon’s revision reflects just how unpredictable the business is, and how little is known about how changes will affect its performance. It clearly did not know, or did not want to admit, how much offering slightly higher-end deals would affect its financial model.

But companies in this stage of development are not typically public, or at this scale, and therefore can usually make these errors in private.

Still, there is some light at the end of the tunnel.

Despite these higher-risk models being put into place, the company reaffirmed guidance for the first quarter, meaning that it was able to perform better than it was expecting.

In the first quarter, it is still expecting revenue of up to $550 million, and net income from operations of up to $35 million.

A Groupon spokesman explained that the revision was necessary because the mix of deals in the fourth quarter changed. Due to higher-end offers, such as Lasik eye surgery, it experienced a higher return rate.

Going forward, it will maintain a higher reserve to account for the more expensive offers.

The company also caught another break. The lockup period for selling shareholders has been extended to June 1 from May 2, due to a technicality. The underwriters and certain holders are not allowed to unload the stock within a 16-day period of material news. The company is now releasing its first-quarter results on May 14.

Last week, I talked to Punit Soni, who runs games and mobile for Google+, to get an update on Google’s plan for social games. Since the conversation took place before Facebook’s filing, Soni has no direct responses to the numbers.

But he addresses in general how Google expects to challenge Facebook’s dominance in social gaming, and the big opportunity in front of them to do something different.

“There’s no point in being in this game if we are a ‘me-too,’” he said. “We want to be different.”

Yesterday, in Facebook’s IPO filing we learned that substantially all of the company’s payments revenue is coming from virtual goods from inside social games, and that one game publisher alone — Zynga — is contributing 12 percent of the company’s revenue, payments and advertising included.

At those rates, it’s easy to see why Google is emphasizing games and wooing developers to its platform.

It started off with a bang in August, when it launched games. In talking to reporters, Soni announced the company was sharing 95 percent of the revenue from virtual goods with developers, and was keeping only 5 percent for itself.

That was, and remains, much more generous than the 30 percent cut that Facebook takes.

Still, with only 36 games on its network, and far fewer users (however you want to calculate it), Soni was pretty honest about how far they still have to go. He was also extremely enthusiastic, and at times looked as if he wanted to leap out of his chair to get going on some of the projects Google had planned.

First, and foremost, he said they are working hard to get virality right; and second, they want to nail cross-platform, so that games worked seamlessly across the Web and mobile.

Viral channels are the most common way for people to learn about a game, and also one of the most controversial.

More than a year ago, Facebook was forced to dial back those channels, because users complained about receiving too many unwanted messages.

“We err on the side of caution,” Soni said. “We are slowly giving more options to do things.”

Soni said they also see a big opportunity to differentiate by offering a multiplatform approach, and letting developers build games that work across Google+, Google’s Chrome Web Store and mobile. Of course, it has an advantage because of the millions of Android users, whereas Facebook’s mobile efforts are still nascent.

Already, there are some examples of cross-platform play.

Today, you can play Rovio’s Angry Birds and Bubble Witch Saga across both Google+ and the Chrome App Store, and can pick up where you left off between the two.

“These are not Google+ games, but games that are on Google,” Soni stressed. “A lot more is coming on mobile.”

Google has also focused on getting a number of games as exclusives that launch a few weeks on Google+ before they show up on Facebook. To date, it has scored at least three titles — including a major title, Kabam’s Godfather — and there are more coming.

Asked why the game developers are willing to go exclusively on Google+, Soni said there’s some marketing that Google is willing to put toward it, but otherwise, “they are betting on us.”

He says it’s mostly the potential of the platform, and the fact that he’s receptive to feedback, that helps him understand exactly what developers need. Developers also acknowledge that supporting more platforms is helpful in reaching more players and diversifying their risk.

“If they say it’s because the platform is the best ever — no, it’s not true. But the plans we have and the sensitivity that we have for our users and developers, we will be very good sometime soon. … That’s why you are seeing exclusives.”

