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.

According to Flurry, which gives developers tools to track consumer behavior, the most prolific business model is the free-to-play scenario, where consumers download the game for free and then pay for virtual goods or currency inside the application.

It says the most successful companies that understand this include Electronics Arts, Zynga, Mobage and Supercell.

In the report, Flurry’s Senior Director of Business Development Dan Laughlin examines consumer behavior, retention and demographics for the top nine most popular gaming genres. For this analysis, Flurry looked at more than 300 million consumers using iOS and Android games over a 90-day period. It only studied free titles, and then lumped them into four main categories based on their earning characteristics.

“The free-to-play business model (a.k.a. freemium), where consumers download and play the ‘core loop’ of a game for free, but then pay for virtual goods and currency through micro-transactions, is the most prolific business model in the new era of digital distribution,” he concludes.

For developers, the more important thing to know is what kinds of games are better at retaining customers and monetizing over the long-term. Here are the four profiles that Flurry says exist in gaming:

1. These games are used frequently for a long time, including slots, turn-based games that are passed between two people and simulation games. From a revenue perspective, the most successful companies maximize revenue through in-app purchases and by displaying ads to those who are not willing to pay.
2. Strategy games are the only genre that are played intensely for a short period of time. Game life cycles are short, and Flurry says the game’s live services must be executed flawlessly. Companies that monetize well encourage players to spend money on continuing their progress through the game.
3. The third profile is defined by infrequent game play for a short period of time, meaning that developers have fewer opportunities every week to monetize the user. The kind of gaming that falls into this bucket is defined as the “Card-Battle genre,” which is mostly popular in Asia, and has now started showing up in the U.S.
4. The final category are games that are easy to pick up and play, and may be enjoyed for years, such as solitaire. However, according to Flurry, the evergreen titles “may lack the depth required to generate sizable in-app purchases.” Instead, it’s better to focus on advertising impressions. The games can also be good for keeping a strong core audience that can be used to promote more apps to.

Last week, Facebook let its longtime dominant gaming partner Zynga out of a long-term contract that will allow the game developer more freedom to create games for other platforms. In turn, it levels the playing field for other developers, and should go a long way toward eliminating the fears of anyone on the platform getting special treatment.

That wooing has apparently included a dinner that Mark Zuckerberg recently hosted for the top brass in social gaming. Also present was Facebook games boss Sean Ryan.

The gathering included some of the top five to 10 social game companies on the platform, such as King.com, Kixeye, Disney’s Playdom, Electronic Arts and Kabam, and was held at the Fuki Sushi restaurant at Facebook’s new Silicon Valley headquarters. Facebook’s largest partner, Zynga, was not present, which is not particularly surprising for a partner it meets with essentially every week. Bloomberg also reported some details about the dinner last week.

A wide range of subjects was on the menu, sources said, with a lot of proposals and ideas floated. Developers did much of the talking, attendees said, with Zuckerberg and Ryan listening but making no promises.

One of the highlights was a discussion about new ways of monetizing games, including different revenue shares. Currently, Facebook charges 30 percent for virtual goods sold inside of games, just like Apple and Google. One idea was to have a sliding scale, so that developers just getting started on the platform would pay a lower rate, while the Zyngas of the world would continue to pay full price.

In other words, game developers would be taxed based on volume versus a flat fee, no matter how popular the game was. Likewise, the game execs argued that the rate structure would provide additional incentive to Facebook to market up-and-coming games.

A Facebook spokesperson was not immediately available for comment, but sources close to the company said that Facebook has no immediate plans to change the revenue share agreement for payments.

But the idea is not so far-fetched, given that most of Facebook’s payment revenue today is coming from a small percentage of large players. Specifically, Zynga contributed seven percent of the company’s Q3 payments revenue, down from 10 percent in Q2. Following that earnings report, Zuckerberg acknowledged: “Gaming on Facebook isn’t doing as well as I’d like.”

One thing Facebook could potentially do is build its own social games, which is now allowed, according to the contract it just signed with Zynga.

However, that idea was immediately shot down by a Facebook spokesperson: “We’re not in the business of building games, and we have no plans to do so. We’re focused on being the platform where games and apps are built.”

If Facebook is truly worried that a lot of its developers are ditching the social network for greener fields on Apple’s iOS or Google Play — and a lot of them are — then the dinner meeting was likely just the beginning.

Game makers are recognizing that advertising is a potentially lucrative way to monetize the vast majority of customers who will never be willing to pay.

Last month, I reported that Zynga is close to launching a homegrown advertising platform that it will eventually make available to third-party developers. Now, the second-largest game maker on Facebook says it is also hitting up Madison Avenue.

King.com, which is headquartered in London, plans to announce today that it has hired Charity Sabater as its senior director of ad sales. Sabater will operate out of New York City, and will have a focus on brand sales in the U.S. Prior to joining King, Sabater was the VP of East Coast sales for Gaia Online, an online gaming site.

King said that advertising revenue from its social games has increased tenfold over the past year, and now accounts for nearly 15 percent of the company’s overall revenue. During a recent quarter, Zynga’s advertising revenue accounted for slightly less — about 12 percent of its revenue — for a total of $41 million.

King said two of the primary ad units that are attracting the most interest right now include incentivized videos and something it calls “Brand as a Friend.” Incentivized videos allow a user to watch a 15- to 30-second commercial in exchange for earning an additional life in the game. King said those ads generate an average click-through rate of more than 5 percent, and a video completion rate of 85 percent. The “Brand as a Friend” campaign allows players to “friend” brands to help them unlock new content in the game.

Some of its recent ad campaigns include such brands as T-Mobile, Samsung, Procter & Gamble, Macy’s and Nestle.

