Exclusive: What exactly is different about Zynga’s Dream Heights?

Dream Heights, Zynga’s newest mobile game, has made plenty of pre-launch headlines in the last month given its similarities to NimbleBit’s Tiny Tower. Inside Mobile Apps takes an exclusive hands-on tour of the version that arrives in the U.S. App Store tomorrow.

We’ve covered cloning at length on both Inside Mobile Apps and our sister site Inside Social Games. The purpose of this article isn’t to rehash the cloning debate. Rather, we present to you the differences between the two games — and leave the rest to your own judgement.

Both games are “tower” titles where the player is tasked with building individual floors of a skyscraper, designating some as commercial spaces and some as residential spaces. As virtual residents move into the tower, the player must staff the commercial spaces, trying to balance each resident’s natural skills to the skills needed to run specific storefronts. The storefronts go on to earn the player virtual currency, which is primarily spent on building more floors. That’s what’s the same about Dream Heights and Tiny Tower.

Here are the subtle and not-so-subtle differences:

Presentation: Dream Heights goes for a cartoonish, 3D look that’s intended to appeal to a mass market. The game puts players in the role of a customizable avatar that hangs out in the lower level of the tower. Players are encouraged to build more floors to their tower by a set of visual landmarks like the Big Ben that they try to “outgrow.” In contrast, Tiny Tower uses an 8-bit art style that appeals to retro video game fans and progress is encouraged mostly by running out of jobs to offer residents or not having enough residents to fully staff all stores.

Social features: All Zynga games incorporate the company’s massive userbase through social interactions very early on in the game experience. This takes place in Dream Heights with a “Sky Bridge” floor the player constructs during the tutorial. This floor connects the player’s tower to other Dream Heights players in a visual way. The player avatar is seen walking along the Sky Bridge to a series of storefronts connected by the floor, each represented by one of the player’s friends.

Visiting a friend’s store nets the player special items that can be brought back to their own tower and traded in for virtual currency. Friends’ avatars will also visit the player’s tower, looking for specific items in different stores. Selling a friend character these items nets the player a currency bonus. Tiny Tower’s social features are currently limited to seeing friends’ towers via Game Center.

Currency System: Like in its other “Dream” games, Zynga uses three types of currency in Dream Heights: coins, cash and reputation. Coins are the “grind” currency players earn through normal gameplay and spend on main game objectives like building more floors. Cash is the premium currency players are expected to buy via in-app purchases. They can spent on speeding up floor construction or item stocking in stores. Reputation, or hearts, comes from visiting friends. This currency unlocks special items to stock in stores. Tiny Tower, meanwhile, uses only two types of currency and can earn them both through normal gameplay activity.

Quests: Aside from the friend shopping feature mentioned above, Dream Heights doesn’t offer quests. Tiny Tower sometimes asks the player to locate a specific resident on a floor to complete a quest and carries a list of Missions the player can complete to earn currency.

Manual Collection: Dream Heights currently requires players to enter the game and click on a store to obtain all the money earned from selling goods in the store’s inventory. Tiny Tower automatically harvests this money even while the player isn’t in-game.

Pace: Dream Heights moves more slowly than Tiny Tower. It takes longer to earn enough currency to build floors and the manual collection element means the player spends longer scrolling up and down floors looking for places to collect currency.

With six recent launches and 60M downloads, Pocket Gems looks to hold onto the top

After coming off a stellar year with the top grossing title of the year in the iOS store, the big question for Sequoia Capital-backed Pocket Gems is — what’s next?

The company has rather quietly launched a host of titles in the last two months including Zombie Takeover and Tappily Ever After, as it looks to duplicate the success of its biggest hit Tap Zoo amid a more competitive environment. In the last three months, the company has released six games that range from brand new intellectual property like Zombie Takeover to seasonal releases of hits like Tap Zoo.

“You’ll see us push the envelope this year with new genres and types of gameplay,” chief operating officer Ben Liu tells us. “We have a couple big launches in the next few months.”