Soni wasn’t wiling to spill specific plans about what was launching next, but said a lot more is coming.

“We are a start-up platform. We are humble and know our flaws. As we grow, you’ll see new things. My work has barely started,” he said.

The New York-based company, which sells travel deals and daily deals via email and from its Web site, said fourth-quarter revenues totaled $35.2 million, falling below analyst expectations of $38.7 million.

However, Travelzoo did manage to return a healthy profit of 40 cents a share, exceeding estimates of 35 cents a share, according to Thomson Reuters, which conducted a survey of analysts.

The company is Groupon’s closest publicly held competitor, other than Google or Amazon, which don’t break out results from daily deals. Groupon was also trading lower today, falling about 3 percent, or 59 cents, to $19.49 a share. Groupon will report fourth-quarter earnings in two weeks on Feb. 8.

In a statement, CEO Chris Loughlin said despite a slower period for travel advertising in the fourth quarter, revenues in that period grew faster year over year than in any quarter in four years.

A majority of its revenues are still coming from travel. For instance, in 2011, Travelzoo reported that 57.8 percent of deals sold were for travel and only 26.7 percent came from local discounts. Search revenues coming from comparison shopping sites such as SuperSearch and Fly.com made up for the remainder.

Still, it is local that is growing the fastest. In North America, local deals grew 196 percent year over year.

The company ended the period with 21.5 million subscribers in North America and Europe, up 14 percent from the end of 2010.

The yellow-handled hammer, which the eBay CEO purchased at Home Depot using PayPal, signals that the company’s plans for entering the mobile payments business has entered the construction phase.

In an interview yesterday, Donahoe provided a few details about the company’s Home Depot trial and how it would expand from five to 51 stores across the country over the next week.

He also talked about his own experience of buying the tool earlier that morning. (Seen at right: Donahoe wielding his hammer.)

The company also announced fourth-quarter results yesterday, solidly beating both the company’s internal guidance and analyst expectations.

One of eBay’s big initiatives over the past year has been to find ways to work more closely with physical retailers by providing them with the technology they need to operate more efficiently online and offline. Over the past year, that has included buying 13 companies, for a total investment of $3.4 billion.

“We are right at the intersection of something that’s really cool,” Donahoe said. “This isn’t something that everyone sees, like social networking three years into it, when only the early people knew about it.”

What everyone is not seeing, he explains, is how retail and payments are two massive industries that are “at an inflection point where they will go through dramatic change.”

One major opportunity is payments being made at the cash register, and arguably many others see it, too, including Google, Visa, MasterCard and the wireless carriers, which are all working on their own solutions.

Interestingly, Donahoe was willing to put a price on it — and it’s huge.

If eBay is able to capture just 2 percent of the sales occurring at the point of sale, it will be able to double PayPal’s $70 billion business today. If they capture 4 percent, they’ll triple it.

Of course, that will take some time.

This year, eBay is focused on learning and testing out the technology in several trials; then, in 2013, it will begin to scale the business. In 2012, the company is not even factoring in a lift from point of sales in eBay’s revenue guidance.

The company’s big test will start later this week, when it expands its trial with Home Depot from five stores in the Bay Area to 51 stores in the Bay Area, Atlanta and Omaha.

Everything continues to be on track, despite the unexpected departure of PayPal President Scott Thompson. Thompson shocked Donahoe right after the New Year with the announcement that he was leaving to become CEO of Yahoo.

Donahoe declined to give an update on his plans to replace Thompson, saying that he was fine with serving the interim role in the meantime, and relying on the rest of the team PayPal has in place.

So far, Donahoe said, the mobile payments technology works flawlessly, based on his own experiences, but there’s still some additional scenarios they will have to consider.

Yesterday morning, he drove to a store in San Jose, where he consciously left his wallet and phone in the car.

