Meet Slade Villena.

In February, the ex-Zynga engineer publicly slammed the door in the San Francisco online social gaming company’s face in this discussion thread on Reddit, although at first he kept his real identity a secret.

With a new seven-person team and a successfully-funded Kickstarter game under his belt, Villena’s a prime example of the sort of independent game developer I wrote about last week. He’s passionate, ambitious and full of big ideas.

But even though he’s adamant about focusing now on a small niche audience, he’s also made a name for himself online directly bashing his old employer.

Welcome to the dark side — or, at least, the gray area– of indie dev culture.

Villena’s Reddit thread three months ago got hundreds of questions and thousands of upvotes, and made Zynga look pretty bad.

But today tomorrow, Zynga — which declined to comment for this article — gets a chance to strike back. In the same section on Reddit, known as IAmA, two Zynga engineers, Seth Allison and Andrew Pellerano, are scheduled to open a Q&A thread at 1 pm PT tomorrow.

So, who do you trust?

When he waxes philosophical about the video game industry, Villena makes some good points. Most interestingly, that competition may be a myth in the indie space, since developers don’t necessarily have to go after a mass audience of, for example, war game-loving teenage boys. But I was surprised by just how much he was willing to put Zynga down, especially since he worked there for only eight months and quit almost a year ago.

And while some of Villena’s points are valid or plausible, Wedbush Securities analyst Michael Pachter said others are “borderline psychotic.”

On the one hand are arguments you’ve probably heard before: That in the pursuit of bigger and bigger audiences, Zynga grinds its employees too hard and pushes them too far.

“I was averaging 70 hours a week because I had to,” Villena said. “They were demanding large spikes and large revenue gains in a very short amount of time.”

He said the heavy workload leads to lots of bugs, and that bugs drive away players. Pachter readily acknowledged that yes, that could happen, but questioned whether Villena was a fair judge.

“He’s probably not spending as much time playing everybody else’s games like I am,” said Pachter. “So, I can tell you that their games are less buggy than most.”

On top of that, Villena alleged a culture of unprofessionalism at Zynga, where long hours were rewarded with trips to Las Vegas and free alcohol for engineers while they worked.

Pachter said he had never observed anything of the sort any of the times he’s visited Zynga, nor had he heard anything about this supposed drinking culture from the 50-odd people he knows who work there.

Putting aside any culture clash on the social front, Villena also alleged that Zynga invades players’ privacy. I asked him to elaborate in our interview, and he compared the games’ use of player data to military-intelligence profiles he observed while serving in the U.S. Marine Corps.

When he was a member of the FrontierVille team, he said, the company posted on the wall the pictures, real names, ages, habits and Facebook posts of some of the game’s biggest spenders.

Creepy? Maybe, if true. But the devil’s advocate argument, of course, is that many social gamers technically agree to give over some or all of that data to game developers in order to use their apps in the first place.

“I was told, ‘We’re getting to know our players,’ but why are you posting their names?” Villena countered. “Why not just post their game’s avatar without having to deal with their photo or their name or anything like that?”

Fair enough. But it’s really when the discussion gets into Zynga’s finances that he starts to sound, to steal Pachter’s words, “a bit unhinged.”

As we were wrapping up our interview, Villena volunteered: “I don’t expect Zynga to survive the summer at the rate that they’re going. Look at their stock, dude. They’re scraping at $7. The way I’m looking at it, by the end of the summer, they’re going to be de-listed from Nasdaq.”

Pachter’s reaction over the phone was, “HA! Ha ha ha! No.“

He later apologized for laughing, while simultaneously calling the idea of Zynga going under this year “the dumbest thing I’ve ever heard.”

Even though Zynga’s stock is at record low levels, under $7 per share, it would need to trade at under $1 per share for 90 days to get de-listed. As for going bankrupt, Zynga is profitable, and doesn’t have any debt.

“And by the way, why the hell does he care?” Pachter asked. “This guy sounds pretty bitter.”

But back to things that matter: Like I said in my last article, gamers don’t have to choose between the games that come out of big companies like Zynga and indie shops like Villena’s Mercenary Game Studios.

Keep an eye on the Zynga engineers’ Reddit thread. In theory, Redditors are supposed to be able to ask them anything, so we’ll see if and how they respond to Villena’s claims.

An earlier version of this article stated incorrectly that the Reddit Q&A would be happening today.

The Los Angeles-based company has not raised institutional funding yet, but is backed by its founders along with Brody Jenner, stepbrother to Kim Kardashian and son of Olympic decathlete Bruce Jenner (see right).

Jenner has already been busy hyping RocketFrog on his official Facebook fan page, which has more than 58,000 likes, by asking fans to join him in poker tournaments for the chance to win $5 Amazon gift cards.

Additionally, the company said that Myspace founder Tom Anderson will join RocketFrog’s advisory board.

Besides its star-studded alliances, the company’s free-to-play Facebook game stands apart from other casino-based games because it allows players to win a variety of prizes, ranging from movie tickets to music, food and more.

Games include blackjack, slots, roulette, deuces wild and video poker, and prizes during the game’s first month include brands such as Creative Recreation, Steve Angello of Swedish House Mafia, Young and Reckless, World of Dance, Abbey Dawn by Avril Lavigne and Paul Oakenfold.

Many companies are scrambling to gain large casino audiences on Facebook now that it appears that online gambling will become legal in the U.S.

Late last year, the Department of Justice issued a new interpretation of the Wire Act of 1961. Under the new ruling, it interprets the act as only outlawing betting on sporting events — not all events and contests. With that clarification in place, it will now be up to each state to pass legislation outlining operating procedures.

A few companies, such as IGT, Zynga and Caesars Interactive, have already started to get ready and a few states have already passed laws.

RocketFrog’s founder Brett Calapp was previously the CEO and co-founder of Centaurus Games, a subscription-based gaming network that sold to PartyGaming in 2010. He was also the president of the Ultimate Blackjack Tour, an international gambling tour, online game network and hit television show on CBS.