For Zynga, which has struggled to develop a new hit game recently, the strategy has two aims. Obviously, it wants to generate more ad revenue. But, just as important, it wants to give game developers a reason to work with its CEO and founder, Mark Pincus.

Multiple sources familiar with the company’s plans say the platform is still under development, but some of the components could launch by the end of the year. It may not be available to third-party developers immediately. A Zynga spokesman declined to comment.

Up until now, the social game maker has been slow to adopt advertising, opting instead to rely on the sale of virtual goods for the bulk of its revenue.

The advertising efforts will be a part of its push into third-party publishing and will be used as another way to attract developers looking for a complete package when it comes to bringing games to market. Sources said the initiative is being headed up by the company’s long-time CTO, Cadir Lee, who has also been in charge of other major platform projects, including the build-out of its own cloud network.

Over the past year, Zynga has been slowly ramping up its advertising efforts. Recently, it announced a deal where Words With Friends players were rewarded for using Honda-related words on their game board. Another example: A virtual State Farm blimp that players used in FarmVille to revive crops.

Last quarter, ads generated $41 million for Zynga. That’s up 170 percent year over year, and represents 12 percent of the company’s overall revenue.

The spike in advertising over the past year likely has a lot to do with the acquisition of OMGPOP, which was generating massive amounts of ad inventory at the peak of its hit game Draw Something.

But it’s not enough. Earlier this month, Zynga updated its full-year guidance, saying that revenue will fall below previous expectations for the second time this year. Zynga will report final results for the third quarter on Wednesday.

So, what could a Zynga-built advertising platform look like?

The platform could enable the company to expand beyond brand integrations and sponsorships into more lightweight experiences, including banner ads, interstitials, video pre-rolls and incentivized downloads. While it will span both Facebook and mobile, it will likely focus more on mobile games, since Zynga has repeated over and over again that they don’t bring in as much revenue as its social games.

To bolster its efforts in the space, back in April Zynga hired Julie Shumaker (formerly of RockYou and Electronic Arts) to be the VP of global ad sales. Since then, sources say, Zynga has hired a few more direct ad sales employees, and lists several more job openings on its Web site, including roles for sales managers and directors.

It is not entirely clear why Zynga is choosing to compete with so many ad platforms that already exist today, but according to sources, there are a few benefits that may outweigh the costs.

For starters, it will keep more of the revenue that way, without having to work with a middleman — important for a company that has been forced to give 30 percent of its virtual-goods revenue to Facebook.

Another theory is that Zynga wants to ensure that it owns all of its own data. Zynga has an incredibly large audience — roughly 300 million monthly active users — and a lot of rich information about them in terms of their behaviors and their social graph.

While most of the attention last week was focused on Amazon’s new lineup of Kindle devices, this new feature will be critically important as the retailer lures developers to its platform.

By enabling developers to sell physical goods inside of games, it will not only open up a new way for them to monetize their applications, but it will also be a key point of differentiation for Amazon in going up against Apple and Google, which don’t have physical distribution capabilities.

Amazon said its first partner is Activision, which will be selling toys inside of Skylanders, its very popular children’s game.

Over the past two months, the company has made several announcements in the videogame space, signaling its move beyond music, video and e-books in the digital content arena.

Yesterday, it went a step further by announcing the creation of Amazon Game Studios and launching Living Classics, its first free-to-play game on Facebook. Next up, expect Amazon to create mobile games to leverage its current and upcoming line of Kindle tablets.

Living Classics on Facebook is a take on the hidden objects genre on the platform, where users must find a handful of items obscured in a painting. In this game genre, which Amazon calls “moving objects,” users must quickly find all the illustrations that are moving on the screen. As part of the game, you must also find several foxes who have wandered off to explore their favorite books. Amazon makes money from charging for coins that allow the player to advance more quickly through the game.

The timing of Amazon’s entrance into social gaming is odd.

Facebook’s insanely fast growth period is over, and even dominant players, like Zynga, are struggling. But clearly the company, which has no prior experience in developing games, had to start somewhere. And with 8.3 million “Likes” on Facebook, it’s probably hoping to gain a big audience quickly.

By launching its own games, it will also give the company first-hand knowledge in how to build a platform that really works for developers.

Ever since the Kindle Fire launched, game developers have been satisfied with how well their games monetize on the device, saying that it often outperforms Google Play on Android, although it falls short of Apple’s iOS. Part of Amazon’s success is that it already has a consumer’s credit card on file, making it easy for them to buy an e-book one day and a virtual item the next.

Last month, Amazon launched GameCircle, which allows gamers on the Kindle Fire to record and track their achievements and to save their game progress to the cloud — similar to features found in Apple’s Game Center. Plus, it launched Game Connect, an e-commerce distribution system that lets customers discover and download free-to-play PC games. Amazon is also handling some of the back-end features for the developers, such as selling virtual goods and subscriptions.

In an announcement released yesterday, Amazon wrote, “Why is Amazon making social games, you ask? Good question! We know that many Amazon customers enjoy playing games — including free-to-play social games — and thanks to Amazon’s know-how, we believe we can deliver a great, accessible gaming experience that gamers and our customers can play any time.”

The company’s Game Studios has employees in both Seattle and San Francisco, and is hiring in Seattle, according to a spokeswoman.

With the prospect of launching even more tablets, which are competing head-to-head with Apple’s iPad, having exclusive content on the devices also helps.

When asked for more information on why Amazon is interested in gaming, a company spokeswoman provided a vague statement about delighting customers and the company’s ability to deliver a great, accessible and fun gaming experience. She also said to stay tuned for even more games, but provided no details on where those games will land. But it’s safe to say they will be on both Facebook and mobile in the future.

Here’s a trailer for the game:

Companies normally get a lift when they exceed estimates, but in this case, investor confidence has been so low that some think a meet will be enough to change the tide.