He walked through the aisles to find a hammer and tape measure, and then went to check out, where the terminal gave him the option of checking out with PayPal. He entered his mobile phone number and PIN, and the transaction was completed, with the receipts sent to his phone and email.

“It was faster than swiping the card,” Donahoe said. “This is an advantage that PayPal has. No one else can do it with a mobile number and PIN. There was no fancy whiz-bang technology.”

Customers will also be given the option of paying with a PayPal credit card.

But not all the pieces are in place yet.

Coming soon: Users will be able to store their loyalty cards in their PayPal wallet, and will be able to receive personalized offers based on their shopping habits.

Also, it’s worth noting that while Donahoe checked out easily, there will be a learning curve for others. In advance of going to the store, users will have to associate a phone number and PIN with their account, and enable their account for in-store checkout.

Right now, there’s no contingency plans for if a person doesn’t have a PayPal account, or if it’s not set up. In fact, a very small percentage of the more than 100 million PayPal users have likely done that.

“That’s exactly why I say this is the year for trialing and learning,” Donahoe said, appropriately adjourning the interview with a bang of the hammer.

He is forecasting that mobile commerce — purchases made from apps or the browser on a phone or tablet — will hit $8 billion in mobile gross merchandise volume this year, up 60 percent from $5 billion in 2011.

Donahoe made the predictions last night in Las Vegas, where he gave the keynote at a technology dinner for leaders of the Consumer Electronics Association.

Additionally, the company predicted that PayPal will reach $7 billion in mobile total payment volume this year, increasing from $4 billion in 2011.

He made the bold predictions despite the recent unsettling departure of PayPal President Scott Thompson to join Yahoo as CEO, indicating that he is still confident about PayPal’s mobile future.

During the keynote, Donahoe also announced that Best Buy was its newest partner to use the RedLaser barcode scanning app to offer local in-store pick-up services. Other companies that offer it today include Toys “R” Us.

Other big data figures: 

• EBay Mobile currently has more than 65 million downloads of its mobile applications across all platforms.
• More than 890,000 new eBay shoppers made their first eBay purchase through the company’s mobile apps in 2011, a 113 percent increase year over year.
• PayPal’s original prediction for 2011 was that it would achieve $1.5 billion in mobile total payment volume for 2011. Instead, it hit $4 billion. A year earlier, it totaled only $750 million.

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Ryan called AllThingsD this morning to clear the air after a report in BetaBeat painted a fairly grim picture of the situation.

BetaBeat reported this morning that as many as 170 employees would be laid off today; that Gilt Taste, the company’s high-end grocery site, was likely to be closed down; and that Jetsetter, its travel operations, was likely to be merged with Gilt City, its daily deal division.

On pretty much all accounts, Ryan declared not guilty.

“We are not closing down any businesses. We are not closing down Gilt Taste, and we aren’t merging Gilt City and Jetsetter,” he said.

Additionally, another new division, Park & Bond, which sells full-priced men’s clothing, is also doing well. “In its fifth month of business, Park & Bond did more revenue than any other business in its fifth month,” Ryan added.

The one grain of truth in all of it, he said, is that over the next couple of months, he expects to selectively trim staff by roughly 50 employees.

But for emphasis, he added, the company will still end up having more employees by the end of March than it does now.

“It’s pretty minimal in the scheme of having 900 employees,” he said. “Not only will we do that [have cutbacks], but we will continue to do that. What Gilt needs to be, and is doing, is to create a fantastic consumer experience while running an efficient company.”

He said the company achieved its goal of generating $500 million in June and now is setting its sights on transitioning the business from a money-losing organization to cash-flow break even this year.

He also said that Gilt Groupe, which raised $138 million in capital last May, is on track for an IPO, perhaps as early as the fourth quarter, but more likely in 2013.

“The timing feels about right, and we are on a steady progression,” said Ryan, who declined to give revenue estimates for this year because the company is in the sensitive lead-up to a public offering.