American Express and Zynga are rolling out a rewards program today that will allow players to earn virtual currency when they spend money in the real world.

FarmVille fans willing to jump through a number of hoops, including signing up for a Zynga-branded prepaid card from American Express, will earn in-game currency, similarly to how consumers earn free airline miles for every dollar spent on an airline-issued credit card.

The rewards program will first roll out in Zynga’s FarmVille game and then will expand to CityVille, CastleVille and other titles over time.

The partnership is smart for American Express since it is working hard to promote Serve, its alternative payment service that is targeting a wider demographic that goes beyond its core business user.

“It opens up tremendous opportunities to address segments of the market that we weren’t able to address with traditional credit or charge products, including the youth or underserved markets,” said Dan Schulman, American Express’s President of Enterprise Growth.

By partnering with Zynga, American Express will be able to pitch the card to a lot of new users.

The two companies started implementing the program five days ago, by offering FarmVille players the chance to visit a Serve-branded farm, where they can earn a virtual tiger. In less than a week, Schulman reports that already 500,000 people have “liked” Serve and have received the tiger.

While FarmVille is one of Zynga’s older properties, it is still one of its most popular, attracting 4.5 million unique users a day.

As I said earlier, it takes a number of steps to sign up.

First, FarmVille fans who visit the Serve farm will be prompted to plant a virtual Serve Money Tree on their farm. Then, they can register to receive a Zynga Serve co-branded prepaid card in the mail. Next, they’ll have to link the card to a bank account, debit card, credit card or cash using a GreenDot MoneyPak.

Only when all the steps are completed will they then be able to use the Serve card anywhere American Express is accepted.

Initially, American Express will reward a consumer’s first five purchases of $25 or more, but over time it expects to expand the program.

Starting later this year, Schulman said the Zynga Serve Rewards program will be able to link to deals inside of the game that can be redeemed in person. For instance, Starbucks could award consumers who have planted coffee crops a chance to redeem a coupon inside the store. Because the offer is linked to the Serve card, the discount will be redeemed automatically and consumers won’t have to remember to print out the coupon.

“It’s a closed loop for Zynga players,” Schulman said. “It’s so very different than what anyone else has done.”

Zynga’s CMO Jeff Karp said the program is not replacing the company’s current rewards program, but rather represents an extension of it. “Our goal is to build and scale the blurring of the lines between the virtual world and the physical world,” he said.

He compared it to other promotions that Zynga has done where it worked with brands, such as 7-11 and Frito Lay.

He said during those promotions, consumers were able to purchase bags of chips or other items, which had codes that could be redeemed inside FarmVille or other games. In those deals, consumers were obviously able to make the mental leap from buying something in the physical world to redeeming credits in the virtual world. Karp said the promotions experienced a redemption rate that was five to 10 times industry averages.

“What’s appealing to these brands is our 292 million monthly uniques, which is providing them with the reach of TV with the effectiveness of online and gaming,” he said.

The San Francisco game company, led by Mark Pincus, closed at an all-time low today of $7.12 a share, down 13.91 percent, on twice the amount of normal trading volume.

At least for now, we can expect the two companies to trade in lockstep, given their relationship status.

On one hand, Zynga is Facebook’s largest partner, and on the other, Facebook is where Zynga attracts most of its user base. Last year, Zynga accounted for 12 percent of Facebook’s revenue, consisting of both advertising and virtual goods sold from within social games.

At this point, Zynga couldn’t move fast enough in trying to limit its exposure to just one company, and is currently focused on increasing revenue from other sources, mainly mobile.

After Facebook opened only modestly this morning, Zynga’s stock fell 13 percent, tripping a standard circuit breaker rule that halts trading when a stock trades down more than 10 percent, according to sources familiar with Nasdaq procedures. When Zynga’s trading resumed minutes later, the company’s stock again was halted when shares shot up by 10 percent.

A Zynga spokeswoman declined to comment.

Zynga’s slide today can pretty much be explained by Facebook’s wild ride that started off at $38 a share, then shot up to $42 a share, before falling back down to close essentially flat at $38.23.

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Big video games like Mass Effect 3 and Halo 4 aren’t going away anytime soon. But a growing cadre of independent games developers is taking the road less traveled — keeping teams tiny and visions narrow.

In fact, they say they don’t want to grow. And despite that unorthodox philosophy, they’re reaching big audiences, making some impressive money and shaking up the games industry as a whole.

These independent developers, or “indie devs,” fill a huge spectrum of opinions about what video games can and should be. But, as with their counterparts in music and movies, it’s not always easy to nail down which games are indie and which aren’t.

Up-and-coming publishers like Zynga and Rovio started out small and indie, of course. In the loosest sense, the term applies to pretty much anyone who’s not one of the big legacy game companies, such as Nintendo, Sega or Electronic Arts.

However, after they put out a hit or two, a few independents peel off from the pack by continually hiring and growing. Contrast Zynga, which has nearly 3,000 employees at 21 offices around the world, with unconventional companies such as San Francisco-based Bolt Creative, where the two co-founders pointedly avoided hiring anyone but themselves.

“We made a decision to stay small,” said Dave Castlenuovo, Bolt’s only programmer. “To me, I get the most enjoyment working out of my home, getting to see my wife.”

Castlenuovo and his design partner Allan Dye eschewed the new-normal start-up song-and-dance: Securing VC funding, finding office space and building a company on the idea of scaling bigger and bigger.

Instead, they found huge success, despite staying small, with their flagship game Pocket God. The game lets sadistic smartphone owners punish an island of perennially doomed cartoon pygmies.

Pocket God was a one-off project started in late 2008, which went from idea to a first version on the iPhone App Store in about a week, Castlenuovo said.

But it has outperformed most one-week larks. The 99-cent app and its downloadable extras have earned about $7.5 million so far.

And the game’s pygmy characters have racked up an additional $600,000 through a spinoff comic book series, which is not bad for a two-man team.

So, how does a little operation such as Bolt Creative thrive while a company like Nintendo, with access to some of the world’s top talent and most beloved video game characters, is reporting to investors its first annual loss since 1981?