The company just crossed 60 million downloads. That’s not the absolute highest range for mobile game developers, but it is notable in light of how well Pocket Gems’ games ranked on the grossing charts last year. Tap Zoo alone has been downloaded more than 23 million times, while its sequel Tap Zoo 2 was downloaded by 1 million players in its launch week.

Now with 110 employees, the pressure is on Pocket Gems to see whether it can reproduce its earlier success. While all gaming companies face this challenge in a hits-driven business, it’s becoming more difficult for everyone as the charts have become more volatile in recent months. In its earnings call yesterday, Glu Mobile said that the period of peak earnings for games is shortening.

One of Pocket Gems’ recent titles is in the familar animal care-taking genre, but it has more of a storyline. In Tappily Ever After, players have to save a princess who was kidnapped on the eve of her wedding. To get to her fairytale wedding, they have to make an animal park to tame the kidnapper’s creatures.

But the company’s also moving into new territory with titles like Zombie Takeover. In the game, the player gets control of a zombie school. Using a similar mechanic as in Tap Pet Hotel, they have to go build rooms to attract specific characters then turn them into zombies. They also have to produce food to grow a zombie army, which they can then use to attack nearby buildings. Pocket Gems also did a number of seasonal titles like Tap Zoo: Santa’s Quest and Holiday Hotel.

Pocket Gems is also now facing off with one of the most formidable competitors in the app store — Zynga. The company launched Dream Zoo late last year, and then used its acquisition of New York-based Astro Ape Studios to produce Dream PetHouse. Both games are notably similar to Pocket Gems’ most lucrative titles, Tap Zoo and Tap Pet Hotel.

“We respect Zynga a lot. They have really talented developers but they’re just one company out of millions in the app store,” Liu said. “Consumers are going to judge what’s a good product and what’s not.”

Because of all the competition, Pocket Gems’ games are not quite as highly ranked as they were in mid-2011. That said, the number of iOS devices out on the market is increasing and any given ranking today on the top-grossing charts produces more revenue than it did half a year ago.

“On the whole, it balances out well for us,” Liu said. “We’re still going to do genre-defining games. And financially, we’re doing great.”

Glu Mobile’s smartphone revenues more than triple to $10.1M in the fourth quarter

It’s been a rough ride for Glu Mobile over the last few years. But it looks like the company revenues are just holding steady as smartphone revenues compensate for the declines in Glu’s old feature phone business. That suggests it may be able to cross over into profitability next year.

Glu’s smartphone revenues tripled year-over-year to $10.1 million, meaning the company now makes about two-thirds of its revenues from iOS and Android. A year ago, just one-fifth of Glu’s revenues came from smartphones, showing that the company is managing the transition to iOS and Android. Shares rallied on the news, climbing 6.1 percent in after-hours trading to $4.19.

Glu grew daily active users to 2.9 million from 2.1 million in the previous quarter, while monthly active users went from 22.1 million to 31.4 million. (Zynga, for comparison, said it had 13 million daily active users on mobile devices in December.) The number of in-app purchases rose to 1.52 million in the fourth quarter from 866,000 in the previous one. The average purchase size declined to $5.79 from $6.40 as Glu used discounts to boost overall volume.

Android revenue grew to $4.3 million in the fourth quarter, but its share of Glu’s total sales fell to 29 percent. That mirrors the trend we saw with Apple’s remarkable $46.3 billion quarter boosting the entire iOS ecosystem relative to Android.

That said, it looks like near-term growth is slowing and Glu is still at least a year away from being profitable. Glu grew smartphone revenues by just $400,000 over the previous quarter in what was supposed to be one of the most lucrative periods of the year for developers given the iPhone 4S launch and the holidays.

The market is just becoming more competitive as we’re now hearing that it’s now taking around 100,000 downloads to break into the top 25 free apps in the U.S. Previously, developers only needed to break the 100,000 mark if they wanted placement in the top 10. (Apple also warned developers not to game rankings this month.)

