Zynga, the San Francisco-based social gaming juggernaut, on Tuesday released its latest title, Empires & Allies, a combat strategy version of toy soldiers adapted for the Facebook generation. 

The title, developed by Zynga's 1-year-old game studio near Marina del Rey, goes live as the San Francisco company is reportedly preparing to announce its plans for an initial public offering of its stock.

Empires & Allies represents the company's latest vision for how it sees the burgeoning market of simplistic social games evolving into a legitimate gaming genre that's more complex and nuanced. Our story in the Business section of The Times goes into more detail on the company's overall strategy for the game. 

Social games in general have come under heavy criticism among traditional game developers, who see the pithy titles as shallow attempts to hook unsuspecting Facebook users into an addicting cycle of empty quests.

A panel at February's Game Developer Conference entitled "Are Social Games Legitimate?" was jokingly renamed "Are Social Games Evil?" by one of the panelists after they were compared to high-fructose corn syrup of games by another panelist, Ian Bogost, a game theorist who teaches at the Georgia Institute of Technology.

Empires & Allies in some ways is Zynga's rebuttal to critics of social games. Designed by developers who worked on the much-revered military strategy game Command & Conquer, Empires & Allies features more nuanced game play and more meaningful interaction with "allies," who can not only harvest their neighbor's crops as in FarmVille but also ride to their rescue and repel invaders.

As for whether Empires & Allies, as with many of Zynga's games, is optimized for addiction, Bing Gordon, a partner in the Silicon Valley venture firm Kleiner Perkins Caufield & Byers, which has invested in Zynga, responded, "Passion is just another way of having an addiction on a schedule." 

Gordon, who logs into his Zynga games multiple times a day, said, "By any measure that I have about evil, I don’t think games qualify. Are they pernicious? Social games are behavior modification systems with entertainment value. So are diet systems." 

-- Alex Pham 

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Zynga, the San Francisco developer of social games such as Mafia Wars and FarmVille, is preparing to file an initial public offering of stock this week or next, according to the Wall Street Journal's All Things D blog.

Zynga's last round of funding valued the company at $10 billion. But a stock offering could allow Zynga to harvest a substantially higher valuation, according to All Things D, citing anonymous sources.

Other technology IPOs have done well this year. Demand Media in January enjoyed a 33% pop in share price on its first day of trading. Shares of LinkedIn, a social network aimed at executives and job seekers, soared 109% on its first day of trading last week, giving the Bay Area company an eye-popping $9-billion valuation. And most recently, Yandex, nicknamed "Russia's Google," clicked up 55% on its first day out Tuesday on the Nasdaq.

The enthusiastic investor reception has laid the groundwork for other expected technology IPOs, including Facebook, Pandora, Groupon and Zynga.

Calls to Zynga were not immediately returned.

The company is the largest developer of Facebook games. Its 55 games and applications draw nearly 248 million players a month, according to AppData.com, a site that tracks usage on Facebook. By comparison, the second-largest game developer on Facebook, Electronic Arts, has just 36.6 million monthly players.

Social games are largely free to play. They make money by selling gift cards that can be redeemed for virtual goods used within the games. They also make money by promoting the products and services of other companies, either within the game itself or through "offers" that give consumers game credits in exchange for signing up for credit cards or buying merchandise from sponsors.

Zynga does not release its financials, but the company is said to be highly lucrative, as a small proportion of players shell out a disproportionate amount of money on game credits.

eMarketer, a market research firm, esimated that revenue from social games would hit $1.09 billion this year in the U.S., up from $856 million last year. About 60% of the revenue comes from selling virtual goods, with the rest coming from ads and promotions, according to eMarketer.

-- Alex Pham

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Zynga Inc., whose Facebook game FarmVille is played by 12 million people a day, has joined up with pop diva Lady Gaga to promote the publicity-seeking singer's next album, "Born This Way." 

The deal calls for Zynga to create GagaVille, a virtual version of "The Simple Life," a reality show that once featured socialites Paris Hilton and Nicole Richie on a dairy farm.

Unlike Hilton and Richie, however, Gaga will not have to get her nails dirty. The GagaVille farm, which players of FarmVille will be able to visit starting May 17, will be run by Zynga's developers.

The San Francisco company, whose social games are played by about 250 million people a day, promised that GagaVille will be decked out in the quirky singer's signature regalia. "Think crystals, unicorns and sheep on motorcycles," Zynga said in a press release Tuesday.

Fans also will be able to stream songs from "Born This Way," set to debut May 23, after they complete certain tasks in the game. In addition, those who buy a $25 gift card at Best Buy stores to play Zynga's games will be able to download the album for free.

The Gaga campaign is the latest in a string of promotions Zynga has done with musicians and movie studios in an effort to expand its reach and drive additional revenue for the company, which is valued at $10 billion based on its last round of venture financing. 

Earlier this year, Zynga helped promote Paramount Pictures' animated movie "Rango" and build buzz for Sony Pictures' "The Green Hornet." Last year, Zynga worked with DreamWorks Animation to advertise "Megamind" and with Dr. Dre to promote his album "Detox." 

Terms of the promotional deals, including the agreement with Lady Gaga, were not disclosed.

-- Alex Pham

Photo: Lady Gaga at a news conference in Mexico City to promote her upcoming album, "Born This Way." Credit: Henry Romero / Reuters. 

Beefing up its senior management ranks, social game giant Zynga has recruited John Schappert, the former chief operating officer of Electronic Arts.