Part of it, of course, is the conventional wisdom that smaller start-ups are just nimbler on their feet. But to get at the real answer, you have to look primarily at three big companies: Valve, Apple and Facebook.

On PCs, Valve’s Steam Store eliminated the need for developers to get their games distributed in brick-and-mortar stores in order to find a mass paying audience of gamers. Mobile app marketplaces, starting with Apple’s on iOS, similarly leveled the playing ground for smartphone game developers.

And games have also infiltrated social networking sites, especially Facebook, although the spoils are decidedly lopsided: Zynga alone was responsible for 15 percent of the company’s revenue in the first quarter of 2012.

To raise the money to make new games, new avenues are also springing up fast. In March, San Francisco-based Double Fine Productions solicited donations on Kickstarter for a new point-and-click adventure game in the style of the classic games made by its founder, Tim Schafer. They met their $400,000 goal in about eight hours and ultimately raised $3.3 million from Kickstarter users.

These sorts of developers don’t always have it easy: They have to do more with less, taking on more responsibilities than they might have to in much larger teams. And they can’t bank on legacy pieces of intellectual property for success.

Not that this is an equally bad fate for everyone. For his part, Castlenuovo compares himself to Robert Rodriguez, an independent filmmaker who famously produces, writes, directs, shoots and edits most of his movies solo.

“I enjoy wearing many hats,” Castlenuovo said.

Plus, indie devs can now focus more on making the games they’re most passionate about and less on how they’re going to sell them, at least initially.

Derek van Vliet, co-founder of a Toronto-based indie shop called Get Set Games, seems to be in a good place. His company’s casual iPhone/Android game Mega Jump, initially developed by just three people (now upped to four), has racked up 24 million downloads since May of 2010.

But van Vliet grumbled that bigger companies like Electronic Arts can temporarily take over app store charts by throwing around the weight of some of their biggest properties, including Madden, Tetris and Scrabble.

“That’s getting a lot from very little work for them,” he said.

For better or for worse, the business of games is not a meritocracy. But it might be a mistake to assume it’s all one big, cohesive business in the first place. After all, the devs say, isn’t at least some of what we’re doing art?

Art vs. entertainment?

If you want to quickly start a fight on the Internet, you should follow Roger Ebert’s lead and assert in broad strokes that video games are not and will never be art. Even among the game developer community, the dividing line between art and entertainment is fuzzy at best and may be impossible to place outright.

After all, some games are just casual fun. But others are deeply personal for their creators and, if you believe their many fans, are more meaningful and higher-quality as a result.

George Fan, co-creator of Plants vs. Zombies, said he knows his game is a piece of entertainment, which he developed independently and later distributed through PopCap before EA bought the company in 2011. But he questioned whether art and indie projects even have a chance amid the business pressures at EA.

“It’s pretty much as far as you could get from indie in any company,” Fan said.

Castlenuovo echoed the sentiment, noting big companies are best able to serve their investors when they focus on making top-10 hits.

“I’m going to stick with the creativity,” he said.

Even if you accept that some developers are making artful games, getting others to appreciate them in that way is an uphill battle. In the delightful new documentary “Indie Game: The Movie,” developer Jonathan Blow explains how his indie mega-hit Braid explores the concept of trying to reverse past mistakes by giving players the ability to rewind time.

However, the directors then cut to an online video reaction to the game from Soulja Boy. The young rapper enthusiastically tells his fans that Braid “ain’t got no point … you just walking around, jumpin’ on shit.”

Still, when developers can work by themselves or on very small teams, rather than as part of a publicly traded company, they’re freer to pursue “passion projects” that mean more to them. On the surface, that’s good, but it can also be a sort of psychological poison.

For Leo Alterman, a hobbyist indie dev and senior at Stanford University, making games is about recreating a sense of wonder he felt as a child playing Nintendo 64. And he’s not just talk: A game he built from scratch starting in high school, Tasty Static, has racked up 100,000 free downloads online in the past two years.

But Alterman said he could never make games his profession — the personal stakes are just too high.

“If you’re doing that as a job, and you fuck it up, then yeah, you’re kind of in trouble,” he said.

Indie devs straddle the stressful line between living to work and working to live. Despite his quest for childlike wonder, Alterman describes himself as morbid, and he’s in good company: In “Indie Game: The Movie,” one developer compares his work to being in a concentration camp as a major deadline approaches. Another earnestly threatens to kill himself if he can’t finish his game as planned.

“So, that’s my incentive,” he deadpans.

It seems unlikely that gamers would look at the latest update to Madden or Words With Friends and use it to judge those games’ creators. But Edmund McMillen, co-creator of the popular (and maddeningly difficult) indie platformer game Super Meat Boy, said the game and its public image are so tied to his story and personality that it’s impossible not to feel judged.

“We put everything into it,” McMillen said of himself and his “Team Meat” partner Tommy Refenes. “We are the game.”

The mainstream response

Just as with indie music and movies, there’s a more emotional response to the idea of a game produced by one or two people than one produced by a faceless company. And finding indie game developers who are willing to question the values of big games companies — like EA and Zynga — is like finding sand on a beach.

“That doesn’t seem like art to me,” the hobbyist dev Alterman said of Zynga, which did not respond to requests for comment. “They’re playing a different game.”

“Zynga’s a business,” Team Meat’s McMillen said. “I would go so far as to say they don’t even make games. They make money.”

“That sounds like hell to me,” Refenes says in “Indie Game: the Movie,” after he’s asked about working at EA or Epic Games.

Plus, players are responding to independent developers in a big way. According to the mobile app analytics and advertising firm Flurry, 56 percent of all mobile games played in Q1 2011 were made by indie devs; one year later, in Q1 2012, that share had jumped to 68 percent.

But those opinions and trends don’t seem to deter Rich Hilleman, EA’s chief creative officer and one of the company’s first 20 employees from the early 80s. He’s careful to praise talented indie devs who have gone on to join EA, but also stresses the administrative headaches that come with staying small.