“We expect Zynga to deliver in-line 2Q bookings, which we think is enough to move the stock higher given sentiment in the name remains weak,” according to a note sent on Monday by J.P. Morgan analysts.

Yesterday, Zynga’s stock closed at $5.09 a share, up 6 percent for the day, but down 63 percent over the past four months.

For the second quarter, analysts are estimating bookings of $345 million and non-GAAP earnings per share of six cents a share, representing little to no growth over the previous quarter, when it reported a profit of six cents a share, excluding some items, on bookings of $329 million.

Bookings are what Zynga actually sells in the quarter versus revenue, which is amortized over multiple quarters. It reports these two figures because virtual goods are perceived as having a long shelf life. Bookings are often considered a better measure for how the company did during the immediate period.

Over the past five years, the company has become the largest game maker on Facebook, attracting 292 million users in 175 countries, based on producing hit games such as FarmVille, CityVille and Words With Friends. But as Facebook’s growth has plateaued (which has also been a problem for its own stock), investors have become concerned that Zynga won’t be able to keep accelerating as fast as it once did.

Last month, the company revealed its upcoming plans at Unleashed, which included the announcement of new games such as The Ville and FarmVille 2, a sequel to one of its most popular games. It also talked about its strategy for becoming a publisher of third-party game titles across both Facebook and mobile, but generally, it wasn’t enough to get investors excited enough to buy.

Since then, the company’s CEO Mark Pincus has been eager to talk about the company’s goal of achieving one billion people playing its games.

Last quarter, Zynga warned that it expects slower sequential growth in the first half of the year, with most of its growth weighted toward the second half.  For the full year, Zynga is projecting non-GAAP earnings of 23 cents to 29 cents a share on bookings in the range of $1.4 billion to $1.5 billion. Tomorrow, analysts will be looking closely to see if those projections have changed.

J.P. Morgan suggested that concerns over the company’s growth rates are overblown, and is slightly more bullish than the consensus. Based on information from AppData, which tracks the popularity of apps on Facebook, J.P. Morgan says that the number of people playing Zynga’s games on a daily basis has increased 2 percent quarter over quarter. Additionally, it noted that data only paints one piece of the picture, because AppData doesn’t take into account how many users come from mobile, and that mobile accounted for one-third of Zynga’s total daily users last quarter.

One concern that multiple analysts mentioned was Zynga’s staggered lock-up expirations. Since going public, the number of shares available to trade has increased to 600 million from 100 million, and by mid-August, the so-called float should jump to around 800 million shares. More shares will mean having to please even more investors.

ZNGA data by YCharts

You may notice something different while goofing off at work playing FarmVille this morning: The first Facebook ads are appearing on Zynga.com’s in-game pages, marking the first time ever that the social giant’s ads have shown up on a Web site outside of its own.

But more significantly, it’s also the first sign of a Facebook advertising network, one that extends beyond Facebook’s own site and across the Internet at large. It’s the same thing Google has done for years, and a long-expected next step for Facebook in its longer-term advertising strategy — one that has come under fire lately for being ineffective and lacking relevance.

As for the new ads, which were first noticed by Inside Facebook, Facebook confirmed their existence, though it’s not clear whether or not the ads are appearing across all of Zynga’s games. And Facebook was quick to reassert its stance on privacy: “We don’t share any information about people or advertisers with Zynga and advertisers do not have any new targeting criteria,” a Facebook spokeswoman told me in an emailed statement.

It’s not wholly unexpected. In Zynga’s S-1 filing last July, the company noted the possibility of a revenue sharing agreement where Facebook’s ads appear on Zynga properties. The new ads will indeed include a rev share, though we don’t know the exact amount (that part was redacted from Zynga’s S-1, unfortunately).

The timing is peculiar. Earlier this week, Facebook killed Credits, the company’s proprietary virtual currency of the past year and a half. The extra layer of Credits meant extra friction for users, which often results in decreased spending. And that’s obviously bad for companies like Zynga.

So it’s possible that in the constant push and pull between Facebook and game makers, Facebook made the Credits concession while Zynga swung open the door to Facebook running ads on Zynga.com.

For what it’s worth, Facebook flatly denies my theory: “The timing of this announcement is unrelated to our news about Credits earlier this week,” a company spokeswoman told me. Zynga didn’t return my phone call.

Whatever the case, it’s another step toward what many assume will come from Facebook one day. In the meantime, I’ll keep my eyes peeled for Facebook ads on other sites.

Over the past 12 months, the gaming giant’s stock has been cut in half, falling to $13.12 a share, down from a high of $26.13. At those levels, its market cap has shrunk to $4.2 billion, making the company potentially tasty acquisition bait for larger fish.

That valuation puts it slightly below its key digital competitor, Zynga, which continues to dominate the Facebook platform in spite of several failed attempts by EA to topple it.

EA has also lost a number of high-level executives to Zynga. And its big releases of Battlefield 3 and Star Wars: The Old Republic have struggled against rival Activision’s comparable titles, Call of Duty and Diablo 3.

Still, in an interview with Riccitiello this week ahead of gaming’s biggest annual gathering — E3, kicking off tomorrow in Los Angeles — he was sounding like it’s all high scores for EA.

“We are in a spectacular position. The stock is oversold, but they [investors] are waiting for a catalyst,” he said. “They don’t know what it is yet; maybe it’s the next mobile hit or social hit? But it will probably be E3. We will make their eyeballs peel.”

What that unusual image means exactly is unclear, but one assumes he hopes to impress at least some of the 45,000 attendees converging on Los Angeles Convention Center like zombies staggering toward fresh brains.

Once there, they will be overstimulated by ear-splitting music booming from a space — dotted with massive booths — about the size of eight football fields.