The move by San Francisco-based Zynga is yet another signal of the company's seriousness in creating a social games powerhouse that can rival more traditional game companies in terms of revenue.

Zynga's 55 games, including Cityville, Farmville and Mafia Wars, command a 75% market share of social games played on Facebook in terms of number of players, according to AppData. Close to 260 million people played a Zynga game last month. The second-biggest developer on Facebook, Badoo, had just  49.5 million players.

Zynga, which is thought to be laying the groundwork for a initial public offering, reportedly has a valuation north of $10 billion, based on a recent funding round that raised $500 million in Februrary. In comparison, EA, based in Redwood City, Calif., has a market capitalization of $6.75 billion.

Schappert, a veteran of the video game industry, worked at Electronic Arts managing the company's sports game business, among other properties, before leaving in 2007 to join Microsoft Corp.'s Xbox games unit. He rejoined EA two years later to reunite with his former boss and EA chief executive, John Riccitiello. Schappert resigned from EA on Monday, according to an 8K regulatory filing.

He will join a number of EA alumni who are now involved in Zynga, including Mark Skaggs, who produced the Command & Conquer series of games for EA, among other titles, and Bing Gordon, former chief creative officer at EA who is an early investor in Zynga and is on the company's board.

News of Schappert's leaving EA to join Zynga was reported earlier by Reuters and VentureBeat.

-- Alex Pham

DreamWorks Animation Chief Executive Jeffrey Katzenberg has joined the board of Zynga, the San Francisco maker of wildly popular free online social games.

Katzenberg's move comes amid a a period of wild speculation over the value of Zynga, whose games boasts tens of millions of players each day. Zynga's latest funding round, which raised about half a billion dollars last month, puts its valuation at close to $10 billion, roughly 10 to 20 times the company's estimated annual revenue.

It has been widely reported that Zynga is preparing for an initial public offering next year.

The company's titles, including Cityville, Farmville, Frontierville and Texas Hold'em Poker, currently occupy four of the top 10 applications on Facebook. About 20 million people play Cityville each day, making it the No. 1 app on the social network.

Katzenberg joins five other executives on Zynga's board, including Bing Gordon, a partner at Kleiner Perkins Caufield & Byers; Reid Hoffman, founder of LinkedIn; Brad Feld, managing director of the Foundry Group; Owen Van Natta, the former CEO of MySpace before he became Zynga's executive vice president; and Mark Pincus, Zynga's CEO.

Pincus, in a statement, joked that "I knew he’d be a great fit for the board after he suggested that the blockbuster of 2011 could be ShrekVille."

-- Alex Pham

Photo: Jeffrey Katzenberg at CinemaCon last week in Las Vegas. Credit: Julie Jacobson / Associated Press.

Owen Van Natta, who unexpectedly stepped down in February as chief executive of News Corp.'s MySpace, has resurfaced at Zynga, a social gaming company, as its executive vice president.

Van Natta, 41, has also been appointed to Zynga's board, becoming the fifth member alongside Zynga CEO Marc Pincus; LinkedIn founder Reid Hoffman; Kleiner Perkins Caufield & Byers partner Bing Gordon; and Brad Feld, managing director of the Foundry Group.

Founded in 2007, Zynga has become one of the biggest developers of social games on Facebook. Its games, including Farmville and Mafia Wars, attract 65 million players a day.

Van Natta was on vacation Friday and not available for an interview.

His 10-month stint at MySpace came to an end after he clashed with News Corp.'s digital media chief Jon Miller. Van Natta had been chief executive of Project Playlist, a music-sharing website, when News Corp.'s Rupert Murdoch recruited him to help revitalize MySpace.

Prior to Project Playlist, Van Natta was in charge of operations at Facebook, where he helped build the company's advertising deals and forged an investment deal under which Microsoft Corp. paid $240 million for a 1.6% stake in the social network, giving Facebook a $15-billion valuation.

Zynga is no doubt hoping that Van Natta will apply his Midas touch at the social gaming company, where his responsibilities when he comes to work Monday will be nearly identical to his job at Facebook: namely, "revenue strategy, corporate development, international expansion and brand."

-- Alex Pham

Photo: Owen Van Natta. Credit: Zynga

The Web is fantastic at many things -- e-mail, e-commerce, e-vites, for example. But unless your name is Amazon or Google, making money there has proved elusive.

But Brian Reynolds, chief game designer for Zynga, the company that made the social game Farmville, this week shed a little light on how to get people to buy the farm online during his talk at the Design Innovate Communicate Entertain Summit in Las Vegas.

• Social games cost between $100,000 to $300,000 to make. 
• Between 3% and 5% of people who play social games pay money for virtual goods in the game or sign up for advertising "offers" that generate cash for the developer.
• Farmville is played by about 31 million people every day.

Now let's suppose that, given these ballpark figures, that each person who plays a social game generates, on average, a penny a day. Multiply that penny by the number of days in a year, 365, and you get an average of $3.65 generated per year per person.

If you are Farmville, you multiply that by the number of people who play your game on a daily basis: 

• $3.65 x 31 million people = $113 million a year

Not bad for a game that perhaps cost $300,000, maximum, to make. Of course, That doesn't include the salaries for a team of about 40 designers and programmers to continuously update and maintain the game (tack on $4 million to the annual budget).

Reynolds did not disclose how many pennies per day Farmville generates. But if it's a penny, one could conclude that it's a $100 million-a-year game. Perhaps that's why some have valued Zynga as a $3-billion company.

Now let's say you were especially clever and you figured out...