The company posted earnings per share of one cent on revenue of $264 million. Consensus on the Street expected Zynga to post a loss of four cents per share on revenue of $209.8 million. Still, that’s a decline of 18 percent year over year compared to the $321 million in revenue the company claimed in Q1 of 2012.

“2013 will continue to be a transition year as we face the challenging environment on the web and invest in developing the leading franchises and network across web and mobile platforms,” said Mark Pincus, CEO and founder of Zynga, in a statement, “and offer our 253 million monthly players a connected experience that can follow them from work to school to home and anywhere in between.”

The most important thing to note there is that 253 million monthly active users stat. It’s down from the nearly 300 million MAUs the company reported as of last earnings.

Also worth noting: Zynga’s daily active users — or DAUs — are at 52 million, an all-time low for the company.

“Users are migrating to mobile, and our marketshare on the Web is larger than it is on mobile,” Zynga chief revenue officer Barry Cottle told AllThingsD, in an interview. “As we look at it, it’s a natural part of the transition we knew was going to happen.”

“When we made the pivot last summer, the transition was happening really very fast, so we had to reorganize our studios quickly to move towards mobile,” Cottle said.

That’s why we’ve seen the closure and consolidation of some of Zynga’s outfits in areas like Maryland and Austin earlier this year, and why we’ll see the company shutter at least four more games in the coming year, focusing on games that are more geared towards a mobile audience.

“We made some decisions on a few Web games that we decided to shut down, which would have propped revenue up but wouldn’t have gone in direction we want to go in,” Cottle said. “It may have been a great short-term decision, but not good for us in the long-term.”

In February, Zynga was eager to remind everyone that nearly a quarter of its users — around 72 million of them — were accessing the company’s games via mobile devices on a monthly basis. Update 3:31 PT: The breakdown wasn’t apparent from the print, but Pincus stated on the conference call that Zynga’s most recent mobile MAU count is at 65 million. Again, that’s down from the 72 million reported last quarter, tracking with the dip in overall sequential MAUs.

“The good news is that we’re not nowhere. We’re sitting in a very nice place, in particular as it amounts to engagement,” Cottle said. “We’re seeing users spend 11.2 billion minutes per month playing our games.”

Shares of Zynga dropped to $2.93 in after-hours trading by 12.5 percent.

The key word, as CEO Pincus repeated on the call this afternoon, was “transition.” I imagine it more like the company saying, ‘we know we’re tanking right now — just stick with us.’

In recent years, game sales have declined dramatically, with software and hardware making up only half of industry spending, according to NPD Group. The other half now goes toward downloadable content and microtransactions — in other words, digital content for consoles, smartphones and Facebook.

Because of this seismic shift in gamer behavior, many industry veterans are banking on the release of the new PlayStation, and a new Xbox coming later this year from Microsoft, to provide a jolt in traditional game sales.

On Wednesday, Sony is hosting an event in New York, where it is expected to unveil the PlayStation 4, as it has been nicknamed. Sony’s machine is expected to come in time for the holidays, along with the Xbox, although Microsoft declines to comment on its plans.

The good news is, that in the past, new hardware has always led to more software sales; as consumers bought one, they bought more of the other. But after a lackluster launch of the Wii U by Nintendo this holiday season, some wonder if a living-room-driven gaming experience has as much firepower as it once did.

“I feel like consumers are happy, and I’m not sure if there will ever be the right time to release a console again,” said Jerry Holkins, co-founder of Penny Arcade, a company that produces provides commentary on the industry through Web comics. “I think the spend is elsewhere. I don’t think they are waiting for the next generation; they are happy with where they are playing today.”

Electronic Arts’ John Riccitiello is more optimistic about the prospects of the next-generation devices. But then, as one of the industry’s biggest publishers, he has to be. During the company’s last conference call, he said that the December quarter was disappointing, but “that often happens when the consumer carries the expectation of a console transition.”

In January, Nintendo slashed its sales outlook after holiday sales of the Wii U failed to hit expectations. The poor turnout does not provide a lot of support for the theory that consumers were just holding back spending for the release of the new hardware.

The Japanese game company was hoping to rekindle consumer excitement by launching the Wii U with a controller that had a six-inch touchscreen display and acted much like Apple’s iPad. It also enabled consumers to interact with their TVs, by allowing owners to comment on programming within a closed social network. But the console was mostly trying to extend the life of the traditional videogame business, which relies on selling packaged software at $60 apiece.

Again, Riccitiello is hopeful that Nintendo’s performance is not an indication of the other two launches.

“I wouldn’t say that we see much correlation between the results that Nintendo has shown with their console debut of the Wii U, and what we see coming,” he said. “We see a pretty sharp distinction and, unfortunately, I am unable to go any further than that.”

But there’s no way to discount what has happened in the games industry since the last generation of devices launched. Social and mobile platforms have led to the rise of the 99-cent game and the free-to-play business model. Gamers have grown to enjoy playing a game without having to pay a dime. Then, if they want to, they can invest as much as they want.

If Sony or Microsoft are to be successful, adopting new business models may be the key.

There are already some signs of Sony’s willingness to change. According to The Wall Street Journal, Sony will provide a new streaming game service that will allow users to play games delivered over the Internet. The service is designed to use current PlayStation 3 titles on the new console. While cloud gaming hasn’t really taken off on other platforms, the technology does enable other pricing models, like subscriptions.

Another development since the last generation of consoles hit store shelves is how much the definition of a gamer has changed. With the massive popularity of Rovio’s Angry Birds and Zynga’s FarmVille, gamers aren’t just “hard-core” players but also housewives and touchscreen-savvy children.

To be sure, Microsoft has been aggressive in reaching out to a broader audience. Last week, it said that 38 percent of Xbox users are women, and more than 51 percent of owners are people who have kids. Overall, it said non-gaming usage has soared by 57 percent year over year.

Despite interest in other platforms, many also believe that there’s still a time and a place for the highest-fidelity experience possible. The console, with its high computing power, is often the perfect delivery mechanism for a gunshot to the face, or a perfectly depicted battle scenes — a fact that Activision proves year after year with its title Call of Duty, which defies industry trends. This year, for instance, the title under the name of Black Ops 2 crossed $1 billion in sales in just 15 days.

Anil Dharni, an SVP of Gree, has focused on publishing hard-core titles like Crime City for tablets, but still believes that consoles “serve an audience, who wants a high-fidelity experience that mobile devices can’t deliver today.” He thinks the traditional gaming market will decline, “but it’s not going anywhere anytime soon.”

Penny Arcade’s Holkins says he will continue buying consoles even if that makes him look old. “I liked having a console,” he said. “I enjoyed that, and I’ll still do that.”

According to a filing in the U.S. District Court of Northern California, the entire case was dismissed with prejudice. Both companies issued identical statements on the subject: “EA and Zynga have resolved their respective claims and have reached a settlement of their litigation in the Northern District of California.”

If you don’t recall, EA filed a copyright infringement lawsuit against Zynga in August, charging that Zynga’s social game The Ville was an “unmistakable copy” of EA’s The Sims Social. The complaint was seeking injunctive relief and damages.

The following month, Zynga filed a pair of motions to rebut Electronic Arts’ claims, arguing that The Ville on Facebook is not similar to EA’s The Sims Social. And, in a third filing, it countersued, alleging that EA participated in unlawful actions, including anti-competitive business practices, when it came to recruiting employees.

All of the cases have now been dismissed. The terms of the settlement are confidential, so exactly how the two companies worked out their differences is not known.

But in some respects, the issues EA had surrounding The Ville should no longer be a concern.

In October, Zynga said it was “significantly reducing” its investment in The Ville as part of a restructuring plan that is designed to return the company to profitability. The Ville was just one of more than a dozen games being phased out.

Electronic Arts Vs. Zynga

To do so, the Japanese-based company acquired San Francisco-based OpenFeint and established a U.S. headquarters in the same city. It then purchased Funzio, a mobile game developer, to help make hit games for the platform. In all, it spent $300 million.

But now the company is pulling back on its plans — just a bit.

While Gree is a massive entity in Japan, with $2 billion in annual revenue, its efforts in North America so far have produced much less. The company does not always break out revenue, but in August, it reported that sales in the U.S. totaled $16.9 million in the second quarter.