Ryan named two divisions that may see cuts over the next couple of months: Gilt Taste and Gilt City.

In October, Gilt City purchased BuyWithMe, and although it hired only 20-25 of the deal provider’s 190 employees, Ryan said they probably don’t need that many going forward now that the integration has been completed.

Additionally, he said there are some inefficiencies within Gilt Taste.

Ryan characterized the site as “doing great,” but said it will need fewer staffers now that it is up and running. At first, it needed to negotiate deals with dozens of vendors and shoot photos of the more than 1,000 products on the site.

Now that they’ve hit a baseline of items, they’ll probably add only a couple hundred new products a year, reducing the need for so much staff.

“There’s much less work to do there,” Ryan said. “With flash sales, you have to do that process every week, but in the full-priced business, there’s greater start-up costs. That’s part of the business.”

In particular, BetaBeat said Park & Bond President John Auerbach was likely to leave the company.

Ryan said there’s always the chance one of the top 15 executives could leave, whether it was their decision or the company’s, but that Auerbach is still working there as of now.

The San Francisco social games company is looking to raise as much as $1.15 billion, which would make it the largest IPO from a U.S. Internet company since Google raised $1.7 billion in 2004.

Shares will likely be sold on Thursday, with the company trading under the ticker ZNGA for the first time on Friday. In the meantime, the company is trying to jockey for the best price and the most shares sold.

At a luncheon yesterday with potential investors, CEO Mark Pincus made one of his boldest predictions yet when it comes to how well its games will monetize.

Currently, Zynga has about 227 million monthly active users who play games for free on Facebook, such as FarmVille, CityVille, Zynga Poker and Mafia Wars. But only a small fraction — around 3 percent — pay for additional features, such as decorative items for a farm or new clothes for an avatar.

“We could see that doubling,” said Pincus, according to Reuters.

Doubling? That’s sure to whet investors’ appetites.

But it’s hard to know how the company will accomplish that.

To be sure, Zynga is about to enter one of its biggest growth periods yet and anticipates launching several new games over the next few months.

On one level, more games will likely translate to more players. But will it translate to more players willing to pay?

That seems like a leap of faith.

However, based on documents filed with the Securities & Exchange Commission, we have gleaned that some of Zynga’s growth prospects are guaranteed thanks to the company’s close – albeit complicated – relationship with Facebook.

As one of the conditions of its partnerships, Facebook is obligated to help Zynga meet certain growth targets. In return, Zynga has committed to offering Facebook a number of exclusive game titles.

The specific details of the relationship were redacted in the document, so it’s not clear how aggressive those growth targets are over the five-year life of the contract.

Zynga also has close ties with Google, which has recently launched its own games network. Zynga has already launched several titles there, including CityVille. Following the offering, Google will own 3.8 percent of the company.

Also during yesterday’s lunch, Zynga’s executives were grilled about player retention and churn rates and its growth prospects for mobile.

Among several responses, Pincus joked about how Alec Baldwin was recently kicked off a flight after getting caught playing Words With Friends while still at the gate.

It seemed investors were not as interested in hearing about recent negative reports that Pincus’s hard-charging personality has made it an unfavorable working environment or that some employees were asked to give up their stock options.

Plus, it’s a crowd that Pincus should be comfortable speaking in front of. This will be the second company the Wharton and Harvard Business School grad has taken public.

The company will continue to have meetings today and into next week. So far, reports indicate that the conversations are going well.

Zynga has apparently already received enough orders to cover all the shares being sold in its initial public offering, reports BusinessWeek, which talked to two people with knowledge of the situation. Zynga plans to sell 100 million shares for $8.50 to $10 apiece, which would value the company at as much as $7 billion.

On the site, shoppers add — or “follow” — celebrities and experts who share similar interests, to receive recommendations on the latest food, fashion, design and style.

In that way, OpenSky pushes product ideas to shoppers, somewhat in the way Twitter lets people discover information versus having to search for an answer on Google.