“I want to not have to worry about clearing credit cards and legal issues and translating this stuff into Maltese,” he said. “I think you recognize that it was fun to be independent, except that that stuff wasn’t all that fun.”

When Hilleman joined EA, the company didn’t do any development in-house; it was solely a publisher that connected independent game designers with bigger audiences. Within the gaming world, the company helped make rock stars out of developers like Bill Budge, whose game, Pinball Construction Set, was packaged like a music album, with Budge’s name in giant script on the front.

Not really something you’d see today. I’ve sunk countless hours into EA’s Need for Speed racing game on my iPhone, but I couldn’t tell you the name of a single person who helped make it.

When I told him this, Hilleman countered that customers, not publishers, are the ones who decide who the stars are, although it’s hard not to wonder why that star status doesn’t correlate with hugely popular games like EA’s Star Wars: The Old Republic, which gained 1 million subscribers within three days of its launch last year.

Hilleman readily volunteers that one of the closest modern rock-star successors to Bill Budge is an indie dev: Notch, the creator of Minecraft. In the past three years, Notch’s sandbox game has built an extremely passionate community of over 16 million players, despite having primarily three programmers listed in its credits.

Despite all this, Hilleman draws a firm line in the sand in opposition to independent developers who say they’re freer to pursue “passion projects” than developers at EA.

“Building video games is just hard,” Hilleman said. “There is no such thing as building something you do not like. It just does not happen.”

Of course that doesn’t mean life is necessarily easier for devs who, at big companies, don’t have to translate anything into Maltese. James Swirsky, co-director of “Indie Game: The Movie,” said he saw plenty of hardship in his two years as a games tester at EA.

Devs there, he said, “were just as stressed out and pushed to the brink as the guys you see in the film.”

The key difference

Independent game developers share a lot of DNA with their big-business brethren, and the differences aren’t big enough to merit a culture war or to force audiences to choose between one or the other.

Furthermore, the mainstream world is not clueless: EA has learned its lessons from the years in the mid-aughts when console games seemed stuck in a rut, and has tried to reach out to and learn from the independent community — although Hilleman is quick to point out the irony of the situation, since in the 80s “Electronic Arts” was still small enough to be synonymous with the indie scene.

Meanwhile, Zynga has established a successful pattern of growing by acquisition, looking for the independent shops that are happy to sell out (not that that’s a bad thing, as OMGPOP and others can tell you).

But there’s still a key difference between the independents and the rest, and everyone watching the gaming space should note: With the rise of indie games as an economic force to be reckoned with, the charges are set for an explosion of creativity in the gaming world in the coming years. Indie devs have been around for decades, but now it’s easier than ever for them to make a comfortable living while making the games they personally pick and love.

The “hardcore” gamer community often derides social games on Facebook and mobile devices as too simplistic. But that will change. Games will get better and more ambitious as barriers to entry continue to fall and more outlier voices come into the mix.

With indies coming into the spotlight, games may finally be able to come into their own. Call it a real-world power-up.

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

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

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

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

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

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

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

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

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

On making acquisitions versus being acquired:

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

How many games can you release in a year?

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

Is there an issue with copycats in the space?

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

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

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

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

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

Facebook’s imminent IPO might mint a mess of millionaires in Silicon Valley by Friday, but in the meantime, it’s driving wealth in a few newly public Internet companies, as well.

With the social networking company’s offering reportedly oversubscribed, some investors are looking for ancillary ways to profit from it, and seem to be turning to Facebook’s already public social networking peers.

As Arvind Bhatia, a financial analyst who covers Facebook for Sterne Agee, observed: “I do sense some ‘temporary’ momentum for these related social media stocks.”

Consider: Shares of LinkedIn, Zynga, Pandora, and Yelp have all been trading up in advance of Facebook’s IPO. On Wednesday, LinkedIn closed at $113.49; on May 1, it was trading around $106. Pandora shares ended Wednesday at $11.37, having closed at $8.56 on May 1. More recently, shares in Yelp — which had been slipping lower in value — saw a sudden uptick around May 11.

It’s the same thing with Zynga, which accounts for about 15 percent of Facebook’s revenue. While its stock has been down 25 percent in the last month, it’s been up 2.75 percent in the last five days.

Also on the upswing: RenRen, the so called “Facebook of China,” whose shares were up more than 7 percent Tuesday.

You could add Groupon to this list, as well — although much of the recent upswing in its share price is likely due to the company’s strong first-quarter results that beat Wall Street expectations.

Coincidence? Hardly.

More likely, these stocks are all benefiting from the halo of interest surrounding Facebook’s IPO, an offering that may well prove to be the biggest-ever in the Internet space. Investor drive for a piece of Facebook is becoming the drive for a piece of a company like Facebook or, better yet, one that might be acquired by it.

“LinkedIn, Zynga, Pandora, Yelp … these are all potential acquisition bait for Facebook,” Ironfire Capital founder Eric Jackson told AllThingsD. “If Facebook is going to trade at a premium — like $150 billion to $200 billion, why not buy the fish and the bait, too?”

But this is all pre-IPO chatter. What happens on Friday, and the Monday following — and in the months to come — will provide a hard-and-fast answer to the question of whether the Facebook halo has any true longevity.

If Facebook’s IPO delivers the gains investors expect, sentiment toward the social media stocks may well continue to improve, making the decision to “buy bait” the past few days a wise one indeed.

Said GreenCrest Capital analyst Max Wolff: “By Friday mid-morning Facebook will be the anchor in a sector with several names, a diversity of stories and well over $130 billion in market capitalization.”

And some new numbers from Nielsen that chronicle the rise of “AppNation” on Android and iOS between March 2011 and March 2012 back up that notion. The study shows the average number of apps per smartphone has jumped from 32 apps to 41, and growth in time spent on app usage outpacing the growth in mobile Web usage on smartphones by a hefty margin.

And while Nielsen’s measure of the top five apps — Facebook, YouTube, Android Market, Google Search and Gmail — remained constant, the rest of the top 50 was more of an open playing field, with more than 20 percent of the remaining spots entering as new players, and plenty of maneuvering going on.