In the conclusion of a two-year spending spree, Gree announced in December that it was rethinking its platform ambitions and laid off about 25 members of its platform team to focus on mobile game development. I caught up with Anil Dharni, Funzio founder and Gree’s SVP of its studio operations, in San Francisco last week, to better understand where the the company is headed.

Here are some highlights from the conversation:

Why did Gree shut down OpenFeint in the U.S.? Does it no longer believe in the ability to build a network where players can discover games and other people to play with (a.k.a, a mobile platform like Facebook)?

Anil Dharni: We acquired OpenFeint two years ago, when Gree wanted to get into the U.S. It was working with a slew of indie developers, and over the past two years, we learned about the publishing business and the platform business. We’ve solidified our position with developers, so we didn’t need the platform team [in the U.S.] and moved production back to Japan.

So, what’s the status of the platform in the U.S.?

Dharni: It’s just being developed in Japan. It’s in beta [in the U.S.] today. Our learnings from the process is that we don’t want to have a me-too publishing strategy. We have to offer more, like game analytics, consulting, push notifications, game mechanics, etc. We are not ready to release those capabilities today, but we think we can bring it altogether.

The transfer of the platform development to Japan led to the elimination of 25 jobs in the U.S. How many employees do you have today?

There are 400 employees in the San Francisco offices, Dharni said, which are directly across the street from AT&T Park. The company has also opened a Canadian studio in Vancouver, where it has 10 employees. Both offices are hiring.

Crime City is one of the company’s oldest titles (launched in August 2010), and it continues to be in the Top 50 highest-grossing apps today. How does it continue to attract players?

“A lot of people talk about shorter lifespan of games on mobile than on Facebook,” Dharni said. But by working with his Japanese counterparts, they’ve been able to learn how to retain users for longer periods of time and increase the user base. It has required them to release more content and new mechanics inside of the games to keep people coming back.

How is hard-core being defined on mobile?

The more strategy-based the game is, the more hard-core it is, he said. “It means a smaller audience that monetizes better.” Genres may include first-person shooters, role-playing and card games (a popular category in Japan that challenges players to collect a deck of cards by completing a number of mini games). Dharni said that more developers have become focused on hard-core as the cost to acquire a player on mobile has gone up, since they can deliver a return on investment over a longer period of time.

As games become more hard-core, is the cost of developing a game going up?

No, it hasn’t, Dharni said, but the amount of time it takes to launch a game has gotten longer. “We used to launch games without events and other mechanics and then layer them in later. Now, they are included from the time of beta, which means testing the games out for a long time in either Canada or Australia.”

Is Android catching up to the iPhone in terms of revenue?

It is, if you aren’t successful on the iPad, Dharni said. But if you are, then Android is not competitive yet.

On Tuesday, Zynga appeased investors by beating its already lowered expectations for the period and exceeding analysts’ expectations.

It also showed critical progress on mobile, where one-quarter of the company’s monthly active users are now playing its games — that’s 72 million people out of 298 million monthly average users in total, making for a very large market across both Facebook and smartphones.

Just yesterday, there was some additional good news for the struggling games company.

New Jersey Governor Chris Christie gave conditional support to in-state Internet gambling, a market that will benefit Zynga as it looks for potential new revenue sources.

To date, most of Zynga’s real-money gaming efforts have been focused in the U.K., where online gambling has been legal for a while. Zynga confirmed on Tuesday that it still plans to launch games there during the first half of the year. Additionally, it said its real-money games would also be available on Facebook in the U.K., where the social network has only conducted a few minor tests to date.

Zynga’s stock soared 11 percent today, or 34 cents, to $3.43 a share. The stock has not traded that high — at least consistently – since July. While today’s rise is encouraging, shares are still down more than 75 percent from a high of $15.91.

Other gambling stocks also jumped following the news out of New Jersey, including Caesars Entertainment, which saw its shares rise 38 percent, or $3.84 a share, to close at $13.91.

What’s particularly important to note about the measure that Christie has endorsed is that it would permit a kind of reciprocity with other states where online gambling is legal. Zynga has already begun the long process of getting licenses in Nevada, so conceivably it would not have to jump through as many hoops to begin operating in New Jersey. And reciprocity would be essential to making a big enough market.

While many investors are obviously thrilled about the prospects of online gambling, it’s hard to know how much revenue it will produce. Dennis Farrell, a gambling-industry analyst for Wells Fargo, told The Wall Street Journal that online gambling could generate between $650 million and $850 million in annual revenue for the industry in the near term, assuming around 5.8 million people gamble on the sites.

Toney is one of the many Zynga employees who have left the games company over the past few months. In October, he stepped down after working there for three years, most of that time as the general manager of Zynga Poker.

“It’s hard to imagine being at a big company now, like Zynga, now that I’m at a small company,” said Toney, after only five weeks on the job. “But that’s why I chose to leave. I wanted to join a company I could lead, and take it to the next level.”

LearnStreet was founded a little over a year ago by Vinod Khosla, a venture capitalist who saw an opportunity to create an easy way to create online courses. Other education companies have also sprouted up around it, including Codecademy, Khan Academy and Coursera.

LearnStreet claims to teach someone the basics of three programing languages (JavaScript, Python and Ruby) with no development background needed.

Toney said it reminds him of his college years, when he bought himself an HTML programming book and taught himself how to make websites (despite the fact that he was studying business). LearnStreet is the online version of buying a book, and can be used by a student studying computer science, or by a teenager or adult looking for job skills.

While Toney’s most recent experience is based in gaming, he said there’s a number of overlaps between Zynga and the new company.

First, running the Poker division is like “having your own startup,” he said. As the general manager, he was in charge of managing an entire team and budget.  The other similarity is that he plans on LearnStreet having a freemium business model, where customers get some of the course work for free and then pay for additional help — sort of like free-to-play games.

“What we’ve done and discovered is we are beginning to pick up on pain points and friction points, where people are willing to pull out their credit card and pay for additional help,” Toney said.

So far, the company has raised $1 million from Khosla Ventures; now, with Toney on board, he said it plans to raise additional funding soon.

Prior to Zynga, Toney held positions at Nike and eBay. At Nike, he was the Global General Manager for Nike.com, working on the company’s e-commerce strategy; at eBay, he was director and general manager of the company’s collectibles business.

As evidence of the impending launch, two websites have already gone live in the U.K. to start spreading the word. One is dedicated to poker, and the other features a variety of casino games, like slots, bingo and roulette.

But during Zynga’s fourth-quarter conference call yesterday, the company disclosed a new piece of information: Its real-money casino efforts will not be limited to standalone websites. In fact, Zynga will also be leveraging the Facebook platform.

Zynga Chief Revenue Officer Barry Cottle confirmed to AllThingsD: “We’ve been working with Bwin to expand the platform to ultimately be able to offer real-money gaming across the Web, PC download, Facebook, and then hopefully mobile, as well.”

Enabling Zynga to conduct real-money gaming in the U.K. is significant for both parties.

Zynga is by far the largest game maker on the social network, and its poker game is the third-most-popular game on the platform. By allowing Zynga to take and pay out real money in the U.K., Facebook is opening the floodgates to gambling. Likewise, by being allowed to operate poker or other casino games on Facebook, Zynga will be able to tap into its existing network of players more easily than it could from a third-party site.

“Poker on a global basis is a very successful franchise, with 37 million [monthly active users],” Cottle said, although he did not know the specific number of players in the U.K.

This will not be Facebook’s first foray into real-money gaming in Britain, where online gambling is legal for adults over the age of 18. In August, it allowed Gamesys to launch bingo, marking the first and only game on the network, but now that seems like a very small test. At the time, Reuters reported that Facebook had no plans to offer gambling in any other countries or with any other partners.

But a Facebook spokeswoman confirmed yesterday that things have changed, and that more rollouts were coming: “Real-money gaming is a popular and well-regulated activity in the U.K., and we are allowing a few developers to offer games there to adult users on Facebook Platform in a safe and controlled manner.”

Online gambling continues to be unregulated in the U.S., except for in a small number of states, including Nevada. Zynga has begun the arduous process of getting licensed there, but it will likely take months, if not more than a year. Even if it gets approved, it will only be able to operate in that state, so it’s unlikely that Zynga or Facebook will roll out gambling in the U.S. anytime soon.

During Zynga’s conference call, the company confirmed that its two websites — ZyngaPlusPoker and ZyngaPlusCasino games — will launch by the end of June. The additional platforms, including PC download and Facebook, are also expected to launch during the first half of the year, but not necessarily at the same time.