“The periods of time in which games retain their peak revenue is shortening,” noted chief executive Niccolo de Masi. The other key point to remember is that Glu’s growth in the first half of the year was also enhanced by offer wall revenues, a strategy which is no longer viable because Apple clamped down on these practices back in April.

Even as churn continues to push titles in and out of the top quickly, a few of Glu’s brands seem to have staying power. The action-adventure game Gun Bros has earned $7.9 million since its launch in 2010. In the fourth quarter, it earned $1.4 million, only slightly down from the $1.5 million it earned the previous quarter. Another stalwart, Contract Killer, brought in $1.9 million. Bug Village brought in $700,000 while Eternity Warriors earned $1 million.

Overall, Glu Mobile doesn’t expect to be profitable until after this year when it breaks even on an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in the fourth quarter of this year. The company widened its annual loss to $21.2 million compared to $11.4 million the year before because it made a big bet through the acquisitions of Griptonite and Blammo Games in the middle of the year. The net loss for the fourth quarter was $10 million.

However, the picture could change as Blammo just published its first game Stardom and Glu expects that Griptonite will start producing titles by March. The Griptonite deal also brought $10 million in cash on the studio’s balance sheet to Glu. Glu will end the year with $32.2 million in cash on its balance sheet, up from $12.9 million the year before.

Glu says smartphones revenues (on non-generally accepted accounting principles or Non-GAAP) will come in at between $14 and 15 million this quarter. For the year, smartphone revenues should make up between 83 and 95 percent of the company’s total Non-GAAP revenues. Glu says it expects Non-GAAP smartphone revenues to come in between $71.0 million and $75.0 million for the full year.

Ngmoco executive Oberfest leaves DeNA to start mobile health company

Another day, another DeNA departure.

Jason Oberfest, who was vice president of social applications for the mobile-gaming platform, has left to co-found a mobile health startup called Mango Health. Oberfest joined Ngmoco in September of 2009, just months before it was acquired by Japanese gaming giant DeNA in a deal worth up to $403 million. Now that the first date has just passed for the $100 million earnout, it looks like we might see more movement from employees of the U.S. subsidiary.

Ngmoco was acquired as a key part of DeNA’s foreign expansion plans. Flush with cash from the Japanese market, both DeNA and its rival GREE are looking to build out global mobile-gaming platforms that replicate their virtual currency-dependent model in Western markets. Ngmoco launched DeNA’s Mobage gaming platform formally last fall and has signed up prominent developers including Nimblebit, TinyCo and Glu Mobile.

Oberfest has not replied to requests for comment on what Mango Health is or what his next plans are. He’s entering a hot space: Massive Health raised $2.25 million from Andreessen Horowitz, Charles River Ventures and others. Venture firms like Accel Partners and NEA are also contributing to a health startup incubator called Rock Health.

We’re also seeing departures from some of the other U.S. assets DeNA acquired the same year. Two co-founders from Gameview Studios, another startup DeNA acquired around the same time it did the Ngmoco deal, have also recently left the company. Gameview is behind Tap Fish, a virtual aquarium game that consistently ranks as one of the top-grossing Android apps. The third co-founder, Irfan Virk, stayed on to start a Canadian gaming studio in Vancouver for DeNA.

GREE’s net income climbs threefold to $167M on $545M in revenue during holiday quarter

GREE said it more than tripled its net income from a year ago to 12.7 billion yen ($167.3 million) and nearly did the same for its overall revenue with net sales reaching 41.5 billion yen ($545.3 million).

Just for perspective, GREE’s annual revenue will probably end up being about twice what Zynga pulled in last year. GREE expects that it will make more than half a billion U.S. dollars in net income for the full fiscal year. (Meanwhile, Electronic Arts reported a $205 million net loss yesterday for the most recent quarter.)

The key to GREE’s remarkable growth has been the rise of paid services like avatar customization, which contributed 38.3 billion yen ($502.8 million), and unexpectedly strong growth in the company’s home market of Japan. Advertising revenue also grew slightly to 3.3 billion yen ($42.5 million). This split between virtual goods and advertising is very similar to what we’ve seen in Zynga’s revenues, where the San Francisco-based company earns just 6 percent of its revenue from advertising.