Data courtesy Nielsen

While Facebook is slowly working out the kinks to bring more games to mobile, there’s a small company in Menlo Park, Calif., that has beat them to it.

ISwifter is announcing a new iPad app today called theWorx for Facebook, which gives users the full Facebook experience — social games and all.

That means users can check their crops, maintain their cities and feed their fish without having to boot up their computer.

A small company of 20 employees, iSwifter is almost entirely bootstrapped, having generated $10 million in revenue last year.

As my colleague Ina Fried wrote, the previous iPad app allowed users to access any Flash-based content on the Web by running a browsing session on its servers and streaming the results to the iPad. What iSwifter quickly realized was that “one of the major use cases is Facebook games,” said the company’s co-founder Rohan Relan.

TheWorx will work similarly to the old app, except that it is tailored specifically for Facebook. ISwifter will host the content on its servers and then stream the games to the user on the iPad, with little latency. By taking this approach, users will have access to all games on Facebook without developers having to lift a finger.

Additionally, all of the original ways to monetize the applications will be in place, including advertising and Facebook Credits. TheWorx will be free for a short trial period, and then users will pay for additional access. The app will come out later this month or in early June. At that time, Relan said, the company will figure out how much it will charge. The iSwifter app currently costs $5.

“Our plan is if we do everything that the Facebook app does, then we can charge for that functionality,” Relan said.

The biggest threat to iSwifter is if Facebook starts bringing more content to mobile. “That would be pretty devastating to us,” Relan admits. However, he said there’s not an easy way for all developers to bring their content to mobile. Currently, some of the largest game developers, like Zynga, have created content specifically for Facebook’s app, but it has been a slow process.

“Some of the big apps have made native versions, but it will take time for the Long Tail to migrate over,” he said.

Here’s how the app works:

More people are paying to play social games than they were a year ago, but the average player is also spending less than in the past.

According to SuperData, the average social gamer who pays to play in the U.S. spent $37.59 in April, which is about $8 less than a year ago, when the average social gamer spent $45.58.

SuperData partners with publishers and developers to create an online gaming panel, which tracks more than a million paying online gamers every month. The report covers the U.S., Germany, Brazil and Spain, spanning all major social game genres, including city building, farming, and strategy and combat.

While the amount each player pays has fallen, SuperData found that as the industry has matured, more people have become more comfortable spending money inside the free-to-play games. In April, 2.5 percent of social gamers converted to spending users, compared to 1.4 percent a year earlier.

But the average paying game player should not be confused with the overall average spend per user. After all, you can spend a lot of time harvesting crops and building cities without ever paying a dime.

For instance, in the first quarter, Zynga said the average bookings per user totaled 5.5 cents, which is the company’s total revenue for one quarter spread across all gamers — whether they pay or not.

SuperData found that game players who play mid-core games, which include strategy and combat games, are spending the most right now. Meanwhile, the average spending player of farming games has been on a decline for the past few months.

The research firm estimates that the North American social gaming market will be worth $1.8 billion by the end of this year, and the worldwide social gaming market, including social games on mobile, is expected to hit $13 billion in 2015.

Illustration via Shutterstock | Picsfive

This week Rovio said its Angry Birds games have been downloaded more than a billion times. That’s a serious milestone, and beyond that there’s no doubt about the cultural effect of the franchise’s stuffed animals, movie tie-ins and repeat success with new titles. So I think it’s fair to call Angry Birds a smashing success.

But on a daily basis, we get pitched by start-ups who want to talk about how they have a thousandth of that many users. Really, a million registered users? Does that even matter anymore?

Well, yes — maybe for a paid subscription service or a marketplace. It’s not quite as impressive for a social game or a photo- or video-sharing service.

How do you know when something hits the big time, between numbers of downloads, users, visitors, page views, subscriptions, customers, monthly actives and daily actives, engagement, growth curves, millions and billions? It all starts to run together.

And very often, these metric milestones are massaged and selectively disclosed.

While it’s been well established that the number of people who actively use an app is more interesting than the number of people who have registered for it or downloaded it since it was released, many companies still tout those all-time user counts.

In response to criticism of it referring to registered user numbers, Google now counts people who have Google+ accounts and also use any Google product within a certain time period as “active” users of Google+. It’s a puzzling substitute for real engagement stats.

But numbers do tell a story. Take Instagram’s growth: 1 million registered users in December 2010, 15 million in December 2011, 30 million in the beginning of April, an estimated 50 million by the end of that month, after it launched on Android and was bought by Facebook.

Or look at mobile gaming, where the records are eclipsed almost as soon as they are set. In the month of April, Draw Something reached 50 million downloads, 50 days after it launched – while Angry Birds Space took only 35 days.

I asked some metrics providers and investors what’s enough to turn their heads.

One public place to find up-and-coming mobile products is the top app charts that are published by Apple and Google. An iPhone app that is consistently in the top 10 of the U.S. popular app charts gets 1.5 to 2 million downloads per month, according to Oliver Lo of App Annie.

Meanwhile, Peter Farago of mobile analytics provider Flurry told me, “What makes a hit, in our view, is 1 million daily active users per platform (e.g., 1 million on iOS and 1 million on Android).”

Jack Abraham, who founded Milo and now leads local at eBay, was one of the earliest investors in Pinterest a few years ago. What got him to notice that company when so many other people couldn’t tell it was about to become a juggernaut? It was the growth chart, he recently told me.

“What I look for is 1 to 3 percent sustained growth in users per day,” Abraham said. “It could be as small as 5,000 or 10,000 users if it has that growth.”

Suhail Doshi, CEO of the widely used analytics start-up Mixpanel, said that even active user counts can hide a larger story.

“You should pay attention to what their definition of ‘active’ even means,” he said. For instance, the number of users who are active on a service within a month could be swayed by a single day’s big spike in usage. “An average rolling daily active is far more indicative,” he said.

By far the most important metric for a consumer app, Doshi argued, is retention — which is to say, the percent of users who come back the very next day after they first sign up. (Of course, measuring retention is Mixpanel’s specialty.)