As a reminder of why Zynga is getting into the real-money space, Cottle said, “It was in response to our players. We did some research, and a subset of our players were either already playing or wanted to play [real-money games], and trusted the Zynga brand. Given that we have the largest online poker game in the world, it seems natural to offer that as an extension.”

In after-hours trading, the stock was up nearly 6 percent to $2.90 a share.

The fourth-quarter and year-end results provide a bit of relief to the social games company, which has been trying to turn things around for the past three quarters.

On the call today, we heard from Zynga’s management team, including CEO Mark Pincus, but also from its new COO David Ko and CFO Mark Vranesh, who replaced Dave Wehner after he left for Facebook.

The call had two strong themes: How Zynga plans on driving additional revenue in the future, and how it will spend less money to do it.

Not unlike Facebook, mobile was one avenue where it expects to grow sales. As a testament to the company’s efforts in the space, Ko said that Zynga has grown the number of dedicated mobile employees from 20 a year ago to more than half the company today. Additionally, Zynga said 21 percent of its fourth-quarter bookings came from mobile, up from 8 percent a year ago.

On keeping expenses down, the company said it intends to spot games earlier in the development process that are unlikely to be hits. As part of that, it will be shutting down three duds, including the recently launched CityVille 2 sequel.

Here is the liveblog from earlier today:

——-

2:02 pm: Things should kick off any second. Pretty cute of Zynga to make the hold music the FarmVille 2 theme song. Too bad it’s looping tirelessly in the background.

Ahh, relief. The call has begun with the usual forward-looking warnings.

2:06 pm: Pincus introducing the new faces on the call, including David Ko, COO, and Mark Vranesh, CFO.

He’s proud of everyone at the company for reducing operating expenses, and exceeding bookings forecast and adjusted EBITDA forecast.

They took a number of actions during the quarter, he said, including realigning the company with a mobile-first focus, with more teams now focused on mobile than Web. It closed some studios, named new managers and invested in its existing talent, with 550 people taking on greater roles and responsibilities during the quarter.

“We’ve always been a learning company, learning from our successes and failures,” he said.

2:10 pm: Pincus highlights the accomplishments of its popular Ville franchises, saying that it has generated $1 billion in revenue, exclusive of partner fees. In Q4, he said the games generated $100 million in gross bookings, the 11th quarter in a row of doing so.

He’s also talking up its newer areas of emphasis that are a bit more sexy, like social casino, including its efforts in the real-money space in the U.K., and entering in new casual genres, like arcade. In 2013, he also said its pipeline is heavily weighted to “midcore.”

2:13 pm: More on mobile: “We are creating a network that will make it easier for people to play together. It will offer a powerful distribution channel.”

As we transition to mobile opportunity, he said the company will be “calling the ball” sooner and will discontinue games that it does not think will result in a hit. It will also be investing in growing its China and India development centers.

“The No. 1 focus is to deliver the best games. 2013 is a pivotal transition year for us at Zynga; we are excited to deliver a whole new class of mobile-social games that make it easier and better to play across mobile and social platforms.”

2:16 pm: Pincus hands the call over to Ko, who we are hearing from for the first time. Since being hired as COO, he said he has been focused on execution.

He said they are planning on launching many more games on mobile, including the Invest & Express category (its Ville games) in 2013.

Ko, the former chief mobile officer, is hot on mobile gaming. He said Zynga has the fifth largest audience on iOS, behind companies like Google and Facebook. In the quarter, they launched four new mobile games and four new Web games.

While it successfully expanded the portfolio during the quarter, Ko said several games missed expectations. As a result, it is closing three games: CityVille 2, Party Friends and The Friend Game.

“We are revamping our game quality process. We need to get feedback earlier in the process,” he said. “The two biggest changes is you’ll see a shift to mobile, and we’ll be calling the ball earlier on games. We’ll double down on the games with the most potential and ship fewer games.”

2:21 pm: Now hearing about Zynga’s advertising efforts, with the sales team closing big deals with top advertisers.

On the cost side, it cut back on outside services, reduced the size of the workforce and rationalized it’s product pipeline.

And, real-money gaming: We are on track to deliver products with Bwin during the first half of this year. And, they’ll be rolling out products across a variety of platforms, including Facebook, Web and mobile.

Interesting that Zynga said its real-money efforts in the U.K. will also be on the Facebook platform, which hasn’t really done a lot on the platform to date.

2:24 pm: Vranesh is now walking through financial results for the quarter and the year. Also the first time we are hearing from him, but Vranesh had been at the company a long time before Wehner replaced him in the lead-up to the IPO.

2:26 pm: During this summary of the press release, be sure to check out Mike’s piece on Zynga’s mobile numbers, which shows how much more mobile is contributing to the company than it was just a year earlier.

2:29 pm: Vranesh notes that headcount now totals 3,058, down 251 people, quarter over quarter.

Some perspective on where Zynga’s stock is currently trading. It has $1.65 billion in cash, which is slightly below the roughly $2 billion market value. Add to that the value of the company’s San Francisco headquarters and it easily exceeds where it is trading.

2:34 pm: Opening up the call to questions.

First question about the steps Zynga is taking on mobile platform to expand the network. What gives you confidence that they will use the network vs. the random opponents?

Ko takes this one: It comes down to a couple of things. We have an advantage today in mobile because of people and the network. A year ago, we had 20 people focused on mobile, and now a majority of the company is focused on mobile. On the network side, we have 72 million monthly users, we know we have games that they will enjoy and will want to play.

2:37 pm: Did the success of FarmVille 2 make it hard for CityVille 2 to be successful?

Ko: In terms of spacing them out, we are focused on franchises, our goal is to create franchises. You’ll see us launch less titles, so they will ultimately be spaced further apart. The reality is we had a longer lead time of testing and learning for FarmVille 2, and that was a key learning experience we didn’t have for CityVille 2.

2:41 pm: A question about the review process.

Zynga says to expect a lighter slate of games in Q1, which will increase the odds of creating new franchises throughout the year — this means fewer but bigger launches that have a greater chance of being long-term, sustainable hits (like the rest of the videogame industry tries to do).

2:44 pm: Question about the new agreement with Facebook that loosened Zynga’s requirements on the platform.

A pretty vague answer by Pincus: On the strategy side, what’s important about the amendment is that in the future, we’ll have more flexibility to market our games on the Web through more distribution channels, in a way that will still work in concert with Facebook.

2:47 pm: A question about Monthly Unique Payers, which is the number of people paying inside the company’s games.

Vranesh said that Web players who paid were slightly up due to FarmVille 2, and for mobile they were slightly down due to Draw Something.

2:54 pm: A question about Zynga’s mobile daily active users: The quarter-over-quarter decline slowed in Q4 compared to Q3. Is building out the mobile network helping you grow users while Draw Something’s decline has stabilized?

Pincus: So, in terms of thinking of looking at our overall DAUs on mobile. First, the stability of existing mobile game traffic. Our team on Words With Friends did a great job of growing engagement during the quarter, as well as mobile Poker. The second driver of traffic will be our new game launches this year. We are bringing existing major franchises, like FarmVille 2, to mobile and other new launches. The third is what we can do on the network level, by driving distribution and ongoing engagement.

2:58 pm: A question on year-over-year growth for mobile DAUs.

Vranesh: On a year-over-year basis, mobile MAUs have grown 75 percent to 72 million.

This is the first time that Zynga disclosed its mobile players, but it did not say in today’s release how much they have grown, so this piece of information is particularly interesting in order to judge the company’s year-over-year performance on mobile. Obviously, when Ko says that the company has gone from 20 employees focused on mobile a year ago to a majority of employees today, this is a reflection of that.

3:04 pm: The conference call has now concluded, you may all now disconnect.

In summary, Zynga continues to make progress on its message to investors, but it’s still scattered. Executives talk about its prospects on a number of fronts, ranging from real-money gaming to mobile and advertising. Clearly, there’s lots brewing, but it’s too early to tell how the company will perform over the long-term.

As most know, the San Francisco gaming company has struggled to find the right balance as consumer behavior has shifted from playing social games on Facebook to playing games on their phones.

In the third quarter, 60 million people played Zynga’s games on a daily basis, up 11 percent from the year-ago period. But those gains were only possible due to mobile offsetting declines on Facebook. The worry of Wall Street investors over the situation is apparent in the price of its stock, now at $2.66, which remains 72 percent below its initial public offering price at the end of 2011.