But for EA and the other companies showing off their wares, it’s an ever dicier situation. That’s because the show continues to celebrate blockbuster console hits over clear consumer trends focused on an increasing number of devices and platforms, as one-time purchases of $60 games are giving way to free-to-play models that make a few pennies per user every month.

In fact, about 90 percent of EA’s business used to come from the console arena, and now it’s closer to 60 percent. In the fiscal year 2012, EA generated $1.2 billion in digital revenues, representing a 47 percent increase year over year.

But in the build-up to E3, Riccitiello contended that, like so many other cycles in the past, the industry will get out of this lull too, and he’s pinning his hopes on new console hardware coming out from Sony, Nintendo and Microsoft this holiday season.

“I’m not saying Moses will part the water for us, but it will damn near be close when the consoles come out,” he said. “For the past few years, we’ve had a challenging console environment, but we are about to enter an era of double tailwinds.”

We’ll see about that, but here are highlights from my interview with Riccitiello:

On the next generation of consoles:

Each generation has built a software business that is 50 percent bigger than the one before, and that was entirely made up of a packaged goods business.

I don’t think console and packaged goods are synonymous, like how music and CDs aren’t synonymous. The delivery system has changed from a disc to a more digital model. It’s shifted to a service, like iTunes and Spotify.

Consoles are super-powered PCs that are connected to the biggest screen in the house. There’s no doubt in the mind that the TV set is going to remain as the principle display device for entertainment going forward.

On EA pulling off the transition from packaged goods to digital:

At some point they [investors] are going to have to wake up. When you are on the podium at the end of the Olympics, you obviously know how to swim. But they are still saying that we need water wings. I get it, I understand the cynicism that prevails.

On the worth of EA’s $400 million acquisition of Playfish, the social games developer, in late 2009:

If you read our fillings, you would see that they earned a significant portion of their earnout, so they must have done something right. If you go to E3, you will see a major introduction that will usher in a long train of products, which was only made possible by Playfish investment.

We are three years out from [realizing the full value of the deal], but the vision we have — and the direction we are going — has been made possible by a platform and culture and technology shift. And a gigantic part of that had to do with an infusion of Playfish’s DNA.

On shifting to an always-on model versus shipping software:

We used to peak on usage a week after we shipped. But all of our games have an ongoing business now, and Playfish was the model for all of that.

On the Sims Social on Facebook not knocking Zynga off the top of the charts as had been expected:

Maybe I wish the Sims Social had sustained longer, but relative to the impact it [Playfish] has made on our company, I can’t say enough about it.

On executive departures — such as Barry Cottle, the EVP of EA’s interactive division, and its COO John Schappert — to Zynga:

It says that people pay are willing to pay a lot of money for EA talent, but we had lower attrition than Google last year. … There were a notable number of high-profile executives who left for 300-600 percent more money. … Even at depressed stock prices, they got $12-$13 million to show up on day one. I take it as a compliment that someone is willing to spend $20 to $40 million dollars on my employees. Those are staggering sums.

On getting that talent back:

I just guided 30 percent income growth, which is better than any of my competition, and delivered a great fiscal 2012 with 40 percent growth on digital. I don’t think my team is missing a beat. Would I want them back? Not now, but I do understand it from a money perspective. I get it.

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In the company’s first-quarter report, filed with the Securities and Exchange Commission yesterday, it disclosed that players who dig planting and harvesting crops accounted for 29 percent of the company’s revenue during the period.

One frequently asked question is whether social games will be played over the long term, or if companies like Zynga will have to continue creating hits to stay afloat.

Since the company went public last year, it has been claiming that the former is true — the older the title, the more revenue it generates. In theory, that’s because long-term players are more committed, and therefore spend more.

Based on the numbers disclosed yesterday, that continues to be the case. In fact, all four of the company’s top titles are at least a year-and-a-half old, and FarmVille continues on the upswing. A year ago, it was contributing 27 percent of the company’s revenue; now it’s contributing 29 percent.

CityVille, which launched in December 2010, accounts for 17 percent of the company’s revenue; Zynga Poker, which is five years old, accounts for 16 percent of revenue; and two-year-old FrontierVille accounts for 10 percent.

Zynga said the primary reason that FarmVille’s bookings increased during the quarter was the release of new content in the game.

However, older titles don’t always perform better.

Mafia Wars is a case in point. Last year, the game was Zynga’s third-best-performing title, and accounted for 18 percent of the company’s revenues. But after the company launched the sequel, Mafia Wars 2, the game suffered, as longtime Mafia Wars players failed to make the transition to the new version.

Now the game makes up less than 10 percent of the company’s revenue, which means Zynga is not required to break out its individual performance. It did note, however, that the quarter’s online game revenue was offset by a decrease of $26.5 million in revenue from Mafia Wars, compared to the first quarter of 2011.

Ouch. That’s a lot less ammunition.

Yesterday, Nintendo reported an annual loss — its first in more than three decades — after revenues fell 36 percent. Hours later, five-year-old upstart Zynga reported nearly the opposite results, saying that first-quarter revenues jumped 32 percent year over year.

“Social, accessible and free are changing things,” said Zynga’s COO John Schappert in an interview. “We were built for this market; we live on free and in-app purchases. We never grew up on $60 games and consoles. It’s a different world, and it’s hard for some companies as they make the transition.”

For more than a year, the game industry has worried about the shift toward social and mobile from more traditional platforms like the home console. And now, after yesterday’s two drastically different financial reports, there is more than anecdotal evidence for concern.

Zynga continues to gain momentum and attract larger audiences with titles like FarmVille and CastleVille on Facebook and Words With Friends on mobile. On the flipside, Nintendo is facing yet another hardware cycle, with consumers waiting for its newest console, the Wii U, coming later this year.