“Any VC worth their salt is asking for retention numbers,” Doshi said. “You’re nothing without it.”

A reasonable retention rate is 20 to 30 percent, Doshi said. Really great retention is 50 to 60 percent.

However, it’s fair to expect lower retention rates for transactional services like TaskRabbit or Airbnb, where users might not return every day but often spend money when they do, Doshi said.

Aneel Bhusri

Sources familiar with the company’s plans tell AllThingsD that Workday has chosen the four bankers that will lead it through the IPO process: Morgan Stanley, Goldman Sachs, Allen & Company and JPMorgan Chase & Co. The search for bankers caps a process begun in December.

The company’s IPO path calls for an S-1 filing to be made with the Securities and Exchange Commission by mid-July. After a late summer or early fall road show, its shares would debut between October and December, depending on how favorable market conditions are, sources familiar with the matter tell me.

The process began in earnest after Workday hired its new CFO, Mark Peek, away from VMware, where he was also CFO.

Workday is feeling emboldened in part by the successful offerings of Jive Software and Splunk, both enterprise companies with their hands in the cloud business. Workday itself is a pure cloud software play, specializing in human resources applications, a white-hot area of enterprise that has seen a lot of M&A activity of late.

In December, software concern SAP spent $3.4 billion to acquire SuccessFactors. Then, in February, software giant Oracle spent $1.9 billion to acquire Taleo, in a deal that took place shortly after I interviewed Taleo’s CEO. Even Salesforce got into the act, acquiring the start-up Rypple for an undisclosed amount in December.

Much of that dealmaking came in response to concerns about Workday, especially after its impressive $85 million Series F round of institutional funding at a $2 billion valuation, which AllThingsD reported exclusively in October. A Bloomberg News report said that round was oversubscribed and grew to $100 million when Michael Dell’s MSD Ventures joined.

Investors in that round included several who also took part in institutional rounds in Facebook and Web gaming player Zynga: T. Rowe Price, Morgan Stanley Investment Management, Janus, and Bezos Expeditions, the personal investment entity of Amazon CEO and founder Jeff Bezos. William Danoff, the manager of Fidelity’s $80 billion Contrafund, the mutual fund giant’s largest stock-based fund, also participated in that round.

A Workday IPO, which would raise about $500 million, would make for a sweet payday for the company’s earlier investors, which include Dave Duffield and Greylock Partners, who invested $90 million in four rounds, and New Enterprise Associates, which joined a $75 million Series E round in 2009. By my math, Workday’s total capital raised comes to a cool $195 million.

So how’s business? With the company having disclosed $160 million in billings total bookings in 2010, sources familiar with its operations tell me bookings in 2011 exceeded 100 percent growth. That would be above the $320 million in 2011 bookings CEO Aneel Bhusri told me he expected last October.

Workday is essentially the creation of PeopleSoft vets Bhusri and Duffield. They started the company in 2005, not long after losing a pitched battle to resist a $10 billion hostile takeover by Oracle. Bhusri and Duffield concluded that the next battlefield for enterprise software would be in the cloud. They kickstarted Workday using their own money and some funding from Greylock, and brought some PeopleSoft employees with them.

The idea was to re-create PeopleSoft, which makes software that businesses need to run day to day, but to deliver it from the cloud.

And unlike other cloud players that approach smaller companies and work their way up to ever-larger customers, Workday’s customers are already in the big leagues. The average Workday customer — there are 280 — has between 10,000 and 15,000 employees. The biggest is Flextronics, the huge electronics manufacturing company, which has 200,000 employees. Other customers include Time Warner, Thomson Reuters, Chiquita Brands and Salesforce.com. There are Workday records on more than two million employees on its system. All that after only four-plus years of active selling. A second, newer line of financial applications aimed at helping companies more efficiently manage their spending is getting traction, too.

Workday will probably be the biggest among a pending batch of enterprise-oriented IPOs set for summer and fall after the Facebook madness is over. For one, there’s Violin Memory, which I’ve been reporting on quite a bit. And Reuters is reporting that cloud storage and collaboration concern Box is looking like it’s eyeing an IPO in 2013. The bankers are going to be busy.

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.

Typically at this point in the hardware cycle, he said, the cost of developing new videogames would lead to a loss. But in a conference call with investors yesterday, Riccitiello said revenue from digital content will keep EA profitable.

“In the face of, unfortunately, somewhat of a headwind relative to console, we’re getting top line growth, robust digital growth, robust margin expansion, robust EPS growth, while affording the investment in the next-gen console. I don’t think, going back to our foundation in ’82, that’s ever happened before. So what we are guiding for is entirely unprecedented, and it’s a function of everything we’ve been saying on the call so far. … It’s our hope to be able to accelerate top line through a transition and accelerate bottom line growth through a transition because we won’t be facing sort of negative console compares.”

Nintendo expects to release the Wii U later this year, which will require new games that tap into both the TV and a touchscreen device. Neither Microsoft or Sony have unveiled plans for their respective next-generation hardware systems, the Xbox and PlayStation. Riccitiello did not mention the new consoles by name, and instead referred any direct questions about hardware to Sony, Microsoft and Nintendo.

“We intend to invest $80 million in Gen4 console development in fiscal ’13. We are strong believers that console will return to strong growth, and represent a great opportunity — one that is in lockstep with our digital plans.”

In fiscal 2012, EA generated $1.2 billion in digital revenues, representing a 47 percent increase year over year. In the past six months alone, FIFA 12 — one of the company’s traditional packaged good titles — was able to break $100 million in digital revenues for the first time. This year, it’s predicting digital revenues of $1.7 billion, representing 40 percent of the company’s overall business.

Even though Riccitiello painted a positive outlook, he failed to turn to the tide.

Along with a broader market meltdown, the company’s stock fell 65 cents, or 4.3 percent, at $14.48 a share. At that price, the company’s stock is off more than 40 percent from its 52-week high of $26.13 a share.