But Zynga management believes it knows how to turn things around, including expanding beyond its classic Ville-style titles, like FarmVille, to more genres that appeal to a wider audience, including casino and more hardcore titles.

In a story earlier today, I wrote about the three executives that CEO Mark Pincus has appointed to help turn things around. One of them is Steve Chiang, the company’s new president of games.

Here are some highlights from an interview I recently did with Chiang:

Tell me a little bit about your background.

Chiang: I got into computers early, when I was six or seven, and I was really into videogames and playing games on my computer. And then I got into programming. First, I got into the industry when I graduated from school as a programmer, by creating games for Super Nintendo. That’s when making a game included one programmer and two artists, or two programmers and five artists, so they were really small teams, so you really had to know all aspects of game development.

And then, in 1994, myself and some guys I went to high school with, and John Schappert, started Tiburon. We started making Super Nintendo games, and then we started working on Madden when the contract came up after the other company didn’t ship the game on time. It was the best-selling game on PlayStation that year, which led to the acquisition by [Electronic Arts].

I stopped programming in 1998 or 1999. When I left EA, I was overseeing all sports development for Peter Moore, who was heading up the sports label, and I headed up development across Vancouver and Orlando.

What was the attraction to Zynga?

Chiang: In 2009, when I was thinking of joining Zynga, we had FIFA Ultimate Team, which was a card-based microtransaction mode. It was a $10 mode you paid for, and then you had $1.50 card packs. We quickly saw the microtransaction part of it surpass the $10 for the mode. So you reduce the $10 to free to reduce the friction.

Microtransactions and free-to-play seemed like the future, for sure. The second aspect was time. Having an hour to sit down and play a game is not easy to come by when you have a family, so, as a person who loves games, the idea of playing games for five to 10 minutes with friends was really appealing. I saw myself reconnecting with people from high school, and I saw my parents playing with my kids. The only game my ex-wife will play is Words With Friends, except for SingStar, a karaoke game on PlayStation.

When you are creating a place where women, children and older parents are all playing, it’s an incredible feeling and experience. It’s like the first time I saw “Star Wars” in the movie theatre — that’s what we are creating for people. That’s what we are trying to create on a day-in and day-out basis.

I’ve spoken to people before about the initial draw of Zynga being that so many people end up playing your game, unlike a console title that has a limited audience.

Chiang: Absolutely, in entertainment, you want to make hits. When you are working on sports games year after year, it’s not super appealing. But the idea you get to work on a game played by millions of people? That’s great.

I mean, I always tell people, you spend the same amount of time on a game that gets canceled as one that is seen by millions of people.

Do you believe the definition of a social game is changing?

I do. It’s a moniker, like casual gaming. We label stuff, but essentially the business model is free-to-play, and gaming has always been social. I look at us as doing free-to-play games on multiplatform.

For a while, social equaled Facebook.

Yeah, that’s how I interpreted it, as well. But when you look at Words With Friends, that’s what a social game looks like, where you are interacting with a friend on a daily basis.

Zynga and Facebook just changed their contract language, which is less restrictive and will free you up to do more things, right?

Chiang: I think Facebook is a really valuable partner. We struck a new agreement, which enhances our partnership in some ways, and allows you to invest more in our platform and mobile.

Everyone talks about gaming as a hits-driven business. Is it possible to sustain that over the long term?

Chiang: I think we’ve seen companies like EA and Activision be able to sustain [that]. There’s aways peaks and valleys.

With social, it’s more about gaming as a service — it’s a TV model, if you will. We continue to put out new content every week, and on Facebook every single day. That keeps our players engaged. There’s games like Poker that have been around forever. There are certainly franchises. It’s not that different from a Call of Duty or a Madden Football, which has been going on for 15 years now. We have some of the same characteristics in Poker and Words With Friends.

Tell me about the story arc for Zynga’s Villes. How come some are not as successful as the ones in the past?

What we’ve seen is a few different things. We are seeing consumer tastes changing, and there’s a player movement toward mobile gaming. If you look at just a single platform, you’ll see a peak or a leveling-off of gaming on Facebook. But we are seeing growth on mobile. As we go multiplatform, we may have peaks and valleys on a single platform, but we’ll see overall growth.

That seems to be a platform issue, but is there something about Villes in particular that is no longer popular?

Chiang: When I look at FarmVille 2, it’s reengaging a lot of players, and is off to a great start. There’s an aspect of something new, and so players are saying, “Let’s try that.”

A game like Pokemon peaked at a $1 billion business, but over time, it’s still a big business and it has sustained. Traditionally, you’ll see a massive pop and then it will sustain. It’s a great business, and when we put out great content like FarmVille 2, our players respond and they engage.

Let’s go back to the cross-platform approach. Zynga is going after both Facebook and mobile, and has restructured its leadership team around that. How has your job changed?

Chiang: I took over all of the games business, so I have every game on mobile and Web, and just recently I reorganized around our players and genres.

We have some great leaders, and some of the most experienced in social gaming in the western world. We are going to run our “Invest and Express,” which are our Ville games. We have a new group in PVP (player versus player), which is focused on men 18 to 34.

Then we have our casino group, which is poker and male-skewing, and we have slots and bingo, which is focused on women. And then we have our mobile casual group, which is focused around some of our big franchises, like Draw Something and Words With Friends.

Some critics say that Zynga’s games are not fun. What do you say to that?

Chiang: I think when you look at a game like FarmVille 2 or Elite Slots, we are driving new innovation, and we are continuing to push innovation. At the same time, if we change too much, players complain. We saw it in sports games, and you see it in social gaming, you want a consistent feel and familiarity. You don’t want to redo everything.

Zynga is such a data-driven company, I’m curious what metrics do you look at every day, and which ones are most important?

Chiang: We look at the net promoter score, where we ask players to rate the game from one to 10. A nine to 10 is a promoter, and below a six is a detractor. We certainly look at overall how many people are playing and what our retention is, especially after launch, to check out retention after seven days to see which way it’s headed.

Why didn’t The Ville do well? Zynga announced it was cutting back on it as soon as it went live.

Chiang: I think with The Ville, the team made a great effort. But we did not deliver.

Our players didn’t respond to it as we would have expected. We hit a high DAU (daily active user), but they did not retain as well as some of our other games. We looked at all of that, and applied that to our future games. When you are going for hits, we’ll also have some failures.

Do you have a mantra, or a way to rally the troops right now that makes everyone believe you can create another hit? Something to inspire them? How do you manage the turnaround process?

For us, it’s about focus and getting back to basics. Our team across the board has delivered hits. We’ve had a number of great game makers who have been tied up with games, and now they are focused on new projects. We are reducing the number of games we are making, and focusing on a fewer with the highest potential in Invest and Express, player versus player and casino.

With many departures over the past few months, does Zynga still have the talent to make good games?

Chiang: Absolutely. We had a lot of people joining before the IPO, and some of those folks have opted out, but the bench is still really deep. We are also still attracting a lot of folks. Social is not for everyone, so some people came here to try something, but the future is really bright. We have a strong network of players on Facebook and mobile, and a number of great games in the pipeline that should be — and we’ll see how they do — but are going to be really fun and social.

Is there a message that you’d like to get out to people on Zynga’s game creation? Do you think there is an impression people have that you’d like to correct?

Chiang: I never thought about that. I firmly believe that we have a huge bright future and have the best position for talent, and in terms of our network and in terms of mobile and Facebook players to drive the biggest and best entertainment in the world. We are well-positioned that way, and hopefully you’ll see things in the future that will surprise and delight a lot of people.

Was it only just over a year ago that Zynga was the hottest game company on the planet?

Today — after seemingly endless executive departures (among the missing in action are the COO, CMO, CFO and the chief creative officer), a falloff in the popularity of its many games on the important Facebook platform, and a perpetually moribund stock price from a $9 billion valuation at its IPO in December of 2011 to $2 billion today — such a moment of glory seems but a very distant memory.

Now, in the wake of the crash, Zynga founder and CEO Mark Pincus is betting his dwindling chips on a trio of lieutenants to make things right: Steve Chiang, who is now president of games; David Ko, Zynga’s former chief mobile officer, who has been promoted to COO; and Barry Cottle, who was named chief revenue officer.

Establishing the three executives’ credibility and skill sets will be instrumental in regaining Wall Street’s confidence in the San Francisco gaming company, and perhaps reestablishing it as a growing and thriving concern.