Generally, experts believe that social and mobile games are expanding the overall games market. But yesterday it was hard not to see Nintendo’s first loss in three decades — totaling $531.1 million — as a hint of where things are headed.

Michael Pachter, an analyst with Wedbush Securities, is bullish on Zynga’s prospects but is not optimistic about the future of console games.

“Nintendo is living in the past, repeating what got them to where they are, and hoping that the recent downturn is a fad,” he said. “They aren’t adapting to the times, and it’s hurting them.”

To be fair, the companies approach the market completely differently, so it’s hard to compare the two.

Nintendo sells proprietary portable and home gaming units as well as the games that work on top of them. Meanwhile, Zynga gives away its games for free and lets them work across most computers and mobile phones. It makes money on advertising and microtransactions.

The two approaches lead to drastically different audience sizes.

Zynga said the number of monthly active users playing its games increased to 292 million in the first quarter, up 24 percent. The game company, which got its start on Facebook, is also expanding rapidly to mobile, reporting that it had 22 million monthly users on mobile, up from only 12 million one quarter ago.

Nintendo does not break out quarterly figures, but the number of new customers it reached during its fiscal year pales in comparison. Over the past year, it sold 13.53 million 3DS units, and expects to sell 18.5 million this year. Nintendo sold 9.84 million Wiis over the past year, down 35 percent.

This year, Nintendo is banking on the Wii U to revive the company and to better position itself against mobile devices like the iPad. The new console will come with a 6.2-inch touchscreen that will allow users to interact in a new way with games on TV screens. It plans to sell 10.5 million Wii units this year, including the Wii U.

Last year, Nintendo Global President Satoru Iwata told AllThingsD in an interview that he is not willing to gamble on free-to-play games, because consumers are willing to pay for Nintendo’s superior experiences and brands.

“If we were simply going to say okay, the only the way we could sell more products is by decreasing the price, then there wouldn’t be a bright future, and the entire industry will fold,” he said.

His point is not entirely lost.

Zynga makes far less money per user than Nintendo. In fact, the gap between them is enormous.

Each console or portable game unit Nintendo sells has the opportunity to generate hundreds of dollars in income, since console games cost $60 and portable games cost around $40 (not to mention the initial cost of the hardware).

Meanwhile, Zynga makes very little on each player. It reports a metric called average daily bookings per average daily active users (ABPU). Yesterday, Zynga said ABPU increased to $0.055 in the first quarter from $0.051 in the same period a year earlier.

For Nintendo to switch from one model to the other would be like giving up the farm.

And to be entirely fair, Zynga wasn’t profitable, either. In the first quarter it lost $85 million, primarily due to stock-based compensation.

When excluding some charges, including stock-based compensation, the company’s non-GAAP earnings totaled 6 cents a share, beating analyst expectations of 5 cents a share. Revenues also exceeded the expectations of analysts, who were anticipating first-quarter revenue of $318 million.

In the period a year earlier, the company reported a profit of $16.8 million on revenues of $242.9 million.

In after-hours trading, the social game developer’s stock bounced around, at one point increasing by 13 cents and then falling later by 2 cents.

The company’s results were solid, considering that it was Zynga’s second quarter as a public entity.

Still, it is also the second time in a row that the company reported a loss, despite seven previous quarters of profitability. It said most of that loss was attributable to $133.9 million in stock-based expense during the quarter, which was up from the $14.5 million reported in the same period a year earlier.

The company, which released such games as Hidden Chronicles and Scramble with Friends during the quarter, also updated its 2012 outlook, projecting non-GAAP earnings of 23 cents to 29 cents a share on bookings in the range of $1.4 billion to $1.5 billion. The company said it expects slower sequential growth in the first half of the year with most of its growth weighted toward the second half.

Bookings are what Zynga actually sells in the quarter versus revenue, which is amortized over multiple quarters. It reports these two figures because virtual goods are perceived as having a long shelf life. Bookings are often considered a better measure for how the company did during the immediate period.

In the first quarter, bookings totaled $329.2 million, an increase of 15 percent compared to the first quarter 2011, and an increase of 7 percent compared to the fourth quarter 2011.

In a lengthy analysis done by Robert W. Baird & Co., the investment bank suggests that Zynga may be becoming less reliant on Facebook, with more revenues coming from other platforms, like mobile.

But before diving into Baird’s analysis, it is important to note that Facebook released just enough data for there to be some insightful guesses as to what Zynga’s first-quarter earnings will look like on Thursday. However, there’s not enough information to know for sure.

In the first quarter, Facebook said, Zynga made up 11 percent of the social network’s revenue, from both advertising and the sale of virtual goods. In comparison, Facebook estimated Zynga contributed 12 percent of its revenue for all of 2011. (Note: Those percentages do not include the revenue coming from third-party advertisers on Zynga game pages.)

The analysis by Baird estimates that 88.4 percent of Zynga’s revenue came from Facebook in the first quarter, down from 93.4 percent in the fourth quarter of 2011.

Zynga’s dependence on Facebook is routinely considered a risk when evaluating the company’s stock, so it would be good news if the company’s revenue from other platforms — primarily mobile at this time — was starting to contribute more to the company’s top line. However, there’s also a chance that Zynga’s revenue from Facebook is slipping. That would be bad.

Baird believes that Zynga made roughly $230 million in virtual goods revenue on Facebook, and estimates that it also generated roughly $65 million in advertising and from transactions on platforms, like mobile. In all, that suggests a total bookings of $300 million, which falls short of the investment bank’s expectations of $320 million.

Again, these are all estimates until final numbers are released on Thursday.

The San Francisco company’s stock was trading down 50 cents, or 5.6 percent today, to $8.50 a share.

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.