During the call, Riccitiello also tried to stress that while Star Wars: The Old Republic is an important title for the company, it is getting an unfair amount of attention by analysts. In the quarter, he said the number of subscribers fell to 1.3 million from 1.7 million when the game launched.

“So while I understand there’s an enormous amount of interest, I don’t know that it warrants as much as what we’re seeing right now,” he said, according to a SeekingAlpha transcript.

The final highlight from the call was when Riccitiello questioned how much Zynga paid for OMGPOP and its hit title Draw Something, which was No. 1 for a short period of time. He didn’t actually name the two companies, but it was implied.

“Right now, what I’m starting to see is valuation expectations that assume that these things are all hockey stick moving up and to the right with no end in sight, and I think those are bad assumptions,” he said. “Some of them will work, some of them won’t, but they can’t all be worth the multiple that I’m seeing in the market right now.”

Since the company’s last earnings release in February, the videogame publisher’s stock has fallen 20 percent, and on Friday, it tumbled another 3.5 percent, or 55 cents, to trade at $15.12 a share.

In general, the market for game stocks are teeter-tottering, as the industry works through a massive transition from packaged goods sold at retail to digital games that are given away for free and distributed through Apple and Facebook.

Even pure plays like Zynga — which are focusing exclusively on mobile and social — aren’t immune, as investors question the free-to-play model and the dependence on third-party platforms. Zynga’s stock is off almost 20 percent since its IPO in December.

This afternoon, analysts are expecting EA to exceed the company’s internal guidance by earning 16 cents a share on revenues of $960 million. EA’s own estimates are calling for non-GAAP earnings of 10 to 20 cents a share on revenues of $925 to $975 million.

As a sign of the times, Wedbush analyst Michael Pachter revised his expectations down by $5 million due to U.K. games retailer Game Group going bankrupt during the quarter.

Otherwise, Pachter said that he’s expecting the company to report at the high end of the guidance, thanks to strong sales of Mass Effect 3, which went on sale during the quarter, and to a solid performance by the company’s online game, Star Wars: The Old Republic.

Other console titles shipped during the quarter include FIFA Street and Tiger Woods PGA Tour 13.

In an interview, co-founder and President Anil Dharni said the company was founded two and a half years ago, but it didn’t make its first mobile game until nine months ago. Since then, it has launched three titles, including Crime City, Modern War and Kingdom Age, all of which have generated more than 20 million downloads.

The quick multimillion dollar sale is reminiscent of Zynga’s recent $180 million purchase of OMGPOP, which had been around for awhile but only recently catapulted to the top of the iPhone charts with its overnight hit Draw Something.

Dharni said the two back-to-back sales are not necessarily an indication of a trend in mobile games.

“We tend to hear only about the successes,” he said. “If you look at some of the other mobile gaming companies, some have gained traction but there’s others struggling that have fallen off the charts. … I think the downward trend is also happening.”

All three of the company’s games are free to play and monetized through in-game items. Both Kingdom Age and Modern War are among the top 25 grossing apps on the iPad. Crime City is the company’s oldest title. Neither Funzio nor Gree disclosed how much the apps are grossing, but Dharni said what makes its games stand out from the rest of the pack is player retention. And generally, the longer players engage with the games, the more likely they are to make purchases.

Funzio, which previously raised $20 million in capital, is expecting to be completely integrated into Gree’s San Francisco operations, relocating all of its 125 employees to Gree’s offices, where the two will have more than 300 employees all told.

“From day one, the thing we proposed was that we didn’t want to be an independent studio. We want to be integrated as much as possible in Gree,” he said.

Gree, which is a mobile-gaming powerhouse in Japan, is aggressively trying to build a worldwide social network for games on mobile devices. Rivals include DeNA’s Mobage network, which came to market through the acquisition of San Francisco-based Ngmoco, and Apple’s Game Center.

Funzio will now begin developing games for Gree’s mobile social platform, although they will not necessarily be exclusive.

Dharni said both he and the company’s co-founder and CEO Ken Chiu started talking with Gree a few months back, and since then had discussions with a number of other suitors, whom Dharni characterized as the “usual suspects.”

What stood out about Gree was its vast experience and knowledge about the mobile gaming space, he said.

“Mobile games in Japan make a ridiculous amount of money and we are just getting started in America. They are two to three years ahead of us in terms of understanding game mechanics and monetization. We can learn so much from them,” he said. “They are super smart and hungry folks and their vision matched ours. We had excellent alternative options, but we found the perfect partner.”

Today, the San Francisco company says that Sprint is coming on board to join the three other major U.S. carriers: Verizon Wireless, AT&T and T-Mobile.

While the partnership provides additional momentum for Boku, the company still has a way to go before consumers are charging all sorts of purchases to their carrier bills. Today, the majority of Boku-paid purchases are for digital goods, such as in-game currency like Facebook Credits, or virtual goods in social games from companies like Zynga.

In an interview, Boku president Ron Hirson explained that it will still be another year or so before it starts seeing physical goods like clothing or electronics being charged to a carrier bill. For that to happen, carriers will have to drop the rates even lower than what they are charging today in order to be on par with Visa or MasterCard.

Over the past two years, Hirson said, prices already have dropped from roughly 40 percent to somewhere in the “teens.”

“We are proving ourselves out, and showing to the carrier that with each incremental drop, we are growing the pie,” he said.

The next likely product category to adopt carrier billing, he said, is digital content, including music, books, or physical tickets for public transportation or concerts. Those items have a big enough profit margin to make paying slightly higher transaction fees affordable.

Other companies in the carrier billing space include Mopay, BilltoMobile and Zong, which eBay’s PayPal acquired last year. Boku strengthened its position earlier this year when it raised $35 million in fresh capital.

While carrier billing has been slow to take off, Hirson said the company believes it will be a huge opportunity because of the convenience factor. To purchase something, users enter their phone number, and then authenticate that payment via text message.

Boku said today that it also signed up a carrier-billing partnership with Deutsche Telekom in Germany, meaning that it is now processing transactions with every major carrier in France, Germany, the U.K. and the U.S.