So, can they do it? To find out, AllThingsD interviewed all three, as well as more than a dozen current and former co-workers of the managers, to get a handle on who they are and what roles they are playing in the company’s turnaround process.

Steve Chiang, president of games:

Chiang, 41, who is now leading all game development, has one of the toughest jobs at the company.

Zynga operates a hits-driven business, and must continue to make compelling games to draw in large audiences, something it has of late struggled to do.

One problem is that it has persisted in churning out its once powerful Ville-style games — FarmVille, CityVille, et al — while its competitors moved on to other genres, such as casino games and action-packed games aimed at males.

Those two new categories, as well as its original Ville genre, which it calls “Invest and Express,” will be at the top of the company’s priority list, in addition to developing across social and mobile.

In this, Chiang’s efforts are critical. But what has made this executive’s path at Zynga unusual was his rise, then fall —  and then rise again — within the corporate ranks.

Ahead of the IPO, Zynga was relentless in its efforts to build out a strong bench of C-level executives. One impressive hire was John Schappert, who came on board as chief operating officer to lead the company’s game strategy.

Schappert hailed from Electronic Arts, where he knew Chiang better than anyone else. Together, Chiang and Schappert co-founded Tiburon Entertainment, which was acquired by Electronic Arts in 1998, and continues to be responsible for hit games such as Madden NFL.

Chiang arrived at Zynga first, in March 2010, as EVP of Games. But when Schappert joined Zynga in April 2011, Chiang’s responsibilities naturally decreased as less work was left to go around.

Zynga’s former chief creative officer, Mike Verdu, who worked closely with Chiang, recalled the transition. “There was certainly a period, especially as other executives came in, that the weight of influence shifted away from Steve,” he said. “All of our roles changed a bit when John was there. He had a very different way of doing things, and when he left, there was a realignment of the organization.”

Schappert stepped down in August of 2012, one of the company’s highest-profile departures.

Because Schappert was the front man in the company’s IPO, the shy Chiang is not as well-known, despite having worked there for three years. His resume at the company includes releasing CityVille, which became the biggest game at the time. He also grew the company into a worldwide organization, adding studios across the U.S. and internationally. He pushed the company into new categories, such as arcade-style gaming and hidden objects. Recent credits include the launch of FarmVille 2, the company’s most recent hit.

Chiang spoke briefly and without a lot of actual detail about his time working with Schappert at Zynga. “He’s a personal friend of mine, and he brought a lot to the company, and we made some internal changes and he decided to move on,” he said.

Now, with the reins in Chiang’s hands, he says he will focus on developing games that appeal to a wide audience. To free up talent to work on new projects, the company is sunsetting 13 of its games, including PetVille, Mafia Wars 2 and Indiana Jones Adventure World.

“We’ve had a number of great game makers who have been tied up and now they are focused on new projects,” Chiang said. “We are reducing the number of games we are making, and focusing on fewer with the highest potential in Invest and Express, player versus player, and casino.”

Whether Chiang can pull it off remains to be seen. But one of Chiang’s direct reports — who declined to be named — said: “We aren’t all driven by money or fame. A lot of people are driven by pride. Steve internalizes that. He’s a champion for the game makers, but ultimately, for the players themselves.”

For more on Chiang, click here for an exclusive Q&A interview.

David Ko, chief operations officer:

There’s a long list of reasons why David Ko, 41, earned the promotion to chief operations officer. Over the past two years as chief mobile officer, the former Yahoo exec has overseen the release of 30 mobile games and closed two of Zynga’s largest acquisitions.

The first acquisition was Newtoy, which is known for the very popular Words With Friends mobile game. The second acquisition, of OMGPOP, was less successful. Immediately after Zynga purchased the company for $180 million in cash, its hit product, Draw Something, fell dramatically in the rankings, although it still accounts for the bulk of the company’s mobile users today.

That said, if mobile is critically important to the company’s future, then having Ko as the second in command was a clear message of its importance.

Ko is now second in command, with purview over 3,000 employees, as well as being the public face for the media and Wall Street. On Tuesday, in fact, he will make his first appearance on the company’s fourth-quarter earnings call.

He has a lot to learn, which is why Ko asked everyone to stand up and introduce themselves at a recent meeting of 130 managers. “It was interesting to go around the room and hear from people who had been there for four to five years, or for two months,” he said. “It was a great diversity of talent, and they came from all different backgrounds.”

Ko’s more inclusive management style is likely to be welcomed by employees, especially since Pincus is known for valuing data over people. “Mark [Pincus] misses that stuff at times,” one former employee said. “It’s a mercenary culture; he looked at people as fungible.”

But Ko’s fast ascent to COO is not sudden as it may look, say insiders.

“In spite of the fact that he looks like he is 12, he’s the adult in the room,” said a former co-worker of Ko’s, who knew him from his days at Yahoo. “That’s the irony.”

Prior to Zynga, Ko worked at Yahoo for a decade starting in 2000. He was based initially in Asia, where he ran the Silicon Valley Internet giant’s mobile business. In 2009, Ko then returned Yahoo’s headquarters as the SVP of mobile, but was quickly promoted amid much executive turmoil to be the North American audience head.

Ko said his non-gaming background is a plus, because he has extensive experience monetizing content.

“We have lots of people with all kinds of backgrounds in social or gaming, but what the company needs is about making sure the content is available to everyone and can be monetized in different ways, whether it’s advertising or user pay.” he said. “I have a lot of experience with this. Advertising is becoming a bigger piece of monetizing, and that’s one of my core competencies.”

In his first three months as COO, Ko said, he has made three priorities at the company: To create a sense of discipline, to make the company’s strategies clear and to have fun doing it.

The reality of it all, Ko said, is that he has spent most of his time on the first two: “I have to remind myself at times, we are still a games company. We do have to do some fun things.”

One time the whole company has fun is for an hour every Wednesday when Zynga staffers drop everything they are doing to play a game under development. It was a practice that the company used to do in the early days, and Pincus asked Ko to bring back. After the employees play, they then provide feedback on what they liked and didn’t like about the game.

“Ultimately, we are a games company, and we have to make sure that people find the games fun that we are going to launch,” Ko said.

Barry Cottle, chief revenue officer:

Barry Cottle, 51, is the newest to Zynga of the three top execs, having joined the company in January 2012 as EVP of corporate and business development.

Previously, he was head of EA Interactive, where he oversaw a group the size of Zynga, including the company’s social and mobile gaming divisions and its PopCap unit. As such, his departure was a particularly big blow to EA.

As chief revenue officer at Zynga, Cottle is now responsible for securing partnerships and advertising, plus he is responsible for sales operations and the company’s real-money gaming initiatives.

And also the care and maintenance of Zynga’s most significant relationship — with Facebook.

In November, Zynga and Facebook announced that the two companies had renegotiated their contract, which will make their partnership less complicated. It also provided some benefits to Zynga, such as the ability to launch games first for mobile. Cottle worked directly with Facebook’s Dan Rose on the new terms, unlike the original contract, which was negotiated directly between the two Marks: Mark Zuckerberg and Mark Pincus.

He also moved quickly on the company’s online gambling efforts by setting up a partnership with Bwin in the U.K., which will go live early this year, and also kicked off the years-long process of getting a real-money gaming license in the U.S., starting with Nevada.

The deals are a demonstration of just how eager Cottle is to drum up new revenue wherever he can.

In Cottle’s previous jobs, he had to be equally scrappy. He joined EA in 2007 to manage the company’s roughly $700 million acquisition of Jamdat, a mobile games company. At the time, mobile gaming consisted of developers making Java and Brew games.

But when the iPhone came out, Cottle took on the job of convincing his superiors that smartphones were the future.

One of his former reports at EA recalled that as soon as Cottle made the decision to develop five games for the iPhone’s App Store, “We were in the war room the next day and were moving resources to the iPhone.”

Prior to EA, Cottle co-founded a company called Mobile Digital Media. (The company, which was later renamed Quickoffice, was acquired by Google last year.) The entrepreneurial effort was a spinoff from Cottle’s days at Palm, where he was part of the executive team that took the company public. Earlier in his career, he was a Disney executive for 10 years, working on the company’s TV and Internet services.

In many ways, Cottle’s job at Zynga is similar to the one at EA. But instead of managing the move from feature phone to smartphone, this time he’s transitioning the company from social gaming to mobile gaming.