Caplan told me OpenSky has raised $30 million in fresh capital to continue building out the business.

The New York-based company, with offices in Los Angeles and Nashville, is only six months old and previously raised $19 million in two prior rounds.

New investor Providence Equity Partners led the financing. Existing investors Highland Capital Partners, Canaan Partners and the Raine Group also participated.

Some of the company’s talent includes celebrity chefs such as Bobby Flay and Italian food expert Lidia Bastianich, and pop culture figures like actress and reality TV star Kristin Cavallari, who will advise customers on the latest fashions.

In a recent offering, Flay, who has 164,626 followers, advised shoppers to purchase a spice bundle for $23. Fitness guru and motivation speaker Gabrielle Bernstein recommended a collapsible Hula-Hoop that’s easy to travel with.

Caplan said it’s an approach that’s really resonating with shoppers, particularly women in their 30s.

He said the company will break $1 million in sales this month and is on track for a $10 million run rate. Both order volume and revenues are growing 50 percent month over month.

The company already has 600,000 members signed up; they are now connecting to millions of shopping “experts.” It took the first 14 weeks for OpenSky to hit one million connections, 10 weeks to get its second million and three weeks to reach its third million. Customers are spending $50 on the average transaction, which is more than double Amazon’s average order of $22, Caplan said.

“This feels like such a modern way to shop, compared to the search box,” Caplan said. “There’s not a lot of soul in online shopping. We are putting the soul back into shopping.”

He added that walking into actual stores is engaging and entertaining. “I think Amazon is a fantastic company, and they have a lot of things they do really brilliantly, but I don’t think it’s the best way to shop.”

Many companies right now are challenging the original e-commerce model, and for good reason. Kleiner Perkins partner Mary Meeker noted in a report last week that e-commerce makes up 8 percent of overall commerce in the U.S. today, and continues to climb.

Caplan said the capital will be used to add more shopping verticals and experts to the site. Today, it has 75, with hundreds more coming.

As the former president of About.com, which relied on a distributed workforce to contribute answers to the site, Caplan believes he knows exactly how to get the business to click.

To make money, OpenSky is splitting the gross profit from the items sold with the experts on the site. It’s free to join as a member, and there’s a 90-day money-back guarantee. So far, it has experienced a 1 percent return rate.

“I personally love businesses where you partner with talent and create talent,” he said.

In a study conducted by SuperData Research on behalf of Viximo, a social games and applications platform, it found that non-Facebook social gaming will explode to $5.6 billion in 2014, up from an estimated $3.2 billion this year.

At that level, the study found that it will represent 65 percent of the overall projected revenue, including both Facebook and non-Facebook social gaming networks, which together are expected to hit $8.6 billion in 2014.

Most of the non-Facebook revenue will be driven by international markets, where Facebook is not dominant, including Asia, Russia, Brazil and Turkey.

Some of the social networks include Hyves in the Netherlands; Tuenti in Spain; StudiVZ, a student-focused site in Germany; and Badoo, a dating site in the U.K. The study does not take into account the entrance of Google into the industry with its games network on Google+.

Other findings:

• Asia is the largest market for social games, with an estimated $2 billion in total revenue for 2011.
• Russia and Brazil also have large social gaming audiences, with 35 million and 32.6 million people, respectively.
• Germany’s social gaming revenue is expected to increase to $250 million in 2014, up from $173 million in 2011.

In the second quarter, Zynga said its “bookings,” which are sales recorded during the same three-month period, dipped four percent. Additionally, it said three million fewer people played Zynga games on a daily basis than in the previous quarter.

After the company’s updated IPO filing was released last week, critics have been dissecting the results and coming to the conclusion that the drop in bookings is a sign of things to come. So, is it?

Probably not.

In fact, the San Francisco social games company, which is seeking to raise $1 billion in the public markets, may be gearing up for its second wind.