For the full fiscal year, GREE expects to see net sales of 160 to 170 billion yen ($2.1 to 2.2 billion) and a net income of 44 to 50 billion yen ($578 to $657 million). GREE says it doesn’t expect to see any sales revenue from Europe, U.S. or the rest of Asia for the fiscal year. The company is pouring resources into expanding overseas after spending $104 million last year to buy mobile-social gaming network OpenFeint. It’s also aggressively stepping up its headcount in the San Francisco Bay Area.

GREE says its plan this quarter is to combine its footprint in Japan with that of OpenFeint’s to create a brand-new, unified mobile-social gaming network that will debut by the middle of the year. It will have a reach of 190 million users and more than 7,500 games.

That’s a turnabout for the company, which originally said it would have two separate networks. In December, the company said it announced 12 games and 12 partners for the platform and yesterday it revealed that partners like Amazon and Microsoft would help provide support for developers.

The company’s shares rose 10.1 percent today to 2,499 yen or $34.81, giving the company a market capitalization of 578.6 billion yen ($7.6 billion).

Zynga’s market cap climbs more than $1B a day after Facebook’s IPO filing

Zynga shares jumped almost 17 percent today after Facebook’s IPO filing yesterday revealed that the social network’s payments revenue climbed 20 percent quarter-over-quarter by year-end — suggesting Zynga might see a comparable boost in its own bottom line. Facebook added that the social game developer contributes 12 percent of its 2011 revenues.

At market close yesterday, Zynga was trading at $10.96 per share — slightly higher than the $10 price they debuted at in December‘s IPO. They opened today at $11.05 and peaked at $12.81 in just a little over an hour. By close, Zynga’s market capitalization was up 12 percent to $8.66 billion from $7.4 billion yesterday. Zynga’s Facebook traffic is also on the rise — up 1.9 million daily active users and 6.4 million monthly active users in the last seven days as recorded by our AppData traffic tracking service.

Zynga won’t share its fourth quarter earnings until Feb. 14, but that hasn’t stopped analysts from speculating that the company may report higher bookings for the quarter. If Facebook’s payments revenues went up 20 percent, Zynga might see a comparable rise. Facebook said its payments revenue rose to $188 million in the fourth quarter from $156 million in the previous one, suggesting that its platform may be doing a better job at converting gamers into paying for virtual goods.

In a research note republished on AllThingsD, Baird Equity Research analyst Colin Sebastian estimates that Zynga’s net bookings may have been $315 million in the fourth quarter.

Sebastian’s estimate is rough. Since Facebook reported $1.13 billion in revenue in the fourth quarter and Zynga contributes a 12 percent of that, Zynga may have contributed $135 million to the social network’s earnings. Baird believes 75 to 80 percent, or $101 to $108 million of that, is from virtual goods sales. If that $101 to 108 million is the 30 percent revenue share Zynga must give to Facebook, then the social gaming company keeps $235 to $250 million. Sebastian adds that an additional $65 million may have come from other platforms like iOS, Android and Google+

Other gaming companies like Gameloft and Capcom have said this week that their mobile revenues ranged from $25.4 million to $52.6 million for the holiday quarter. That suggests that Zynga might easily have a $100 to $200 million-a-year mobile gaming business because it has similarly ranked games.

With Facebook delivering 93 percent of Zynga’s revenues, the two company’s futures are intertwined until at least 2015, when a five-year deal between the two expires. Zynga has taken steps to mitigate the risk of relying completely on Facebook by expanding into mobile and international markets.

Facebook, meanwhile, is trying to forge a stronger, more compelling games platform with improved discovery to offset rising costs to developers on its platform. Through Credits, Facebook takes a 30 percent cut of all in-game transactions. On top of that, social game developers are also a large source of advertising revenue for the company.