As part of that, one of Cottle’s biggest challenges will be finding a way for Zynga’s games to be discovered on mobile.

With Facebook, Zynga leveraged virality — friends invited friends to play, or discovered games through their news feeds. But mobile does not have the same dynamics, making distribution much more challenging. Last year, Cottle inked a deal directly with T-Mobile USA, which preloads some of Zynga’s games on to smartphones, and which is actually a throwback to when games were best distributed through the carriers.

Recognizing the pace at which the business is moving, Cottle said, “You have to be able to move fast and adapt and ensure that you bring your consumers with you. They’ll move from platform to platform; we just need to bring our franchises along with them.”

To accomplish this, Cottle has one key strength in his corner: A reputation for working as hard as it takes.

Zynga’s general counsel, Reggie Davis, who has known Cottle since they both worked at Hallmark Cards in Kansas City 25 years ago, said: “He’s Midwest like me. We got taught to show up early and to clean up afterwards — and if you do, you might get asked back. That’s totally Barry.”

In a statement, Zynga’s President of Games Steve Chiang confirmed the departure:

“Brian has a long history in the game industry and has been a great partner to the creative leaders at Zynga. I want to thank him for his leadership of the Zynga Baltimore studio in the design and development of FrontierVille, which brought many innovations to social gaming. We appreciate Brian’s contribution and we’re proud of the deep bench of creative leaders who are leading the next wave of game innovation at Zynga. We wish Brian the best in his next chapter.”

Reynold’s departure, which was first reported by Polygon, is particularly noteworthy since he was one of Zynga’s top gaming veterans.

When Reynolds joined Zynga nearly four years ago, he gave the company credibility in the gaming world — if someone who was known for being the lead designer on the hit Civilization II would join Zynga, then maybe building casual games on Facebook was a legitimate business.

Since joining Zynga, his work has included creating FrontierVille and CityVille 2. He also assisted with the launch of FarmVille 2 and ChefVille.

But the company’s creative team has undergone a lot of changes over the past few months.

When Chief Creative Officer Mike Verdu left in August, Reynolds was one of the game leaders who was expected to step up to fill his shoes, along with Tim LeTourneau and Bill Jackson. In November, Zynga promoted LeTourneau to replace Verdu.

With all the departures, the company is essentially playing a game of musical chairs, plugging each hole with talent from another part of the company when someone leaves. While it has had the depth to do that so far, the worry is that at some point its ranks will wear thin.

Reynolds has not said what he is doing next, but using the Twitter handle @ZyngaGameChief, he confirmed his departure: “Yes I’m officially leaving Zynga after 3 3/4 great years. Back soon… need to think of a new Twitter handle though!”

Shortly after, he updated his Twitter handle to @TheGameChief.

To be sure, the company’s stock price has not helped with retention.

Until recently, shares were trading around $2.40 a share, or about 80 percent below the company’s public offering. On Monday, shares soared 14 percent in anticipation of Facebook’s fourth-quarter earnings this afternoon. Today, shares are trading a little lower at $2.57 a share.

The game maker started off as a Facebook developer, but over the past year has moved aggressively into mobile gaming. It is known for building mid-core social games, including such hits as Kingdoms of Camelot and The Hobbit: Kingdoms of Middle-earth.

The San Francisco company said its gross revenue increased 70 percent year over year, and that it is now on a $200 million run rate.

In this case, the numbers are the equivilent of a public company’s bookings, Kabam said. That means the figures do not take into account the 30 percent cut that Kabam must pay to Facebook or Apple when items are purchased inside of games.

By releasing the numbers today, Kabam gets out in front of social gaming leader Zynga, which will report 2012 results next Tuesday. Despite Zynga’s recent challenges, it still is expecting to record bookings of up to $1.1 billion in 2012.

It is important to note, however, that Zynga’s bookings already take into account the 30 percent cut it pays to Facebook and others, which means the comparison is not exactly accurate. A better comparison would be Zynga’s 2012 gross revenues, which won’t be reported until next week.

“Kabam blew past its plan in 2012,” said Kabam’s co-founder and CEO Kevin Chou in a statement. “At this time last year we forecast 2012 revenue to grow by 30 to 40 percent. Because of our team’s focus on strategic growth across diverse game genres and platforms, including mobile and the Web, we exceeded our own expectations.”

Kabam attributed its rapid growth to diversifying beyond Facebook. At the end of 2011, nearly all of the company’s revenue was coming exclusively from the social network. Now, it also has games on iOS, Android and the Web. Additionally, it said seven of its games grossed more than $1 million a month in 2012.

Based on the company’s last fundraising in May 2011, it was valued privately at $500 million. The valuation would have been determined before Zynga went public, and before there was anything directly comparable on the public market, so it easily could have changed by now.

According to a report by Envision IP, an intellectual property research firm, Zynga has grown its holdings from a single patent and nine pending a year ago to roughly 89 U.S. patents and 36 pending today.

A Zynga representative declined to comment.

A quick search on the U.S. patent site reveals that Zynga owns at least 50 patents for everything from “finding friends for multi-user online games” to “changing virtual items based on location-based actions” and “harvest mechanics for interactive social games.”

Envision Managing Director Maulin Shah explains that another 38 or so patents have been reassigned to Zynga by a company named Walker Digital. Of those, he said, 33 patents relate to casino gaming and gambling technologies.

The patents reassigned to Zynga range from technology that allows users to place wagers, to team play within a casino slot club, to making payouts based on predefined rules. Another five had to do with audio streaming.

Shah said a significant ramp-up in patent holdings can be normal, especially if a company is trying to expand into a new business line. “They probably found it prudent to get some patents before they entered the online gambling space,” he said.

To be sure, Zynga is serious about moving into real-money gaming from its core business of selling virtual goods on Facebook.

Last month, it launched two landing pages in the U.K. that will eventually become the home to 180 casino games, including slots, roulette and blackjack. Additionally, Zynga’s FarmVille brand is expected to be used for one of the slot games. It also began the arduous process of seeking a license in Nevada to conduct real-money gaming online. The process could take close to two years — in just one state.

The acquisition of licenses from Walker Digital is the most interesting part of this story.

In August, The Wall Street Journal reported that Walker Digital had filed about 30 lawsuits targeting hundreds of companies, including Amazon.com, Google and Zynga. Walker Digital, which is owned by Jay Walker, the founder of Priceline.com, is known for enforcing patents opportunistically (a.k.a. patent trolling).

Shah said on March 26 that the case was dismissed, just four days after Walker Digital reassigned the 33 patents to Zynga. However, the patent at issue in the lawsuit was not one of the ones reassigned.

It is completely unclear if those events are connected, or how much Zynga paid for the patents (if anything). But Zynga’s not talking. We also sent an email to Walker Digital, but did not hear back immediately. If we do, we’ll be sure to provide an update.

Sterne Agee analyst Arvind Bhatia downgraded the company’s shares from “buy” to “neutral,” calling the Street’s estimates “overly optimistic.”

Bhatia is concerned about the company’s performance when it came to its big console game titles of the year. But Electronic Arts is increasingly offsetting its declines in the traditional packaged goods market through the sale of digital content.

But will digital will be able to generate enough revenue this time to make up for its poor-performing console games?

In a note to investors, Bhatia said that he believes EA should have lowered full-year guidance “following disappointing early performance of Medal of Honor Warfighter and the cancellation of NBA Live in October of last year.”

This morning, EA’s shares were down 3.6 percent, or 52 cents a share, to trade at $13.93. Yesterday, after the note went out, shares fell 2.9 percent. The videogame publisher is still trading way below its 52-week high of $20.64, but is still above its low of $10.77 a share.

Electronic Arts’ guidance for third-quarter earnings per share was 50 cents to 60 cents, which at the time, was well below consensus estimates of 71 cents (excluding some items). For non-GAAP revenue, it guided $1.25 billion to $1.35 billion, which was lower than the consensus estimate of $1.38 billion. For the full year, Bhatia is now projecting revenue of $3.87 billion, which is 5 percent below consensus and 6 percent below the midpoint of management’s guidance range of $4.05 billion to $4.25 billion.

Bhatia figures that the company will have a tough time matching its 2012 performance, which saw strong sales from the first-person shooter Battlefield 3.

He estimates that Battlefield 3 sold 13 million units; in comparison, Medal of Honor Warfighter has shipped roughly three million units, creating a 10 million unit gap, which pencils out to $500 million. In addition, EA’s title slate in 2013 was smaller, with only 14 titles, compared to 2012, when it shipped 22 titles. By his estimate, that creates another $200 million hole.