In the first half of the year, Zynga launched only one major game — Empires & Allies — to break a five-month hiatus.

Since then, it has moved quickly, announcing two other major releases: Adventure World and Mafia Wars 2. In addition, it has launched a number of minor releases, including an expansion to FrontierVille, as well as Words With Friends, which was brought over to Facebook from mobile.

It has also launched two titles on Google’s new games network, and it is making a big announcement — called “Zynga Unleashed” — on Oct. 11, at a press event at its new headquarters.

Today, Zynga is looking a lot more like an entertainment company that must continue to deliver new hits in order to gain new players, much like a TV studio needs to produce new sitcoms in order to get more viewers. Practically speaking, if Zynga doesn’t release a new game, then it won’t see a lift in users.

While Empires & Allies was technically launched in the second quarter, it launched in June, so it would have only one month of results before the end of the quarter.

Given that it launched virtually no games for five straight months, the second quarter still performed fairly well.

In that quarter, Zynga’s revenue totaled $279.1 million, increasing 115 percent compared to the same period in 2010.

More to the point, the new titles it has launched since then have already garnered millions of new players.

Empires & Allies is attracting nearly five million daily active users; Adventure World is clocking 4.5 million; Words With Friends is bringing in four million; and FrontierVille’s Pioneer Trail is garnering 2.4 million, according to AppData.com. All told, that’s about 15 million more users, which exceeds the 13 million players who play CityVille, the most popular game on Facebook.

Getting more players is key because fewer than five percent of its players actually pay to play. The big question will be whether the new games will be enough to offset Zynga’s older games that are either stagnant or losing players.

In fact, it’s moving so quickly that a research firm that released a report only five months ago is already revising its projections upward for the year.

BIA/Kelsey now believes that consumer spending on deals in the U.S. will hit $2 billion, up from its previous forecast of $1.2 billion.

In a release, the research firm said the growth is being fueled by a larger number of registered users who are actively buying deals, better targeting capabilities and new niches in the space, including flash sales sites, which offer deals on apparel and other categories for a limited time via email.

Calculating spending habits in the space is likely difficult, given that Groupon is the only company that has publicly disclosed its figures in its registration statement.

Mark Fratrik, BIA/Kelsey VP and chief economist, said despite the revisions, the firm sees a ceiling coming “on how many deals consumers will buy and their overall interest levels in deals.”

Because of that, the report was less bullish on the industry’s five-year prospects. The research firm also increased its long-term view on the space, although more modestly, saying that in 2015 it expects spending to hit $4.2 billion, up from its previous forecast of $3.9 billion in March.

Both numbers far exceed the $873 million that the research firm estimates was spent in 2010.

Coincidentally, Groupon said its second-quarter revenues increased to almost exactly that much, or $878 million, which is a worldwide total.

The forecast was included as part of the company’s first-quarter results released today.

In February, Nordstrom agreed to acquire four-year-old HauteLook, marking the department store’s first foray into online private sales. Such sales, also called flash sales, liquidate excess inventory by offering steep discounts to members who have signed up for daily email.

Nordstrom paid $180 million in stock for the company, which is now close to HauteLook’s annual sales. If the company meets certain performance goals, the transaction size could jump to as much as $270 million over time.

For Nordstrom, the revenue stream is fairly insignificant. In the first quarter, net sales for the department store totaled $2.23 billion, an increase of 12 percent compared with the same period in 2010.

The acquisition will also hit the company’s bottom line. Charges associated with the HauteLook acquisition, including stock-based compensation, reduced earnings per share in the first quarter by four cents, and is estimated to impact full-year results by about $0.20 a share.

Gilt Groupe, which is also in the flash sales business, announced earlier this week that it had raised $138 million in capital at a reported $1 billion valuation. It previously said it expected to record $500 million in revenues for its fiscal year ending in June.

The Seattle-based company said revenues totaled $9.86 billion, compared with $7.13 billion in the year-ago period, and that net income decreased 33 percent to $201 million or 44 cents a share.