As part of the announcement, the retailer is also confirming that it will take a 30 percent cut of each transaction, which is the standard across Apple’s App Store, Facebook and Google Play (Correction: In an earlier version, it stated that Google takes 5 percent, which only applies to the Google+ game network.)

The announcement is not a huge surprise, since Amazon has been testing in-app payments over the past few months with a number of developers in the Amazon Appstore, which runs on the Kindle Fire and a number of Android handsets.

The payments platform utilizes Amazon’s well-recognized and trusted “1-Click” purchasing experience that so many consumers are familiar with from shopping online. By bringing it to mobile, it will make it easy for consumers to purchase a few more coins inside a game or to subscribe to a magazine.

But while the announcement sounds fairly basic, the rollout is important for Amazon to get right, since developers’ initial reception to the Appstore was a little strained — and stories of making money on the platform have been mixed.

That’s because, unlike other app stores, Amazon has decided to dictate how much an app sells for, and in some cases, the company elects to make apps free as part of its Free App of the Day promotion. In doing so, developers sometimes make less revenue than they would normally expect (especially since there was no potential upside from in-app purchases).

Developers and publishers will be able to set the price of the items within the store, including virtual goods or subscriptions, an Amazon spokesperson said.

Based on developers that participated in the beta tests, so far Amazon’s Appstore looks like it has been monetizing well.

Storm8, which was one of the game developers that participated in the beta test, told AllThingsD that it generated $700,000 in revenue from in-app purchases in March — before Amazon’s cut. The Redwood City developer said it has 10 free-to-play apps in the store, including such titles as Kingdoms Live, Nightclub Story and Farm Story; at one point, four of its games ranked among the five most popular free apps on Amazon.

Flurry, which provides analytics software to developers, also estimated  that Amazon’s in-app payment platform monetizes well, and that it outperforms Google Play, but falls short of the industry’s gold standard, which is Apple.

Still, it’s unclear whether Amazon will be able to woo developers, given that it is so much smaller than the other players. Last month, after celebrating its first year in business, Amazon confirmed that it had more than 31,000 apps in its store, which is far fewer than either Google or Apple.

It’s also unclear how many devices the Appstore is installed on, since Amazon does not share much information, including how many Kindle Fires it has sold.

According to a report by IHS iSuppli, Amazon shipped 3.9 million Fires in the fourth quarter, to claim 14.3 percent of the market. That makes it the world’s second-largest tablet vendor, surpassing Samsung, which has been in the market far longer, with many more devices.

In the future, what could potentially be even more interesting for developers than in-app payments is if Amazon will let them use apps to sell merchandise, such as Rovio’s plush toys, or DVDs and other cross-promotional items.

An Amazon spokesperson declined to comment on the possibility.

And because of its strong association with a brand, the game makers are hoping that this time the game won’t be as easy to replicate by competitors — unlike what happened with Disney’s big hit Gardens of Time.

Animal Kingdom Explorers, which will launch over the next couple of weeks, challenges players to find a number of items within a scene. Butterflies and birds, for example, are hard to decipher among the lush vines of a jungle; leopards, crocodiles and elephants are camouflaged in the deserts of Africa.

The game is Disney’s second to fall under the category of “hidden objects,” a genre that Disney arguably helped define with the launch of Gardens of Time, which Facebook named as the most popular game of 2011.

“After we launched Gardens of Time, we wanted to follow on that with something that would appeal to those who loved it and reinforce the elements that they loved the most,” said Eric Todd, the VP of product at Playdom and creative director of Animal Kingdom Explorers. “And what they said is that they really like learning.”

They also wanted a game that couldn’t be copied as easily by competitors, which frequently occurs in social gaming when a particular title or genre suddenly takes off.

For instance, the Gardens of Time game had a Victorian theme, with players traveling throughout multiple eras, learning about history as they went. After its success, many copycats followed, including Zynga’s Hidden Chronicles, which also had a Victorian look and feel. I pointed out the similarities between the two games after Zynga launched the game following its initial public offering.

But by partnering with one of Disney’s big brands, Todd is hopeful that this one will be more difficult to mimic.

He said the Disney-owned Playdom team traveled to Orlando to meet with the engineers who created the Florida theme park, so that the game would be scientifically accurate and would be familiar to anyone who had visited the park. In all likelihood, equivalent resources wouldn’t be available to other game makers.

“Hidden object games are tremendously popular among a broad and very enthusiastic audience,” Todd said. “It’s flattering to the degree in which our previous game was intimated.”

Generally, if you’ve played the Gardens of Time, or many other social games — the mechanics of this new game will be familiar; it doesn’t stray too far from the commonly used playbook.

For instance, as part of the game, players will have a space — in this case, it’s a nature reserve — where they have to decorate and add animals and other items. Users will be able to visit each other’s reserves, much like visiting another user’s farm or city.

In addition, the game uses a common game mechanic to get users to cough up a few dollars for the free-to-play game. After playing for a certain period of time, a player will run out of energy. They can either wait to play some more, or pay to buy more energy.

Another advantage in leveraging a Disney brand is being able to tap into the company’s massive entertainment marketing engine. The game will be promoted on Disney’s Web sites and within the theme park itself. Likewise, the park will be promoted from inside the game. Also, because of the close tie-in with a Disney property, the developers are using the name Disney Social Games, rather than Playdom, which Disney bought in 2010 for more than $500 million.

Playdom plans to release a dozen games this year, several of which will finally leverage Disney’s big brand names. The first game built on Disney’s intellectual property – Marvel: Avengers Alliance –   launched in January.

At that size, it claims to have outpaced Rovio’s Angry Birds, which took 20 months to hit 300 million.

If you haven’t heard of Outfit7, it’s probably because it hasn’t raised any institutional venture capital, it wasn’t founded in the U.S., and much of its application usage is spread across 120 countries.