However, EA continues to talk about how digital revenue is more than making up for the drop it is seeing from packaged-good sales.

In the second quarter, it reported that digital revenue was 40 percent higher year over year.

For instance, the FIFA soccer game generated more than $115 million in digital revenue in the first half of 2013, and Battlefield 3’s premium service has sold more than two million subscriptions to date (all of that revenue will be recorded in the fourth quarter). Additionally, the company’s Simpsons game on iOS, called Tapped Out, has been the top-grossing game for the past four weeks.

While digital revenue is up, the company is not as bullish on Facebook as it once was, and is scaling back its investments in the platform. In addition to developing fewer games for Facebook this year, EA also started shutting down underperformers such as World Series Superstars, EA Sports PGA Tour Golf Challenge, Monopoly Millionaires and Age of Immortals.

Similarly, social games leader Zynga recently said it would shutter 13 titles.

EA’s CFO Blake Jorgensen told AllThingsD last quarter that the company believes social will be key for games going forward, but not necessarily as an individual platform. “I would say that, overall, digital is growing the fastest, and within digital, it’s the mobile business that’s growing the fastest,” he said. “Clearly, mobile is up dramatically, and it’s no surprise — it’s driven by smartphones, tablets.”

The social games maker, which started losing ground earlier last year, had previously earmarked 13 undisclosed games for closure. Last week, TechCrunch identified 11 games which were either already shut down or close to it.

Some of the titles include PetVille, Mafia Wars 2, ForestVille, Vampire Wars and Indiana Jones Adventure World. A Zynga spokeswoman declined to comment, but when you try to visit the games on Facebook, there’s a message redirecting players to check out some of Zynga’s other games, like CastleVille, ChefVille, FarmVille 2, Mafia Wars and YoVille.

There’s a reason why these games eventually must be put to sleep.

The mechanics simply don’t work anymore if a lot of people aren’t playing them — after all, they are social games. If friends aren’t around to tend to your crops or visit your pet when you are away for too long, the games simply break down.

Having a large enough base of players to continue momentum is a problem that extends to other game publishers, too.

For instance, Electronic Arts has a Web page where it lists a running tally of games and services it has either shut down or plans to close. Some Facebook games that have already been cut include World Series Superstars, as of Dec. 31; EA Sports PGA Tour Golf Challenge, on Oct. 25; and others, like Monopoly Millionaires and Age of Immortals.

But as more games become services and are played against other people, instead of computers, other services are being shut down on game consoles, mobile phones and the PC. In January, EA said, it plans to shut down a myriad of services, like FIFA Soccer 11 Ultimate Team for PlayStation 3 and Xbox, and Madden NFL 11 for all three major consoles.

On Zynga’s chopping block, the most popular game is PetVille, which continues to attract a million users every month and 60,000 users daily.

The others are significantly less popular, such as Mafia Wars 2, which has as few as 200,000 monthly and 10,000 daily visitors, according to App Data. Compared to its top-performing titles, like FarmVille 2, which gets 43.5 million monthly and 8.1 million daily users, that’s clearly not very many well-loved pets.

At least two more games are to be discontinued, and that likely doesn’t include other titles that are flagged as underperformers. For instance, Zynga also said that it was no longer investing in The Ville, which performed poorly shortly after the game’s launch in June.

As part of the cost-cutting measures, the San Francisco company also reduced headcount by 5 percent, including some of the developers in Austin who were working on The Ville.

The company’s stock did not respond favorably to the plan, and continues to trade at $2.36 a share, down from a high of nearly $16 over the past year.

Perhaps it’s because investors don’t just want to see how it can cut costs, but how it can generate new streams of revenue. In other words, can Zynga can innovate in new areas that span beyond the ’Ville genre and Facebook? A new hit is what the company has been sorely lacking for the better part of 2012.

By freeing up resources, it at least has a chance.

About halfway through 2012, Zynga started prioritizing new game categories, like mid-core gaming and the casino genre. For instance, in mid-December, it launched Elite Slots on Facebook.

Electronic Arts is also clearly deciding where best to spend its resources, and Facebook is not a favorite. As part of its earnings call in October, it disclosed that the number of people actively playing its games on Facebook dropped by more than half in the past year. Therefore, it was reducing the number of Facebook games it was building this year.

Zynga Plus Poker and Zynga Plus Casino are both viewable in the U.S., but once it goes live, players will have to be located in the U.K. and over the age of 18 to legally play.

Right now, the sites are being used primarily as a marketing tool to get the word out and to start collecting email addresses ahead of the official launch.

A Zynga spokeswoman declined to comment.

One thing that’s noticeable is how much social is being emphasized. The tag lines for the respective sites are “Casino For The People” and “Poker For The People.”

Today’s launch shows that Zynga is making at least some progress on its promise of expanding into online games where players can win and lose real money, from its core business of selling virtual goods on Facebook. Both sites say that the games will go live in early 2013, which lines up with what Zynga’s CEO Mark Pincus had previously promised.

In October, the San Francisco company announced an exclusive partnership with bwin.party, which enables it to launch a real-money gaming site in the U.K. The casino site is expected to launch with 180 games, including slots, roulette and blackjack. Additionally, Zynga’s FarmVille brand is expected to be used for one of the slot games.

For now, Zynga’s casino ambitions will have to be limited to markets where gambling has been legalized. It has filed an “Application for a Preliminary Finding of Suitability” in Nevada, but the process could take up to 18 months. If Zynga is found suitable, a license could take another two to three months. Even then, it still would only be allowed to operate online in one state.

During its last conference call, Zynga declined to say how much revenue the real-money gaming sites could generate, but based on the company’s current stock price, it seems investors are being cautious. Zynga’s shares fell 5 cents, or two percent, today to $2.33 a share.

The event looks like a pretty big deal, judging by the invitation alone. The thick card stock features a hologram flipping back-and-forth between the Disney Infinity logo and a 3-D view of the Magic Kingdom.

You can also tell it’s important based on the speakers. Presentations will be made by both John Pleasants, the co-president of Disney Interactive, and John Lasseter, the chief creative officer of the Walt Disney and Pixar Animation Studios. Lasseter is also the principal creative adviser for Walt Disney Imagineering.

The event will take place in Hollywood, Calif., at El Capitan Theatre, a fully restored 1926 movie house owned by the Walt Disney Company.

The unveiling of Infinity could be tied to an unannounced gaming initiative code-named “Toy Box.” Very few details are known about the secret project, but according to the New York Times, Toy Box is a console game that has “extensive mobile and online applications in which various Pixar and Disney characters will interact with one another for the first time.”

For years, Disney has aspired to do something big in the gaming space. But despite making several large investments, it has failed to gain much traction. Those investments include six console-based development studios, and in 2010, it purchased its way into social gaming with the $563 million Playdom acquisition. It also owns and manages a virtual world for children, called Club Penguin. More recently, it has been pushing into the free-to-play market around the world through smaller acquisitions and partnerships.

Despite some successes, especially on mobile with hits like Where’s My Water?, the Interactive division continues to drag down earnings. During the fiscal fourth quarter ended Sept. 29, interactive revenue for the year decreased 14 percent to $845 million, and the unit reported a loss of of $216 million.

Today, Zynga is announcing that it will soon launch its newest casino title, Elite Slots, on Facebook.

The game will be the company’s third title in the casino genre, following poker and bingo. It is critically important for Zynga to do well with this game, given that there is already a healthy audience that enjoys spinning the wheels for a chance to win virtual currency on Facebook.

Of course, this has nothing to do with Zynga’s plans to generate big money online through real-money gaming. Those efforts are still a year or more away, so in the meantime, getting a base of free-to-play players should help its prospects when the time comes to add real online gambling.

Over the past two years, the casino genre has been quietly racking up significant interest on Facebook.

Zynga has been phenomenally successful with its poker game, which attracts more than six million people a day on the social network, but other companies have dominated the broader casino sector, which includes games like bingo and slots.

In January, International Game Technology, which makes games found on casino floors, acquired Seattle-based Double Down Interactive for up to $500 million. Prior to the acquisition, AllThingsD reported Double Down was generating $140,000 a day in revenue at the end of 2011. Caesars Entertainment also entered the space when it purchased Playtika, an Israeli game company known for its Facebook title, Slotomania. And on mobile, Bash Gaming is on track to gross $55 million on its one bingo game this year.