Beeline, Capcom’s mobile unit, sees revenues climb to $52.6 million in the first nine months of this fiscal year

Buoyed by hits like Snoopy’s Street Fair and growth in the local Japanese market, Capcom’s mobile revenue climbed 68 percent year-over-year to 4 billion yen ($52.6 million) in the first nine months of this fiscal year. Profit or net income was up almost threefold year-over-year at 1.4 billion yen ($17.9 million).

The Tokyo-based company’s mobile unit has done well for itself by licensing out well-known brands and building casual, freemium mobile games around them. It plans to leverage another family-friendly brand this quarter with the launch of Shrek’s Fairytale Kingdom. Capcom also said a Japanese mobile title, Monhan Tankenki Maboroshi no Shima did well on the GREE platform along with another game, Resident Evil: Outbreak Survive.

Capcom’s mobile and social gaming studio Beeline Interactive has now seen 46 million cumulative downloads. Monthly active users have also grown by 30 percent over the last three months, likely due to Apple’s strong quarterly sales of more than 37 million iPhones.

For the fiscal year, Capcom says it expects to see $25 million in net income on $78.8 million in revenue from its Beeline unit. Yesterday we saw that Gameloft’s smartphone and tablet games produced $25.4 million in revenue for the company. Both of these figures underscore remarkable growth for the entire mobile gaming industry.

Mobile was one of the brightest spots in what was otherwise a difficult year for Capcom. Overall net sales, including arcade and video game revenues, were down 29 percent to 50.3 billion yen ($660 million). Net income declined 52.6 percent to $42.6 million as sales of video games declined. During the same quarter a year ago, Capcom said it released a number of flagship titles for consoles which it didn’t do this holiday period.

At the same time Capcom is confronting what every other major video game maker is seeing — the rapid shift away from handheld gaming devices to smartphones. Yesterday, Electronic Arts’ earnings revealed that its Nintendo DS business has fallen by more than two-thirds in the last year to $15 million last quarter from $49 million a year earlier.

Capcom said in its statement today: “The trend of structural change washes over the video game industry, with the rapid growth of affordable and easily accessible social games attributable to the rise of mobile phones and smart phone.”

Gimmie, a new startup from a PopCap developer, ties real-world deals with gameplay

The former lead developer behind EA PopCap’s Plants vs. Zombies is behind a new startup that ties real-world deals and purchases to gameplay.

Called Gimmie and backed by $200,000 from mobile incubator Tandem, the company lets gamers earn special points that can be redeemed for discounts on products like iPad cases and pillows. It’s kind of like a cross between the install networks, which give gamers virtual currency rewards if they watch ads or download other apps, and Kiip, which gives gamers coupons when they make in-game achievements.

While users play or take actions in a game like level up or buy virtual goods, they rack up more Gimmie points. Then they can go to an offer wall-like experience for real goods where they can get discounts. Like in-game offers, users can pick whatever products they want. Gimmie is currently in beta with ten mobile app developers and ten consumer product brands. It’s an HTML5-based offer wall, so it works across iOS and Android.

Gimmie says the benefit to advertisers is that they get a new way to market their real-world products in the fast-growing world of mobile apps. They can target the users they want to show their products to and give extra discounts if consumers share their deals on Facebook.

David Ng, the company’s chief executive, said he and co-founder Roy Liu came up with the idea while playing basketball.

“We thought it would be great if we could do a startup that could combine gaming with shopping,” he said. “We thought there must be a way we can make a real-world offer so easy that it’s kind of like a basketball layup or gimmie.”

Liu, who worked for EA PopCap for five years and was lead developer on Plants Vs. Zombies, left shortly after its acquisition by EA and joined Ng.

Gimmie faces more of a hurdle in making this two-sided market work. Unlike Flurry, Tapjoy and W3i, which mainly deal with developers as both publishers and advertisers, Gimmie will need to attract developers and consumer product brands. Kiip has had some success with this in recruiting brands like Sephora, Carl’s Jr. and PopChips, thanks to the hustle of its young founder Brian Wong. Tapjoy has also expanded its advertiser portfolio to brands in recent months, but that was only after it secured a strong network of developer advertisers.