But the company’s franchise of apps called Talking Friends, which are sort of like a modern-day Neopets, is gathering a large base of users.

The characters include Talking Tom Cat, Talking Ben the Dog and Talking Harry the Hedgehog — in other words, many more brands than Angry Birds alone. Of the 14 in existence, Talking Tom Cat is the most popular, having been downloaded 100 million times.

The animals serve as a virtual pet, which responds to your touch and repeats everything that you say. You can pet him, poke him or grab his tail. A popular activity is to record videos of the pet and send them to friends.

The number of users who come back to the app is impressive, with more than 90 million monthly active users worldwide. The company also averages more than 25 million downloads per month.

Executive Chairman Narry Singh believes Rovio and Outfit7 have similar growth trajectories; and like Rovio, which was able to create a strong brand from Angry Birds, Outfit7 is angling to create brands, as well.

Today, Outfit7 has offices in Palo Alto, Calif., as well as Slovenia, Cyprus, London and Seoul, South Korea. Its apps are primarily free, but users can make in-app purchases to buy virtual goods.

The company is also announcing today that it is partnering with Iconicfuture and Digital Artists to bring branded virtual goods to Talking Tom Cat. In a testament to its international pull, the merchandise will represent six of the world’s most popular soccer clubs, from Spain, Italy, England, France and Portugal.

Of course, Outfit7 is not the first company to want to replicate Rovio’s successes.

In the end, it won’t be important which company got to 300 million downloads the fastest, but which one was able to build a more long-term and sustainable company.

When you look at it in those terms, the jury is still out on Rovio, as well.

Facebook said today in its filing with the Securities & Exchange Commission that Zynga accounted for approximately 12 percent of the company’s revenue last year when Facebook’s revenues totaled $3.7 billion.

The revenue came from both its 30 percent payments processing fee related to the sale of virtual goods from games, such as FarmVille and Words With Friends, but also from advertising purchased by Zynga.

Additionally, Facebook said Zynga’s apps generate a large number of pages on which it displays ads from other advertisers.

The dependence on Zynga is so significant that Facebook warns that if it fails to maintain its relationship with the game maker, or if Zynga’s popularity declines, its financial results may be adversely affected.

Even more notable perhaps is that it’s not just Zynga. Facebook said social games are currently responsible for “substantially all of our revenue” when it comes from payments.

In December, Zynga went public, raising $1 billion, and is obviously one of the companies most reliant on the social network. But now with Facebook’s financials also public, we can see that the two companies are actually interdependent.

And, in fact, over the past three years, Zynga’s importance has only increased. In both 2010 and 2009, Zynga accounted for less than 10 percent of Facebook’s revenues.

The big turning point occurred in May 2010 when Zynga agreed to use Facebook Credits as its primary payment method inside games. As part of that, Facebook would collect 30 percent. That contract will expire in May 2015.

Some of the details of that contract were disclosed as part of Zynga’s public offering, but we wouldn’t be surprised if Facebook is also required to publish it at some point. In the version Zynga released, a lot of the contract was redacted.

In after-hours trading, Zynga was trading about 4 percent higher to $11.02 a share, nearing it’s all-time high of $11.50.

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The Mountain View, Calif.-based company tries to boost online companies’ revenue by placing targeted promotions and offering incentives at the point of checkout.

It’s a bit similar to how grocery stores try to boost sales by strategically placing tabloid magazines, gum and candy bars at the register to spur last-minute impulse buys.

Instead, TrialPay makes last-minute offers to give people incentive to make a purchase when they are on the fence.

As an example, TrialPay’s CEO Alex Rampell said that when people visit Fandango’s site, they may get an offer for a free movie ticket if they sign up for Netflix. Or, in a Zynga game, you might be offered a virtual bouquet for free, in return for purchasing real flowers on Valentine’s Day.

Visa’s participation in the investment, which is being announced later this morning, is rare. Over the years, the payments company has made a few acquisitions, including PlaySpan, CyberSource and Fundamo, but Visa’s only investment in recent memory was in payments darling Square, which allows anyone to accept payments using a cellphone.

Rampell said that with Visa’s help, TrialPay will be able to expand to offline merchants from working exclusively with online retailers, by giving it a way to track if a person visited a store and made a purchase.

“The question is, how do we send traffic to Starbucks or McDonald’s or any other offline merchant?” Rampell said. “We already have access to people online who are buying or thinking about buying something. It would be great if we could could give you 20 virtual coins if you shopped at McDonald’s. But how do we close that redemption loop?”

Today, TrialPay, which has 130 employees, reaches more than 70 million monthly active users worldwide. In 2011, Rampell said, revenues more than doubled; he declined to offer specifics.

Rampell also declined to provide details about potential partnerships with Visa. Visa also declined to comment.

Investors in the company’s fourth round included new investors Greylock Partners, Visa Inc., T. Rowe Price, DAG Ventures, DFJ Growth and QuestMark Partners. Existing investors also participated. To date, it has raised roughly $70 million.

For more of Rampell’s opinions on how the payments space will evolve, check out his Web 2.0 speech from October:

But one of PopCap’s original developers, Roy Liu, believes he has come up with an alternative. Gimmie, based in San Francisco, has created an incentives platform for mobile app developers.

It launches today with 10 mobile app developers in its beta program.

It works like this: In return for using the app, a player can earn points which can be redeemed for real-world products. It’s sort of like a traditional arcade, where players earn tickets that can be redeemed for candy and toys, but instead of gumballs and baseball cards, Gimmie primarily doles out game downloads and other mobile content.

Gimmie is also announcing today that it has raised $200,000 in funding from Tandem, an incubator in Silicon Valley.

Liu, who was one of the lead developers on Plants vs. Zombies for PopCap before it was purchased by Electronic Arts, co-founded the company with CEO David Ng.

