It’s crunch time for Sequoia-backed Pocket Gems, the maker of what seemed to be a never-ending hit, Tap Zoo, a casual game that stuck among the top 10 grossing iOS apps for about a year.

But with Zynga now gunning for the company’s crown jewel, the San Francisco-based game developer has just released a more polished version of the game called Tap Zoo 2: World Tour with several new worlds starting with an African-themed park (see below). (To unlock the new park, players have to reached Level 14 and cross-breed a hyena and giraffe.) The company also made its cross-breeding mechanic more sophisticated by letting users mix and match the heads, bodies and tails of different animals to create new ones.

With refreshed artwork, Tap Zoo 2 shows the higher-production value that Pocket Gems now has to achieve to compete with games in the same genre from Zynga, Backflip Studios and TinyCo. It’s a trend we’re seeing in multiple game genres. As user acquisition gets more expensive on iOS and with more venture funding in the space, we’re seeing the original genre leaders on Apple’s platform like Storm8 fall behind other companies that put more attention into art and graphics like Funzio, which coincidentally was founded by some of the original Storm8 founders.

In launching Dream Zoo, Zynga riffed on Pocket Gems’ original Tap Zoo by adding more leveling for each animal, a social currency called ‘Hearts’ and more mini-games around cleaning and feeding. In Zynga’s roadshow for its initial public offering expected next week, the company said that when it launches a new game, it expects to do three to five times better than the incumbent. Because Zynga has lost daily active users for two consecutive quarters, it has to successfully diversify off Facebook and onto iOS and Android to raise value for shareholders going into 2012. So Zynga will spend whatever it takes to lock up those top-grossing spots.

To keep up with the competition, Pocket Gems has hired very aggressively in the last few months by bulking up to around 100 employees and even sending executives to India to recruit local talent there. It’s gone for the low-hanging fruit by releasing seasonal editions of its games like Tap Zoo: Santa’s Quest and Holiday Hotel, but plans to do entirely new games too.