However, now that consumers are reportedly spending more time in mobile apps than on the web, brands are bound to pay more attention to them as an advertising medium and may be willing to take a bet on a relatively small startup as a partner.

For now, Gimmie is free to both developers and advertisers. The presumable business model here would be some sort of affiliate model where Gimmie and the developer displaying the promotion split a fee every time a consumer makes a transaction. But Ng wouldn’t give more specifics.

Gimmie Teaser from GimmieWorld on Vimeo.

Exclusive: Microsoft to discontinue its virtual currency system Microsoft Points

Microsoft’s proprietary virtual currency system, Microsoft Points, will be phased out by the end of the year, according to a source with knowledge of the company’s decision. The change will affect developers for Windows Phone, the Zune marketplace and Xbox Live.

By the end of 2012, all transactions will be based on the region set on the purchasing account and real money will be used to purchase all Windows Phone content. The move puts the Windows Phone Marketplace in line with the purchasing practices used in the App Store and the Android Market.

When asked Microsoft declined to provide further information, with a Microsoft spokesperson responding with “we do not comment on rumours or speculation.”

Mobile developers that have publishing agreements with Microsoft are being warned to plan their upcoming downloadable content (DLC) and in-app purchases in accordance with the change. Customers with existing Microsoft Points balances will have them converted into their local currency after the switch.

Microsoft Points are currently used to purchase games and media content on Xbox Live, the Zune Marketplace, the PC and Windows Phone, but the system isn’t used universally. On Xbox Live, the prices for full games are listed in dollars, but downloadable content is purchased with Points. On Windows Phone, apps are priced in dollars, but users can make in-app purchases with Points. Windows Phone users can also use Microsoft Points to buy accessories for their Xbox Live avatars and purchase Points directly from their phones.

While the decision to eliminate Microsoft Points may seem to be a surprising move, Microsoft has been gradually introducing cash purchases to Xbox Live, the most popular platform where Points are used. It makes sense for the company to move to a single cash-based payment system, as it brings it in line with its app market competitors and eliminates a consistent criticism of the system — that the Points to dollar conversion ratio is not only confusing, but it forces consumers to purchase more Points than they actually need. The smallest amount of Points that a consumer can purchase at one time is 400, or $5 worth.

Android Game Developer Bionic Panda Raises Seed Round From SoftTech, Norwest, Google Ventures

Even though Android’s reach still isn’t making up for its weakness in monetization, investors are still betting that it will just take time.

Bionic Panda Games, an Android-focused mobile gaming company, said it raised an undisclosed amount of funding from an angel and venture syndicate including SoftTech Venture Capital, Norwest Venture Partners, Google Ventures, 500 Startups, and former Gaia Online chief executive Craig Sherman and Kal Vepuri.

Bionic Panda is run by a more experienced team, with deep connections throughout the social and mobile gaming world. Its co-founders Charles Hudson and Mike Jimenez worked at Serious Business, which was sold to Zynga in 2010. Hudson is also a venture partner at SoftTech, which explains the firm’s participation in the round. He also worked in corporate development at Google, whose venture arm also contributed to the round. (Disclosure: Hudson co-authors our Inside Virtual Goods reports.)

The company has so far focused on taking proven genres to Google’s platform. Its game Aqua Pets is should be familiar to anyone who has played any of a long line of casual aquarium games like Tap Fish, Fishville, Happy Aquarium and so on. The game lets players build up an aquarium by getting virtual seals, turtles and fish and has attracted more than 3 million downloads.

While Android has more than 200 million activated devices and is adding 700,000 new ones per day, it still lags behind iOS with about one-fourth of the revenue for comparable titles. Hudson has been more transparent than many gaming CEOs in talking candidly about the difficulties and opportunities in building on the Android platform. He called for Google to create its own version of Game Center a few months ago.

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