The idea is not so different from other in-game incentive programs, which ask users to fill out a survey or download a different game in exchange for free virtual goods or other benefits.

Those types of programs, served by companies like TapJoy and others, have been immensely successful — although more recently, they have been received poorly by Apple and others because they can affect the most popular games list.

Gimmie believes what it is doing is different because it rewards users with items outside of the app for performing actions inside it.

Other companies are also trying to come up with alternative advertising platforms for mobile games. In games, banner ads are often completely ineffective because people are focused on playing the game, and don’t take the time to read the ad or leave the page to investigate it further.

A Chicago-based start-up called Tap.me is creating an ad network for virtual goods, which can gain advertisers on a broad scale for generic items, such as being able to jump higher or more energy across many games.

The company has confirmed to All Things D that it is actively investigating several opportunities, and is in talks with several partners about gambling on the Internet.

A Zynga spokesperson provided this statement to AllThingsD:

“We build games and experiences that our players want and love. Zynga Poker is the world’s largest online poker game with more than 7 million people playing every day and over 30 million each month. We know from listening to our players that there’s an interest in the real money gambling market. We’re in active conversations with potential partners to better understand and explore this new opportunity.”

As with any new entrant in the space, Zynga will have to fulfill several requirements, meaning any major rollout is still months away.

The San Francisco-based social games maker will have to wade through a maze of state, national and international regulations. It will have to secure the correct licenses, and it also needs the right technology to make betting over the Internet secure.

For either of these last two requirements, a partnership or acquisition of an online gambling organization or other technology would make the most sense, instead of starting from scratch.

However, the effort could easily pay off.

Zynga was one of the first online gaming companies on Facebook, and continues to dominate the platform today. If it is able to get its toe in the door, just as the laws change in the U.S., it could be a leader yet again.

Back in October, Zynga first started showing broad interest in the casino category.

Zynga founder and CEO Mark Pincus announced at a press event that the company was going to launch Zynga Casino, which would serve as a single destination on Facebook to build off its strong brand in poker.

Its first new game, which has not launched yet, will be bingo.

Until now, the company’s efforts have been limited to building social and mobile games that are given away for free and monetized through the sale of virtual goods.

Getting users to make bets and part with real money could prove difficult, even for a company that has so many dedicated fans.

One thing Zynga has going for it is that social games are frequently compared to gambling because of their addictive nature — both lure consumers into spending a few more dollars to continue playing.

The casino genre has also been quietly racking up big numbers on Facebook.

Besides Zynga Poker, which is the most popular poker game on Facebook, and one of the company’s longest standing titles, there are many other sleeping giants. Sean Ryan, Facebook’s director of game partnerships, has even called them “unbelievable monsters.”

Said Ryan: “It turns out that people are completely okay winning virtual currency that they can never cash out.”

If players actually have the chance to win money, who knows the size of the opportunity?

A Facebook spokesperson said the company does not necessarily see a future for gambling on the social network. “We don’t have any plans to get into real-money gambling,” she said.

It’s unclear if that eliminates others from experimenting. In the meantime, it hasn’t stopped game makers from exploring the category or the concept.

Last week, Seattle-based Double Down Interactive, which was named by Facebook as one of the most popular game makers of 2011, was acquired by video poker giant International Game Technology for $500 million. It has 4.7 million monthly active users playing a variety of games, including blackjack, slots, video poker and roulette.

The deal closely followed Caesars Entertainment’s purchase of Playtika, an Israeli game company known for its Facebook title Slotomania. Caesars bought the company in two stages, the first of which was rumored to be purchased for up to $90 million.

Caesars, which filed to go public in November, declined to comment because it is currently in its quiet period.

However, some of its plans were revealed in a document filed with the Securities & Exchange Commission. It said its Caesars and World Series of Poker brands are dedicated to online gaming, and will take advantage of real-money gaming as it becomes legalized. Right now, Caesars Entertainment offers games “for fun” in jurisdictions where online gambling is not yet legal, but has identified the legalization of online poker in the U.S. as “the largest opportunity in online gaming in the near term.”

Still, the biggest hurdle is the law.

Internationally, several countries have permitted gambling for some time, and those areas represent the most immediate opportunities.

But there are signs of the U.S. beginning to open up, too. On the day before Christmas, the Department of Justice gave the online gambling community an early present, according to a blog post written by Nelson Rose, a professor and lawyer.

“President Barack Obama’s administration has just declared, perhaps unintentionally, that almost every form of intra-state Internet gambling is legal under federal law, and so may be games played interstate and even internationally,” Rose wrote.

Essentially, what the Justice Department did was to issue a new interpretation of the Wire Act of 1961. Under the new ruling, it interprets the act as only outlawing bets on sporting events — not all events and contests, according to an article in the San Francisco Chronicle.

With that clarification in place, it will now be up to every state to pass legislation outlining operating procedures. So far, Nevada and the District of Columbia have moved quickly to enact laws. To get other state laws passed could be a lengthy process, especially during an election year.

In the meantime, launching games only in Nevada and D.C. doesn’t represent the big opportunity everyone was hoping for.

To be competitive against Caesars and IGT, Zynga may have to partner or acquire companies that already have the licenses in place or the necessary expertise.

Some of the more obvious candidates include Bwin, which operates PartyGaming.com and is traded on the London Stock Exchange; Betfair, and other operators, like Bodog, Bet365 and 888.com. Many are based in the U.K. and handle a variety of casino games and sporting contests there.

The entrance into a new market, such as gambling, would take substantial resources, and Zynga has them thanks to its public offering. In December, it raised $1 billion, making it the largest Internet IPO since Google.

So, will Zynga be the next “unbelievable monster?” Clearly, it is willing to try.