While that may pale in comparison to the money that casinos make, it shows there’s an appetite for players to have the same experience online, even if there’s no chance at winning real money.

Zynga previously launched a slots game on mobile, but the one launching soon on Facebook will be completely different, with more game elements.

“There’s already a slots audience out there, but for people who don’t like slots, it’s normally not deep enough,” said Jesse Janosov, a general manager at Zynga.

To get a sense of how Zynga added depth to a game that doesn’t generally require much skill, I got a thorough demonstration of Elite Slots from Nathan Ratcliffe, the design director for the game, who works out of the company’s Austin studio.

Slots on Facebook are very similar to what you see in Las Vegas. You place your bet, choose the number of lines you want to play and then spin the wheels. Facebook games usually give players a number of free coins a day with the option of buying more.

In that regard, Zynga’s game is no different — it provides all of the basics that a slot player will be looking for. But it also offers a couple of side games, which players can either choose to participate in or ignore.

The game is played simultaneously with 150 people in a room who are not necessarily friends, but can chat and share goals. Together, the players rack up points to hit certain targets to fight a boss. In a fairyland setting, that might be a witch, but in a winter wonderland, it could be an abominable snowman. Players choose their avatars for the fight, anything from a white owl to a chihuahua or a cute bulldog.

Ratcliffe says the game will launch with six different themes, with all hand-drawn original artwork. The game also has 50 minutes of original music to replicate all the normal sounds heard on a casino floor.

While slots is all luck rather than skill, there is some strategy to this game. For instance, picking the bulldog over the chihuahua will allow you to progress faster to the goal, and the more you bet, the more you will win, which will give you more strength in fighting the boss. It’s important to note that “fighting” doesn’t entail any weapons or special game skill. It just requires players to continue spinning the wheels — each win results in an attack on the boss; the spins eventually take their toll and kill him.

Ratcliffe said the strategy elements were borrowed from Blizzard’s World of Warcraft, while the avatar components were copied directly from Zynga’s popular Ville games, where expression and collecting items is popular. It’s the combination of the two that they are hoping will attract a wide audience from the existing poker base to its Ville players to new players who are playing slots elsewhere.

Zynga’s Elite Slots is an important game launch for the company since players have grown tired of the mechanics of its other games. Plus, Janosov estimates that slots makes up 80 percent of the casino genre, so while Zynga has dominated poker, it still has a way to go in the other categories.

The game falls nicely into the trend of bringing casino games to new platforms using the free-to-play model. Players purchase virtual coins in order to play, but since they can’t ever cash out their winnings, it is not considered gambling.

Arguably, one could say that Zynga is the leader in casino space based on its Poker game, which has consistently remained at the top of the charts on both mobile and Facebook for years. But its following titles, such as Bingo, have not been as successful. For example, as part of the social game company’s layoffs in October, it cut back on that game’s development.

CEO Sumit Gupta believes Bash Gaming was successful by focusing on one game, which moved from Facebook to iOS nine months ago and more recently to Android. Today, most of its traffic comes from mobile devices.

“We believe the casino games, in general, have a very strong game mechanic. Once they start playing, they want to play more and more, and with the ability to play with friends, it makes it more exciting,” he said. “Players get a certain amount of free chips, and then they start buying those chips, and play more.”

Today, the game remains in the top 20 best grossing apps on iOS, and has at times been in the top five. Gupta said that 95 percent of its users — who are mostly women — play the game for free. The few players who do spend clearly spend a lot. Two of the most popular chip packages are 100 for $8 and 200 for $16. The company’s annual run rate of $55 million does not include the 30 percent cut it must hand over to Apple.

Based on the success of the game, Gupta said, the San Francisco-based company plans to invest in more casino titles under the Bash brand. Currently, the company has roughly 55 employees, a majority of whom are based in India. He expects the company’s headcount to double over the next year. The company, which is profitable, has only raised $1.2 million in financing.

To help ramp up game production, Bash Gaming hired Sean Eyen as VP of Global Gaming. Previously, Eyen worked at Caesars Entertainment, Liberty Media and Wagerworks before establishing his own consulting firm focused on the regulated casino and lottery industries.

Earlier this week, Zynga announced it had officially started the process of getting licensed in the U.S. for real-money gaming, and it previously inked a partnership with bwin in the U.K. Gupta said Bash is investigating the real-money space as well. “We are very focused on what we are doing today. This is a very exciting space, and dealing with real money is a green field opportunity, especially in Europe, where it’s legal. That excites us.”

The San Francisco social games company said today that it has filed an “Application for a Preliminary Finding of Suitability” in Nevada. The process, conducted by the state’s gaming control board, could take up to 18 months. If Zynga is found suitable, it could apply for a license, which could take another two to three months.

“Zynga has filed its Application for a Preliminary Finding of Suitability from the Nevada Gaming Control Board. This filing continues our strategic effort to enter regulated RMG (real-money gaming) markets in a prudent way,” said the company’s Chief Revenue Officer Barry Cottle, in a statement. “As we’ve said previously, the broader U.S. market is an opportunity that’s further out on the horizon based on legislative developments, but we are preparing for a regulated market.”

The company, which has been clear for awhile about its intention to enter the real-money gaming space, also recently partnered with bwin.party in the U.K. to roll out its first real-money gaming experiences in the first half of 2013.

Online gambling in the U.S. is still very much in the air. Last year, the Department of Justice ruled that online gambling is legal under federal law, but now it’s up to every state to pass legislation outlining operating procedures. Nevada and the District of Columbia moved quickly to enact laws, but clearly it will take time for every state to get a law passed, unless the federal government steps in with a national policy.

The policies, which were announced back in August, send a clear message to developers that, going forward, Facebook.com is the only place to play social games online.

Over the past few months, the social network has been working hard at wooing game developers, including hosting a sushi dinner with some of its top publishers. It also created a lot of goodwill last week when it signed a new agreement with Zynga that takes away some of the social game company’s special privileges. But the changes taking place today are more of a strong-arm tactic designed to ensure that game developers stay on their platform.

The new terms will only affect a small number of game developers, and interestingly, one of the companies that will be hardest hit is Zynga.

Here’s the deal: Starting today, game developers will be prohibited from accessing Facebook’s open graph on other platforms. For instance, if a game player has elected to log in using his or her Facebook credentials, developers won’t be able to access that person’s friend list. However, game developers will be able to continue publishing news items to a Facebook user’s stream.

Facebook spokeswoman Malorie Lucich said very few developers were using the provision anyway. “The majority of online social game activity is happening on Facebook.com and with Facebook on mobile platforms, and not on desktop Web sites,” she said. “As a result, we are putting our resources toward canvas [Facebook on the Web] and mobile gaming, where the most demand is.”

In a second provision, the social network is clamping down on the ability of developers to use Facebook.com to drive traffic to external Web sites. For example, when a person searches for a game on Facebook.com or gets an invitation from a friend, he or she can no longer be taken off the site. The exact wording of the provisions can be viewed here.

Clearly, these two steps keep developers focused on building for the Facebook canvas and not for other sites. It’s also worth noting that these new provisions only apply to games, which is how Facebook makes most of its revenue from payments. The provisions will not apply to other companies that have also integrated the open graph into their services. For example, if you log in to TripAdvisor with your Facebook credentials, you can see hotel reviews that your friends have written. A social commerce company like Wrapp, which allows you to send gifts to your friends, has done a similar integration with its mobile app.

Zynga will be affected most by these new provisions since it has worked the hardest at building out a standalone game network at Zynga.com. Zynga allows players coming to its site to log in using their Facebook credentials. Once signed in, Zynga asks players to invite their friends to play and frequently prompts players to send gifts to friends or to ask for help. Based on the changes being made today, Zynga will no longer be able to tap into a person’s friend graph, and instead will need to build up a network of gamers independently.

Facebook confirmed that Zynga will have more time to make the changes on Zynga.com “in order to ensure a smooth transition,” given that the ink is still drying on the contract the two companies signed last week.

Before last week, Zynga would have been exempt from these new provisions. Under the previous terms, Zynga had agreed to use Facebook payments on Zynga.com, which would give the social network 30 percent of all of its revenue. Facebook also was granted the option of handling all the Web site’s advertising. Now Zynga will have a lot more financial flexibility, but it will also now have to comply with the new terms like every other developer.