The company also announced that it has added two executives to its team: Jon Prideaux, the former EVP at Visa, is joining as chief business officer; and Stuart Neal, the former managing director of international development for Barclaycard, is joining as SVP of Business Development.

Late today, it announced the acquisition of Funzio for $210 million.

At that price, it exceeds what Zynga just paid for OMGPOP, which arguably had just one hit game. Sources said at the time that Gree was also one of the bidders in that deal.

Funzio, which is based in San Francisco, has developed a number of well-received mobile social games, including Crime City, Modern War and Kingdom Age, all of which have generated more than 20 million downloads.

“The team at Funzio is creating some of the best mobile games in the world today. This acquisition allows us to join their talent and expertise with our vision for a mobile social gaming ecosystem,” said Naoki Aoyagi, Chief Executive Officer of Gree International, in a release. “We are extremely excited to expand our mid-core portfolio and continue to show how the mobile games market is the inevitable next step for gamers worldwide.”

Funzio’s executive team, including CEO Ken Chiu and COO Anil Dharni, will join Gree International as Senior Vice Presidents while CTO Ram Gudavalli and VP of Engineering Andy Keidel will join as Vice Presidents. In February, Gree announced aggressive hiring plans in San Francisco. The company said it was moving into a new 41,000-square-foot office this spring, which will enable it to double its headcount to about 300 employees.

In May 2011, Funzio raised $20 million, and more recently, TechCrunch reported it was seeking to raise $50 million at a $350 million valuation.

Gree is aggressively trying to build a social games network for mobile phones, similar to the network Facebook has built for social games on the Internet. Rivals include DeNA’s mobage network, which came to market through the acquisition of San Francisco-based Ngmoco, and Apple users would compare the network to the iPhone and iPad’s Game Center.

But in order to attract users, it must first have good games. For foreign companies, like DeNA and Gree, it’s even more important for those games to appeal to Western markets as they try to expand here.

Since he was appointed mayor a year ago and elected to a full term in November, Mr. Lee has made it a priority to boost the city’s economy through the tech industry. Last year, he backed tax breaks to help San Francisco Internet companies Zynga Inc. and Twitter Inc. He visits tech companies weekly and is close to start-up financier Ron Conway.

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Pundits and others are using the B word — bubble — more than ever. Is it time to stop, or will this gain even more traction in 2012?

In fact, consumers are now spending equal amounts of time social networking and playing games, according to Flurry, which provides tools to app developers to track consumer behavior.

In the first quarter, Flurry found that the average consumer spent 24 minutes on games and social networking — each — every day. In the same period a year earlier, consumers spent 25 minutes playing games and only 15 minutes social networking.

In a blog post, Flurry’s Peter Farago explains that while time is now evenly split, the shift is more severe when you calculate the percentage of time spent on each type of application. By doing so, you can see that time spent on gaming has dropped as overall usage on phone applications has increased from 68 minutes a day to 77 minutes a day.

In the first quarter, consumers spent 31 percent of their time playing games, falling from 37 percent a year ago. Likewise, social networking has soared from 22 percent to 37 percent.

Social networking on the phone would include Facebook and other applications like Instagram (which Facebook just acquired for $1 billion). Games include everything from Rovio’s Angry Birds to Zynga’s Words With Friends. Other popular phone categories include news and entertainment.

Flurry also discovered that advertisers have followed the change in behavior with more ad revenue being generated by social networking apps than games. In April, 37 percent of ad revenue went toward social networking apps versus 36 percent going toward games. Just two months earlier, games were generating 35 percent of ad revenue and social networking was generating only 24 percent.

One limitation of the study is that it is looking only at smartphones and does not take into account behavior on tablets, where a lot of gaming is taking place.

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.

Instead, the company is focused on building games for smartphones.

“We are maintaining the old games, like Happy Aquarium, but we don’t build new Facebook PC games any more — we are 100 percent focused on mobile,” Relan said.

Last year, he said, 90 percent of the company’s revenues came from Facebook, but he predicts that this year 90 percent will come from mobile.

CrowdStar’s decision to leave Facebook is bad timing for the social network it as nears its public offering.

A platform must have both a lot of applications and a lot of users in order to be successful, but if the perception is that the platform can be profitable only for a few, developers will go elsewhere. Today, the reality is that Zynga dominates the charts and makes far and away more money than anyone else. Meanwhile, fledgling developers are seeking financial alternatives.

Founded in 2008, the Burlingame, Calif., company was one of the first to feed off of Facebook’s social graph, which allowed companies to endlessly post messages on players’ walls to get the word out about their games. Since those viral channels were shut down, Crowdstar has had a difficult time keeping up with social game leaders, such as Zynga, Electronic Arts, Wooga and King.

A year ago, the company raised its first round of funding totaling $23 million, but since then, its games have slipped in the rankings as its focus has shifted to mobile. Today, it attracts fewer than 8 million monthly users, down from 29 million a year ago, according to AppData.

Since then, said Relan, they have discovered an attractive audience on mobile, consisting of females age 13 to 30 who are not interested in sitting in front of a PC or a console to play games. “They are very mobile and communications-oriented,” he said.

For example, Crowdstar’s Girl franchise, including Top Girl, Social Girl and Modern Girl, has collectively hit 20 million downloads across both iPhone and Android. Modern Girl alone surpassed two million downloads within three weeks of its launch.

The Girl franchise includes role-playing games where users dress up avatars and are judged on their outfits as they walk the runway.

Relan said Zynga has done a good job serving the females, aged 35 and over, who grew up on PCs and enjoy playing games online. But the slightly younger demographic is looking for a different kind of game play on a different platform. Relan said they still will leverage the Facebook platform on mobile.

The decision to pull away from Facebook on the PC is new since the company announced a three-prong strategy in October that included Facebook games, mobile games and an emphasis on Asia.

Relan said that even if the company weren’t targeting a niche that gravitated toward mobile, he’d still be wary of developing games for Facebook. That’s because he believes the audience for Facebook games has plateaued or started to decrease.

“If I was going after an older audience, I might focus on tablets,” he said.