In a statement, Jeff Bezos, Amazon’s founder and CEO, said: “We love inventing on behalf of customers and have never been more excited about the long-term opportunities.”

But you have to wonder how much investors love it.

The company’s stock dropped $3.12, or 1.7 percent, in regular hours, and then slid another 90 cents in after-hours trading.

Besides investments, analysts questioned what impact the Japanese earthquake had on Amazon’s results, since the region is particularly strong for the company. Here’s updates from the call on that subject, as well as news from Amazon that it will start selling its ad-subsidized Kindle a week early.

In some regards the quarter demonstrates a return to the company’s frothy days when the motto was get big fast, and then later, that morphed into get bigger faster.

To be sure, the company is dipping its toes into a variety of pools, ranging from cloud computing to traditional e-commerce to digital commerce. It’s building hardware, such as the Kindle e-reader, announcing a new version recently that’s supported by advertising. It’s also just beginning to reveal where it’s mobile strategy is going with a promotion that crosses both its Android Appstore and its handset business.

To be sure, one of those growing pains was felt last week when when its cloud services crashed, leading to outages for nearly a week. The company did not comment on the crash in its earnings release, but it will likely have to answer analyst questions during this afternoon’s call.

Still, Amazon was able to meet its own sale forecasts, which predicted net sales of between $9.1 billion and $9.9 billion.

Sales also exceeded analyst expectations, who were hoping for revenues of $9.54 billion, representing a 34 percent increase from the same period last year, according to consensus forecasts from FactSet Research. However, Amazon fell way short of analyst’s earnings estimates of 61 cents a share. Amazon reported 44 cents a share for the quarter.

In the second quarter, Amazon is predicting software net sales ranging between $8.85 billion and $9.65 billion, representing year-over-year growth of 35 percent and 47 percent. Operating income is expected to be between $95 million and $245 million, declining by 9 percent to 65 percent.

Katzenberg, who created the animation studio along with Steven Spielberg and David Geffen, marks the sixth board member of the privately held social games company, which earned a jaw-dropping profit of $400 million on $850 million in revenues last year.

Zynga’s CEO and Founder Mark Pincus made the announcement in a blog post today on the company’s Web site: “I knew he’d be a great fit for the board after he suggested that the blockbuster of 2011 could be ShrekVille.”

Pincus continued to joke that Katzenberg will help recruit a seventh member to the board (maybe Jack Black or Mike Myers?).

But more seriously, Katzenberg’s appointment signals Zynga’s desire to evolve from a well-recognized–and successful–Silicon Valley start-up to a large consumer brand name and entertainment company.

Social gaming on Facebook so far is in its infancy.

Zynga has been able to profit handsomely off no-name games, like FarmVille, CityVille and Mafia Wars. Critics argue that it will have to turn those franchises into brands as the market matures and gets inundated by well-recognized brands. That progression has already started to take shape with Electronic Arts’ acquisition of Playfish and what Disney has planned with its purchase of Playdom.

Having an answer to this question will be key as Zynga considers raising up to $250 million in capital, and positions itself for a potential IPO.

“DreamWorks Animation is a revolutionary technology company, a recognized consumer brand, and at its core, a media company. It’s easy to see the value that Jeffrey will add to Zynga as we grow and look for more ways to delight our players,” Pincus wrote.

In a statement, he added: “Jeffrey redefined storytelling when he launched DreamWorks Animation. He turned an independent studio into a brand name and his vision will be an asset as we work to define the future of play.”

Katzenberg can offer that outside perspective as the board’s only member not in Silicon Valley. He joins Pincus; Owen Van Natta, Zynga’s EVP of Business; Bing Gordon, partner at Kleiner Perkins; Brad Feld, managing director of Foundry Group; and Reid Hoffman, founder and chairman of LinkedIn.

Here’s the full video from Katzenberg’s appearance at last year’s D conference: