One of our newest speakers is Randy Breen, chief operating officer at Social Gaming Network, where he oversees game development, business development, strategy and executive management. He has worked in the game industry since 1986 at companies such as Electronic Arts, LucasArts and Emotiv Systems.

Today is the last chance to get DiscoveryBeat tickets at the early-bird rate of $114. That’s a 25 percent savings from the regular ticket price per attendee of $149.

As a reminder, DiscoveryBeat is all about getting your apps noticed. The event is targeted at the intersection of social, mobile and gaming trends. The event takes place in the afternoon of Dec. 8 at the Automattic Lounge on Pier 38 in San Francisco. Check out the DiscoveryBeat site for the full agenda and speakers. We’ve got a good batch of sponsors signing up for the event. A partial list of sponsors includes apps PR firm AppLaunch PR/VSC Consulting, Peter Relan’s startup incubator YouWeb, app store operator GetJar and social gaming firm SGN.

We’ll discuss the “secret recipe” for getting discovered in an age when getting discovered can mean huge viral growth and the difference between profound success or prompt failure. We think there are five main ingredients to the secret recipe for viral growth: 1) Social networking and marketing, 2) advertising, 3) web design, 4) partnering and 5) measurement.

Our previously announced speakers include John Pleasants, chief executive of social game firm Playdom, Ge Wang, co-founder and chief technology officer at music app maker Smule; Jon Vlassopulos, CEO of Zippo virtual lighter app maker Moderati; Roy Sehgal, executive producer of the Cafe World social game at Zynga; Julian Farrior, CEO and founder of iPhone hit game maker Backflip Studios; and Sebastien DeHalleux, president of social gaming firm Playfish, which was recently acquired by Electronic Arts for as much as $400 million.

Tickets are available here.

The company said it is cutting back investment in making games and other apps for Android-based cell phones, even though Android has won a lot of attention lately with new models from Motorola and Sony Ericsson, according to Reuters.

“We have significantly cut our investment in Android platform, just like … many others,” Gameloft finance director Alexandre de Rochefort said at an investor conference. “It is not as neatly done as on the iPhone. Google has not been very good to entice customers to actually buy products. On Android nobody is making significant revenue.”

By contrast, iPhone games are generating 13 percent of Gameloft’s revenue in its most recent quarter. Rochefort said that Gameloft is selling 400 times more games on iPhone than Android.

Not every developer is so disappointed with Android. Stewart Putney, chief executive of mobile games publisher and platform company Moblyng, said that he is very bullish on Android. His company has eight titles on Android and it deploys its games first on Android. One of his games recently hit No. 1 in the Android app store. (Moblyng makes a platform that allows it to publish games quickly on a bunch of different smartphones at the same time).

“Every app store is different,” Putney said.  “We have learned how to manage our Android app catalog presence and monetize our apps.  Android app monetization can be as good, or better, than iPhone- but it does require a different, more technology-driven, approach.  As app stores proliferate, older and bigger developers can’t just rely on being featured by Apple.”

Electronic Arts, the biggest mobile game company, also has faith in Android. Adam Sussman, vice president of worldwide publishing for EA Mobile, said, “We look for Google’s Android platform to become an important channel for EA Mobile and we have already launched some of EA Mobile’s most popular franchises on Android including Bejeweled and The Sims 3 with more to come, including Surviving High School, Spore Origins and many others.”

To date, 40 developers have launched official communities at Playhaven in its first month. Fans can join the online communities for free, and developers can claim the communities for free. Developers simply “click to claim” the communities, which means it’s minimal work for game creators.

The idea is to spark word-of-mouth buzz around games, which is extremely important on the iPhone because its easy to get lost among the 22,784 games among the 118,568 published iPhone apps (Mobclix numbers).

Fan reviews and ratings are especially important ways to get noticed on the iPhone, said Raymond Lau, chief executive of San Mateo, Calif.-based Playhaven, in an interview. These are the sorts of issues we’re going to discuss at our DiscoveryBeat conference on Dec. 8 in San Francisco.

“Right now, the developers fly blind because they don’t know who their fans are,” Lau said. “We want to empower the developers by establishing a community.”

Developers can add the links to the fan community into their apps for free. Lau said the company may add premium features that developers can pay for at some point in the future.

Playhaven uses the description and art work that companies submit to the AppStore when they launch, so it can easily start a new fan community for every new game. So far, the company has created more than 15,000 fan communities where fans can post game guides, tips, reviews and other content. They can also communicate with developers on the official sites. Develoeprs can create blog posts.

Some of the popular games with official forums are Aqua Globs, Radio Flare, Fare City: First Shift, Wheeler’s Treasure, Medieval and The Quest – Hero of Lukomorye I. Bryan Mitchell, the developer of Geared, found that a third of his game’s players are entering the community site every day, partly to see the fan-created guide to all 80 levels of the game. An AdMob survey found that 46 percent of iPhone users choose apps based on word-of-mouth recommendations.

Playhaven was founded in 2008 by Lau, Erik Yao, and Kurtiss Hare. Lau and Yao had previously started MyGameMug, a social networking site for gamers. It didn’t do particularly well, but it has become useful to World of Warcraft guilds that are recruiting new members. So the site is still in operation. The company has fewer than 10 employees.

Competitors who do similar things include Scoreloop, Aurora Feint’s Open Feint platform, and Ngmoco’s Plus+ platform. But Playhaven doesn’t require that its communities be integrated into a game via a software development kit. Investors include Tandem Entrepreneurs and LaunchBox Digital. The company raised an undisclosed amount for its seed round.

[The excitement in this industry is one of the reasons why we're holding an executive event called DiscoveryBeat on Dec. 8 in San Francisco. The event will explore the secret recipe for getting your social game or mobile phone application "discovered" in an age of increasing noise. Get your early bird ticket by today to get 25 percent off].

The development is one of the results of the recent scandal around the quality of offers in social games and apps. Some of the offers have been tainted as scams because they don’t tell consumers about hidden obligations or fees. Earlier today, Offerpal said that it was issuing a set of standards for its advertisers to follow in order to meet the highest ethics standards.

Tatto Media has had a history of problems with alleged deceptive ads, but Gambit has reportedly been trying to play by the rules. Facebook outlined the actions it was taking on Nov. 5, but it did not name the banned companies at that time. The reason was repeat violations of Facebook’s guidelines for offers. A spokesman for Facebook confirmed that the companies mentioned in the post were indeed Tatto and Gambit.

Curiously, Gambit said today in response to Offerpal’s announcement, “We at Gambit are really glad to hear that Offerpal is taking these steps. For our part, Gambit’s AdControl suite of tools has been in effect since the earliest days of Gambit, so we see this as great news because it validates our product development choices. … Because of the recent limelight on our industry, we think we can look forward to lots more announcements like this as more and more payments and offers companies realize that ‘monitor’ and ‘filter’ are key components to ‘monetize.’”

Gambit has also addressed the scam issue in its own blog. Apparently, Gambit’s approach isn’t good enough for Facebook, which has begun cracking down on scam offers as a result of the controversy. Gambit hasn’t yet responded to our query about the Facebook ban. [Update: Gambit says the following, somewhat cryptically: Gambit is, and has always been, up and running on our clients’ applications on Facebook, MySpace, and many other venues online. We're not happy that there has been news otherwise, and we are working to address the issue. We will be announcing the real story in days to come.]

The offer crackdown is serious, since Inside Social Games reported today that the offer business accounts for 30 percent of revenues in the $1 billion virtual goods business. And Inside Social Goods reported that as much of 20 percent of the offer business may be based on questionable promotions. Thus, the crackdown on Facebook and other social networks could have a significant slowing effect if all of the questionable offers are removed.

Offers are special ads that are used to monetize otherwise free social games on Facebook and other social networks. In an offer, a user will agree to sign up for a Netflix subscription or credit card offer. The business has been lucrative because the offers guaranteed some kind of direct benefit for the advertisers, who are willing to pay more. And these offers are appealing to gamers who didn’t want to pay for virtual goods with credit cards. Offer companies like Offerpal, Super Rewards, Gambit, Trialpay and others have been at the forefront of the industry.

But as with other online media, complaints arose that some offers were scams. The scandal ignited last month as Techcrunch editor Michael Arrington challenged former Offerpal CEO Anu Shukla over the legitimacy of most offers at the Virtual Goods Summit. Shukla said that less than 1 percent of the offers have generated complaints from users. But the ensuing debate led to changes in policy regarding offers at Zynga, RockYou, and other companies. Facebook renewed its crackdown on scams and actually stopped one of Zynga’s games, FishVille, from launching until Zynga removed controversial offers. Zynga has also stopped using offers until it could set up a system to properly vet them. Zynga is now in the process of restoring offers, using companies that include Offerpal.

Burned by a scandal in its offer business over inappropriate promos, Offerpal Media is moving to set standards that forbid offers that are misleading, deceptive or otherwise objectionable.

The action is the first move the company has made since it brought in a new chief executive, George Garrick, a couple of weeks ago. The CEO transition happened in the midst of a debate over scam offers that were allegedly duping users into mobile subscription deals and other purchases that they really didn’t want.

Offers are special ads that are used to monetize otherwise free social games on Facebook and other social networks. For example, a user will agree to sign up for a Netflix subscription or credit card offer.

The business has been lucrative because the offers guaranteed some kind of direct benefit for the advertisers, who are willing to pay more. And these offers are appealing to gamers who didn’t want to pay for virtual goods with credit cards. Offer companies like Offerpal, Super Rewards, Gambit, Trialpay and others have been at the forefront of the boom in virtual goods, which are expected to generate $1 billion in U.S. revenues in 2009.

But as with other online media, complaints arose that some offers were scams. The scandal ignited last month as Techcrunch editor Michael Arrington challenged former Offerpal CEO Anu Shukla over the legitimacy of most offers at the Virtual Goods Summit. Shukla said that less than 1 percent of the offers have generated complaints from users. But the ensuing debate led to changes in policy regarding offers at Zynga, RockYou, and other companies. Facebook renewed its crackdown on scams and actually stopped one of Zynga’s games, FishVille, from launching until Zynga removed controversial offers. Zynga has also stopped using offers until it can set up a system to properly vet them.

In an interview, Garrick said that the move is a result of some actions he took upon becoming CEO. He said that the new standards were developed in close contact with publishers such as Zynga and platform owners such as Facebook. He said that Offerpal has improved its tools that can automatically detect non-compliant offers and remove them from the system. Garrick referred to this as an “electronic watch dog.” He noted that Offerpal has pulled down hundreds of offers in recent weeks and has been putting them back up as they become compliant. Garrick noted, for instance, that the cost of an offer to consumers is now more clearly spelled out, with bigger font sizes, so there will be fewer complaints about offers containing “fine print” that cost consumers money.

“This is something the industry needs to do,” Garrick said. “Individual companies need to draw a line in the sand in what they will do. It sends a message to partners that you want valid and credible and ethical business.”

Offerpal’s move may help head off litigation. Lawyers have been fishing for clients for possible class-action lawsuits against the industry, on behalf of harmed consumers. Garrick admitted recently that Offerpal’s enforcement of its standards weren’t as good as they could have been, and he confirmed that view in the interview today.

Garrick’s own tone has been less combative and more apologetic than Shukla’s initial response to the allegations of scams, which she referred to as “shit, double shit and bullshit” at first. Garrick said he thought that, despite the emotional exchange that happened, Arrington acted appropriately drawing attention to the scams, as it was a “valid issue.”

“I personally try to avoid situations that are combative or confrontational,” Garrick said.

Garrick said that Shukla will continue as a board member and an advisor, but he said that she will not have an operational role in the company.

Offerpal says it is the first to offer a set of guidelines for advertisers. These include a multi-step review process before each offer goes live and automated processes for continually verifying the current offers. Offerpal will continue to do some things it says it has always done, like personally handling each complaint that comes in. The company says it has remained in close contact with Facebook, MySpace and other social platforms, which have moved toward a “zero tolerance” position on offer scams.

Offerpal also says it has added many high-value offers from recognizable brands such as Real Networks, ProFlowers, New York Times, DirecTV, Disney, Yahoo, Blockbuster, Netflix, Priceline, Discover Card, Columbia House, Nielsen, Gevalia and many more.

In a statement, Offerpal’s rival Gambit said, “We at Gambit are really glad to hear that Offerpal is taking these steps. For our part, Gambit’s AdControl suite of tools has been in effect since the earliest days of Gambit, so we see this as great news because it validates our product development choices. Because of the recent limelight on our industry, we think we can look forward to lots more announcements like this as more and more payments and offers companies realize that ‘monitor’ and ‘filter’ are key components to ‘monetize.’”

Interestingly, Facebook confirmed to us that Gambit has been banned from making offers on the social network.

Super Rewards, another Offerpal rival, said that it has had the ability to take out offers in an automated fashion since May. Super Rewards calls this a “blacklist” technology, where publishers say what kind of offers they don’t want. The company also makes available tools with which publishers can create a “whitelist,” or list of the kinds of offers they want. Super Rewards released its first “whitelist” technology today. [We noted that Super Rewards had an F/D- rating with the Better Business Bureau recently, but the company has addressed complaints and moved back to an A- status in the U.S., and it has moved from an F in Canada to a B+ rating there.]

The new cities take the service across six continents, but it’s not so long since it was a strictly a tech-insider phenomenon in the US. As cofounder Dennis Crowley (pictured below) told me last week “The goal is to build something that everyone wants to use”. The company first took its service outside the US almost by accident.

It started, like a Coen Brothers film, with two Dutchmen in Texas. Young Dutch entrepreneurs Alper Cugun (of Tipit) and Robert Gaal (of Wakoopa) discovered Foursquare at this year’s SXSW conference and had so much fun collecting points that they resolved at the airport to bring Foursquare to Amsterdam. On April 7 Gaal sent the first email to Crowley, Cugun got the venue data together — Amsterdam restaurants and other destinations worth including in the game — and within a few weeks Foursquare’s first European city was up and running. It wasn’t an overnight success. Apart from anything else, the iPhone application wasn’t approved for the Netherlands until much later, but they kept checking in. “It’s just addictive,” says Cugun. “It lures you in.”

For those unfamiliar with Foursquare, it’s a game that lets friends track each others’ location and earn points and badges by checking into various venues throughout a city. The player who checks into a particular venue most frequently earns the title of Mayor of that location.

Dennis Crowley, co-founder of Foursquare, visited Amsterdam last weekend for a Mobile Monday event and used the opportunity to announce Foursquare’s new API. The new API opens up the service to third-party developers, promising new kinds of expansion going forward. Several applications developed locally in Amsterdam are already using the Foursquare API including a Foursquare Layar (Layar is a mobile augmented reality browser also from Amsterdam).

Gaal explained how there are certain fundamentals in how young people socialise: hit as many places as possible, find your friends, prove your social worth and be conspicuous about it. Foursquare’s game mechanics for collecting points and competing to be the mayor of a particular location fit in perfectly with those objectives. Soon, pitched battles were breaking out over rankings on the Foursquare leader board in Amsterdam. Things stopped just short of defenestration of rivals for the title of mayor of De Burgermeester. “The app gets mapped onto a part of your brain,” says Cugun. “It becomes like an extra sense. When you are outside the scope of Foursquare, it’s like your peripheral vision is gone.”

One of the most interesting things about Foursquare is the way it shapes social behavior. Players use it to avoid people as much as to find their friends. A new behavior has emerged in New York called the “pre-check in,” where a user checks in on on the way to a venue or even earlier. When friends see the check in they will assume he has arrived and will be “fooled” into showing up before he does. Players will also purposely check in at a venue far away from where they know a friend will be, to passively send a signal that they probably won’t catch up with that friend tonight. One notable aspect of Foursquare in Amsterdam was that it wasn’t just for tech insiders. Gaal says “First it caught on with our friends, not necessarily with the tech-savvy crowd”. This has obvious relevance to Foursquare’s ambitions to go from tech media darling to mainstream application. More on that below.

So what is Foursquare, really?

This answer isn’t that straightforward. As Crowley says, “If you put 10 different people around a table, they will give you 10 different answers about what it does”. Is it a social utility, a recommendation service, a game? Foursquare actually brings multiple ideas together; presence, location-tracking, the real world as a video game, personal metrics, discovery and even “mediated serendipity”. There is something unique about that odd mixture that users (100,000 of them to date since the launch in March of this year) find very compelling. Like smokers who need a cigarette first thing in the morning, checking in is the first thing players do when they arrive somewhere. It’s hard to avoid some comparison to the practice of sending tweets about what a great time you are having instead of having too great a time to report on it. But if Twitter is about what you are doing now, Foursquare is about “what next?”

I asked Crowley about his objectives for Foursquare. “Now that people are giving us their location, and have been doing that over a set period of time, what other interesting things can we bubble up? What can emerge out of that? That’s something we never got to figure out with DodgeBall (an earlier service sold to Google in 2005), and that’s the primary reason we are doing Foursquare. With Dodgeball we didn’t really understand how much value the history of where you have been can have. Foursquare is specifically built to take advantage of that history.”

When it comes to competitors, and there are plenty, including Loopt and Gowalla, Foursquare doesn’t seem too worried. Crowley says, “We feel like we know what we are doing. We are not focusing too much on the competitors because we know exactly what to build next.” On the implications for Foursquare if Facebook decides to buy a location-tracking company, Crowley is cagey. He merely suggests that since privacy is a very important part of Facebook’s DNA, the company will be extra careful in how it approaches location-tracking.

Crowley sees Foursquare’s business model being based on three main sources of revenue:

* Sponsorships and branded badges, which form part of the marketing campaigns of major brands.
* Customer loyalty programs from retailers and large hospitality business chains. There is currently only one mayor in each venue, but these businesses want to reward a selection of their best customers.
* Local merchants might reward customers for things like introducing new clients to the store. Foursquare can detect which users are friends, when they checked in together, and chop up all kinds of other interesting statistics.

Foursquare’s new cities bring the total number of cities covered to 100. The Blackberry version is due out sometime in December, and the objective is to get the application on to many more devices. The last few months have been spent refactoring the infrastructure rather than adding new features; what Crowley calls “3 months of awful”. That should be changing soon. The features most requested by users are new cities, new badges (apparently there are endless ideas for these) and the Blackberry version.

Crowley’s visit to Amsterdam also reminded him of how important the new user experience is. When you are in an unfamiliar neighborhood Foursquare “should give you something awesome to do” even if there are not many other players yet. Other new directions could include incentivizing people beyond entertainment. Intriguing possibilities in that area are suggested by Foursquare’s recent partnership with BART and the phenomenon of users going to the gym more often just to earn the Gym Rat badge on Foursquare.

Foursquare may finally be going global but Amsterdam was happy to be the first at the party. As Cugun says, “It may be worthless to be the mayor but it’s cool to have the crown next to you”.

[Image credit: mediamemo.allthingsd.com]

The winner were selected by a panel of expert judges, including Accel Partners’ Rich Wong, PricewaterhouseCoopers’ Tim Carey, KPMG’s Craig Lobdell and Spring Ventures founder Sunil Paul. The Innovation Competition itself was hosted by Mayfield Fund and moderated by the firm’s managing director Navin Chaddha.

Locust Storage emerged from stealth mode today, launching an enterprise and data center energy storage system that promises to reduce energy use by up to 90 percent for its customers. It does this by “providing excess energy when driven under hard use and storing energy when demand is low,” according to founder and CEO Seth Georgion “the key is to power the discs down when they aren’t in use.” The company is looking for a first round of investment, with a plan to launch the product in beta in the first quarter, followed up by a general release in the third. Based in Campbell, Calif., the company has rightly attracted a lot of interest from data center owners. “Too many people are already writing us checks,” Georgion said following the competition.

The company says that its storage systems will easily handle petabytes (1 petabyte is equivalent to all Facebook photos right now) as well as exabytes, the equivalent of 10 trillion Facebook photos, 10billion YouTube videos, 129 trillion emails and 6 million blu-ray movies. Another feature that makes Locust’s systems unique: They are wireless.

CPower, a more established company that runs demand response programs, also took home the prize. Much like its competitors EnerNOC and Comverge, the New York-based firm provides financial incentives for industrial commercial companies to cut their power consumption when the grid experiences peak demand levels that could cause outages. It actually has the distinction of being the largest company who does this, even though it has yet to go public. It already enjoys extensive partnerships with utilities and grid operators, which should also help it gain more market share.

So far, CPower has raised two rounds of funding — the second, amounting to $10.7 million in April of this year. It is backed by Mayfield Fund, Bessemer Venture Partners, Expansion Capital Partners, Schneider Electric Ventures, New York City Investment Fund and Consensus Business Group.

Look for these two companies, and the other nine finalists — R2EV, Viridity Energy, Current Group, Grid Net, Consert, Xtreme Power, Econetix, Control4 and Building IQ — to make waves in the Smart Grid space in the next several months.

There are now more than 20 million active Xbox Live subscribers (both free users and those who pay $50 a year for multiplayer gaming). That means that more than two out of three Xbox 360 owners use the service. The company has added popular new video services such as Netflix videos and this week it debuted integration with Twitter, Facebook and Last.fm.

Microsoft also knocked out a bunch of users from the service who were using “modded” Xbox 360s, which have been modified to play pirated games. We sat down this week with Marc Whitten, the general manager of Xbox Live, to catch up on the latest with the service at the Streaming Media West show.

VentureBeat: You’ve got more than 20 million subscribers now. Tell us more about the numbers.

Marc Whitten: We hit two million concurrent users (meaning they were logged in at the same time) last week. That was a big milestone for us. It wasn’t all that long ago that we announced 1 million concurrent users. That’s been great to see. I am excited about the usage of a bunch of the stuff we’ve unveiled, which includes Netflix movies and the Sky Broadcasting service in the United Kingdom. (The Xbox 360 serves as a set-top box for Sky’s Internet TV service.) The usage of these non-game services ranks as high as the game usage. We have high expectations for the usage of Facebook, Twitter and Last.fm too. People are really loving these experiences.

VB: So the Nov. 10 release of Call of Duty: Modern Warfare 2 pushed the service into its record numbers?

MW: Modern Warfare 2 was phenomenal. Those guys at Infinity Ward are amazing. It pushed us into the record.

VB: It seems like a lot of people skipped the single-player game altogether and just started playing multiplayer on Xbox Live?

MW: We had a mix. That had a great single player experience, but the community play for Modern Warfare has always been so great that a lot of people moved right into multiplayer. We have seen that before, though it depends on how well the multiplayer experience is. On day one of a launch, we see a big surge of multiplayer with almost any game. Halo Wars saw a spike in multiplayer on its first day.

VB: So Modern Warfare 2 beat out Halo 3: ODST in multiplayer numbers?

MW: Yes, Modern Warfare 2 broke the records.

VB: When you started thinking about adding Facebook functions into Xbox Live, how did you approach it?

MW: When we launched the New Xbox Experience on Xbox Live a year ago with Netflix, part of the goal was to create a platform that let us change and modify and launch things right away. It wasn’t just about doing better graphics. You recall that for a long time we would update the service just twice a year and figure out how to add a new blade into the user interface. That work made it easy to figure out how we could layer in this new stuff.

We worked on Facebook for less than a year. It was not a difficult project. The fundamental thing you ask when you’re designing something like this is ‘what can be done better?’ To us, that was clearly adding better photo viewing. It’s a better social environment in front of the big screen. You can all be comfortable and look at the pictures from Facebook more easily than crowding around a computer. It has been way too hard to get photos on your TV. Building something that makes that easy was what we wanted to do.

The beauty of Facebook to me is that people will link their Xbox Live accounts to their Facebook accounts. Then the next new people who sign up for Xbox Live will find they already have a lot of friends on it. They can get 30 friends a lot faster.

VB: I suppose people have a lot more friends on Facebook.

MW: We had a 100-friend limit on Xbox Live. Mixing these experiences together will get us to the best of what we want. The rate of adding friends has to do with who you already know on the service and finding experiences together that you like. With Sky, you can do party mode viewing. You can all watch a movie together and comment on it.

VB: There were stories that talked about how Microsoft knocked out a lot of modders from Xbox Live. I recall that early on there were maybe 1 or 2 percent of the people who were using modded machines. Why would there be such a large number now? One report said it was a million modders knocked out.

MW: It’s a cat and mouse game. These were people that were pirating software. We try to keep sanctity of life from a safety and anti-cheating perspective and we protect our partners. We didn’t release the number. I cannot explain to you why people would think it was a million people. It wasn’t a million people. Check the veracity of that claim. It was one news source. I think we do a really good job understanding what people are doing on the system. That applies to intellectual property (piracy) and how we treat the community in terms of harassment. We are committed to making it better and better.

VB: With the social networks, you will bring in a lot of user-generated content. Is that a security risk?

MW: No. Where we have introduced user-generated content, we have been careful to create community tools that help us in the policing and to make sure we can maintain a safe environment. With indie games, anyone can submit a game for our community games section. That runs in a sandbox so that we can test if the game operates correctly in the environment. We also have community ratings so they can rate it and filter out inappropriate content. They serve as the first filter for us.

VB: How are the indie games doing now?

MW: It’s going well. One of the games I’m playing the most now is an indie game called Avatar Drop. You drop your avatars through hoops and watch the ragdoll physics (where the bodies bounce around with realistic physical effects). Indie is great because it brings you interesting services.

VB: Will you be able to do a lot more with the social networks, like playing Facebook games?

MW: Bringing social networks and content together creates a different experience. Social has been different in the past. Can you play a game that is on the social network? In the future, they will move much closer together. With Sky, you can see how they mingle together. We can just start mingling things. Social will remake entertainment. A lot of stuff happens because the tools are created. I take a lot of pictures with my cell phone camera. They get on Facebook and suddenly they can show up on the television now with Xbox Live. If you have a party at your house, you can put up a Facebook page. You can take pictures and see them constantly update on the TV. That’s a cool experience. It will get more interesting as creators use the tools to create new experiences.

VB: A lot of the observation of games this year has been about the rapid growth of free Facebook games, at the same time that console games have been shrinking because of the recession. At some point, it looks like you might embrace that. But it could be bad for your business if people play free games instead of paid console games.

MW: It’s been a great year on Xbox Live. If you recall, we went from a million concurrent users to two million, that’s great growth. It’s been an uptime for us. Live continues to be an incredibly relevant experience in terms of digital downloads and the growth of our Xbox Live Arcade games. Some of those download games are 100 percent higher than a year before.

The other point is that we are going to continue to see social and games come together in interesting ways on a variety of platforms. I am passionate about this — entertainment you want, with the people you are about, wherever you are. A lot will happen in the living room. There is also a lot that will happen on the PC, the web, and mobile platforms. We need to make sure we are building the right experiences. We are very excited about the growth of games for everyone. It just brings more players into the category.

The company said in September that it’s service was seeing big growth, but it has made more progress now. It’s announcing today that 12 more game developers have signed up to use its mobile payments system. These new companies alone will help Boku reach 200 million more customers who play 250 social and casual games.

With Boku, game players can use their mobile phone numbers to pay for virtual goods in social games on Facebook and other platforms. They simply enter their phone number when prompted to pay for something. Then they reply “y” to a text message that verifies the transaction.

The San Francisco-based company is also announcing a new user interface, allowing partners to increase their revenue dramatically. It will be interesting to see how much Boku can grow in the U.S.

European and Japanese users have embraced using their cell phones to pay for items. But the U.S. has lagged.

The new game developer partners include 6Waves, Cie Studios, Cyberstep, GameDuell, IGG, King.com, NHN USA ijji, Ntreev, Outspark, PerfectWorld, Snap Interactive and Zoosk. With these new partners, Boku has a number of the top Facebook apps covered. It also has a strong presence on web sites using virtual goods models. Full told, Boku has more than 1,000 merchant partners who accept its payment system in 56 countries.

Boku, a startup competition finalist at our recent MobileBeat conference, is funded by Benchmark Capital, Index Ventures and Khosla Ventures. The company was founded in 2008 and raised $13 million in June. It used a bunch of the money to buy payment firms Mobillcash and Paymo. Rivals include Zong, Obopay, and PayPal.

Today, the company is announcing that is merging with casual game development firm Offspring. And Offspring’s chief executive Lesley Mansford will become NeoEdge’s new CEO. Mountain View, Calif.-based NeoEdge will continue to focus on serving ads to casual games, which you can download from web sites. That business is the mainstay of NeoEdge’s revenues and the reason it was founded.

But NeoEdge will also make its own casual and social games that use NeoEdge’s platforms, now that it has merged with Offspring.

Mansford will be joined by her co-founders: Andrew Pedersen, Karen Schulman, and Todd Heringer. These executives worked with Mansford at Pogo.com, the casual online games company that was purchased by Electronic Arts.  Mansford replaces Dan Servos, who took over in May as CEO after original CEO Alex Terry left. Servos will now be a senior vice president at NeoEdge.

This big change is happening in part because of NeoEdge’s new investor, Vanedge Capital, which (along with Jefferson Partners) has invested $4 million into NeoEdge. Vanedge chief Paul Lee replaced former Atari chief Nolan Bushnell as chairman of NeoEdge in September. The positive for NeoEdge is that it is getting a fresh, proven management team that created a successful casual game business at Pogo.

On the other hand, this is a pretty drastic change that shows something at NeoEdge just wasn’t working right. The downloadable casual games — which players can play on web sites and pay to download them if they like them — have been hit by a huge price drop. The games sold for $19.99 a couple of years ago, but now they sell for only $7  thanks to the proliferation of free games on sites such as Facebook and price slashing at Amazon.com.

In an interview, Mansford said that NeoEdge will continue to push forward on both of its businesses, in-game ad sales and the development of games. The in-game ad platform is being used in 500 ad-supported casual games, and web sites such as Yahoo and NBC Universal have partnered with NeoEdge.

Offspring, meanwhile, was just getting started making social casual games and had not yet published anything. Mansford met with Lee, who brought up the idea of merging the two companies. Mansford said that the businesses are complimentary and that Neoedge has considerable technology that Offspring can use in creating games. The combined company will have 24 people, with four from Offspring and 20 from NeoEdge. In the coming months, Mansford said that NeoEdge will add eight people as it fills out the staff for its game studio in San Francisco. Pederson, one of the Pogo.com veterans, will head the studio.

Mansford said that the company will launch its first game on Facebook. In doing so, that will help kickstart the presence of NeoEdge’s ad platform on Facebook. NeoEdge will add new social features to its platform, on top of the ability to insert video ads into games.

Mansford said that NeoEdge expects an extremely strong fourth quarter, thanks to a comeback in online ads. The average cost per mil, or CPMs, is around $15. CPMs are a measure of the cost of ads per 1,000 views. In in-game ads, rivals include Microsoft’s Massive, IGA Worldwide, Wild Tangent and Double Fusion. But those companies don’t focus on NeoEdge’s niche in downloadable casual games.

The new business won’t be easy. Offspring will compete against the likes of Electronic Arts, which bought social game firm Playfish. It is also competing against more established companies Playdom and Zynga. But Mansford said the social game market is just beginning and there is plenty of opportunity for NeoEdge’s game division.

The platform is a natural extension of the analytics business that has become very popular. With AppCircle, Flurry can offer something valuable to developers. And, with luck, those developers won’t mind sharing revenue with Flurry, given that the platform should help them generate lots more sales.

Peter Farago, vice president of marketing at Flurry, said that it all starts with analytics. Developers can use Flurry’s analytics for free, just by putting some code in their iPhone/iPod Touch apps. Flurry can then get lots of data about what users do, such as how much time they spend with an app, what other apps they use, and how much money they spend on apps.

“Flurry can effectively solve the problem of discovery for thousands of developers,” Farago said.

About 14,000 developers, from Viacom to Namco, are using the analytics. As a result, Flurry is able to track the habits of 40 million unique users per month, or about two thirds of the population of iPhone and iPod Touch users. Flurry is also tracking about two thirds of the Android-based phone users in the same way.

That data becomes extremely relevant in coming up with a list of recommended apps. Apps that use Flurry’s AppCircle can then make a recommendation to the user about other apps they should buy. The recommendation appears much like a mobile ad: it’s a single line at the bottom of the app which a user can tap. Because the recommendation is based on the users own tastes, it can be much better targeted. All the user has to do is tap on the recommendation, which brings up a description of the app and then another link to tap for purchase.

If users purchase a recommended app, Flurry knows about it. It can thus take its cut of the purchase and the developer keeps the rest. It’s a kind of razors and razor blades strategy, where Flurry gives away its analytics and potentially makes money on the recommendations.

The payment works like this. A user pays the regular AppStore price for a recommended app.  The developer whose app is sold takes 70 percent of the gross sale and Apple keeps 30 percent. Then the developer whose app is sold, shares another 50 cents or 30 percent of the app gross (whichever is higher) with Flurry. Flurry splits that between itself and the host app (or the one that does the recommending).  Later, Apple gives 5 percent to Flurry via Linkshare, a marketing program that rewards companies that generate AppStore purchases. So Flurry’s total winds up being 20 percent of the gross in the end. Flurry doesn’t get anything unless a transaction takes place.

It is not so different from the way that AdMob, which was purchased by Google last week for $750 million, makes money via mobile ads. But Flurry’s technology is interesting because it is based not just on what users purchase, as is the case with Apple’s Genius application. Rather, it’s based on usage of those apps. Farago says that this fact makes the apps a lot more useful.What’s more, ads tend to work best in free apps. In paid apps, users show less patience for ads.

Dozens of developers are trying out the system, Farago said. Five or ten of them may launch by the end of November. The platform has been submitted to Apple and there are no red flags. Flurry has been working on the technology for six months. One of the developers trying it out is PlayFirst. And Farago showed off a game, Digit Defenders, that uses the AppCircle platform.

“We’re pretty excited about it,” Farago said. “We think this can be just like driving word of mouth.”

Besides AdMob, other rivals include Scoreloop, Ngmoco, and Aurora Feint. The latter three focus on games. But Farago noted that other apps such as books are coming on strong. It’s possible for Flurry’s AppCircle to make recommendations that cross product lines, such as recommending a Harry Potter eBook to someone who bought a Harry Potter game on the iPhone. If a publisher wants to block certain apps from being recommended, it can do so.

Overall, the benefits for apps developers could be reaching new users, better return on investment in acquiring new users, affordably priced advertising, a higher ranking in the AppStore, a charge only when a download occurs, and the automatic generation of ad material. The latter is true because Flurry’s descriptions use the available AppStore assets.

If the plan works, Flurry will be on its way to its first meaningful means of monetization. The company was started in 2005 and has raised $5 million to date. It has 12 employees.

[The excitement in this industry is one of the reasons why we're holding an executive event called DiscoveryBeat on Dec. 8 in San Francisco. The event will explore the secret recipe for getting your social game or mobile phone application "discovered" in an age of increasing noise. Get your early bird ticket by today to get 25 percent off]

The smart pen turns ordinary writing into a digital experience. With the smart pen, you can record a lecture as you take notes on a special paper that tracks your writing. If you put the pen on a particular section of the writing, the pen will play back the audio of the words that were being spoken at the time you took the notes.

It can do that because the pen comes with flash memory for audio recording an a microprocessor. The new apps can take advantage of the hardware, since Livescribe has opened up its platform for others. The new apps include language dictionaries. With those, you point at a word on paper and the pen will display a translated version of the word on its monochrome display.

The company launched the pen in 2008. Now it offers a $169 model with 2 gigabytes of data storage, as well as a $199 4-gigabyte version that can store 400 hours of audio.

Among the new apps, is an educational tool for adults learning English as a second language. There are tools for the visually impaired, medical transcription, oil field services, games, utilities, and productivity tools.

An example of an educational app is U.S. Presidents. When you write a number, the pen will display the name of the president. If you write 44, the pen displays Barack Obama, for example. I tried some of the apps out, such as a classical music app that will play a clip from Bach for you if you tap on a word on a piece of paper. It really is amazing to make something happen just by tapping on a piece of paper or writing something down.

Byron Connell, head of marketing at the company, said he expects to see audio transcription services available sometime next year for users who want their handwritten notes converted into text. That could be the ultimate app for LiveScribe.

The company is trying to emulate the success of Apple’s iTunes/AppStore business model. The Oakland, Calif.-based company has also given a facelift to its Livescribe Desktop software, smartpen firmware and its online store.

The company doesn’t disclose exact sales numbers. But Connell said that revenues were up 2.5 times over a year ago, and he expects sales will double in the coming year. If sales keep growing and the app makers develop new software, Livescribe will find itself in the enviable position of having an app economy. So far, there are 5,500 registered developers. For every app sold, LiveScribe keeps 35 percent.

The pen is now available in 25 countries and it can be found in a lot of locations in the U.S., including Best Buy, Target, BJ’s, and Costco. There are other signs of momentum. The City of Sacramento, for instance, is using the pens to share notes of its meetings online. Numerous school districts are ordering pens by the thousands.

The company was founded in 2007 and has 70 employees. Over its history, the company has raised $48.8 million. Investors include Aeris Capital, Lionhart Investments, and Vantage Point Venture Partners. There are related smart pens on the market from Leapfrog Enterprises, but those pens are aimed at much younger users. Livescribe targets its smart pens at college students and adults.

He began the conversation with VentureBeat editor Matt Marshall by comparing the evolution of the Smart Grid to the initial, disorganized adoption of the internet. At the same time, he acknowledged how different grid and cleantech investing is than previous areas of focus in the Silicon Valley. Chiefly, most companies in the space that are looking for funding require a lot more money and time to get where their going. He gave distributed energy startup Bloom Energy as a prime example — seven years into it, Kleiner is still backing it, but it has yet to emerge from stealth mode. “Instead of companies looking for $20 million, they need $250 million,” Doerr generalized.

He said he recognizes that venture capitalists still have the responsibility to make money, but that the stakes are much higher than that. Following the release of Al Gore’s Inconvenient Truth, Doerr said he was gauging people’s reactions to the film, and his daughter very candidly told him, “Dad this is your generation’s fault and you better fix it.” Speechless, he went back to his partners and asked them what they were going to do about the situation.

Since then, Kleiner Perkins has grown its cleantech practice into one of the biggest and most influential in the venture capital community — on a national, not just Silicon Valley level.

When asked what advice he had to offer to investors scouting the Smart Grid space for the killer apps and hottest investments, Doerr said it’s important not to assume that the economy is going to get any better than it is today. It’s important to work within current constraints, while still looking forward.

He said that the tight economy is certainly sending ripples through the Smart Grid investment structure, in addition to the fact that the federal government spent less than $1 billion on research and development in the whole cleantech sector last year. That said, he has confidence in the Obama Administration to make the right moves in the coming years to build out a cleaner, more effective grid.

“We’re at a moment in time when we have a president with a very clear agenda around green,” he said. “And he has built an absolutely A team, from Steven Chu to Carol Browner to Cathy Zoi, and he knows how to manage and get things done. I know the team is good, but I’m still sobered by how hard it is to reach policy that’s going to work.”

Marshall turned the conversation to Kleiner Perkins’ lead Smart Grid portfolio company, Silver Spring Networks. When pointedly asked whether the smart metering communications company will go public next year (there’s been rumors circulating), Doerr offered a coy, “It’s got traction… it could.”

Beyond that, he said that Silver Spring’s success has been built largely on its top-tier crop of partners and supporters, a group that includes major utilities like Florida Power & Light and Commonwealth Edison. “Bringing together these kinds of players takes the kind of organization that also pays a lot of attention to the needs of customers,”  Doerr said.

He said that Kleiner’s experience with Silver Spring has taught it how different it is to work with grid companies than typical Silicon Valley investments. “We’re not accustomed to this in the Valley — we’re used to creating a product, putting it up on the web and selling it over and over.” Instead, much of Silver Spring’s success depends, and will continue to ride on quick evolution and consistent growth.

Doerr, armed with a white board and dry-erase markers, then fielded questions from the audience.

Responding to whether the Smart Grid will create jobs, he offered an unequivocal “Yes… the only thing more important from a policy point of view is to put a price on carbon.” He says that he has lobbied time and again for that price to be set, arguing that doing so will open the floodgates on a host of cleantech innovation, which in turn will generate more jobs.

He also backed the concept of decoupling — the separation of utility revenue from the amount of energy they deliver. By instituting these policies, utilities will be freed up to become active proponents of conservation, with the power to launch very influential energy-saving programs. He said he is interested in seeing what Jim Rogers will say on this topic later in today’s agenda.

Airing his opinions on California state policy, Doerr threw his support behind Assembly Bill 32, designed to make major cuts in the emissions of greenhouse gases statewide. He said that gubernatorial candidate Meg Whitman’s promise to repeal the law gave him great pause — especially because she is making the argument that it will hurt employment in California, which he says is plain untrue.

He highlighted Denmark as an illustration of how employment is consistent with aggressive climate legislation. The country’s unemployment rate remains incredibly low, while it exports hordes of wind turbines every year. “Denmark put a price on carbon, and that encouraged investment,” Doerr said.

He capped off his talk by saying he is very concerned about the U.S.’s position in the global cleantech business. America only has about four companies in the upper echelon of cleantech companies, spanning solar, wind, advanced batteries, and more he said.

“When you look at the internet, the U.S. won in every category — look at Microsoft, Amazon, Apple, eBay — we were leaders in all of them,” Doerr said. “Even if you don’t believe in global warming, or if you don’t believe this is going to be the biggest global business… the U.S. is not going to win unless our entrepreneurs start to lead — and not just our business entrepreneurs, also our policy entrepreneurs.”

He concluded by giving his email out to the assembled crowd. So if you ever want to bend John Doerr’s ear, you can reach him at jdoerr@kpcb.com.

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, today and tomorrow, Nov. 18-19, featuring keynotes from Nobel Prize winner Al Gore and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.

[Second photo credit: David Lin]

Security is one of the foremost concerns as utilities and other companies work on building a cleaner, more efficient grid. With so much energy consumption data flying by on wireless networks, it seems almost too easy for people to hack in and disrupt service. Contracting a computer virus is one thing — a virus that can take out power for whole city blocks is something entirely different, and far more disconcerting.

The worry isn’t for nothing either. Wired magazine reported earlier this month that the Information Trust Institute at the University of Illinois received an $18.8 million grant for a five-year investigation of Smart Grid cybersecurity. The research group successfully took out power in 15,000 homes for a full day with a digital worm — that certainly proved a point.

Verizon’s goal in launching this new consulting branch is to help utilities protect against such instances before they happen. In order to do so, it will be working with major energy vendors to make sure they are in compliance with 2010 requirements published by the North American Electric Reliability Corporation. Utilities certified by NERC will also be subject to random audits to make sure no cracks have appeared in their systems.

Verizon is bringing cybersecurity expertise earned in the mobile space to its new utility clients. The energy services will be folded into the company’s broader portfolio of security consulting offerings, which it has long provided to literally hundreds of clients. It says it will charge anywhere between $50,000 to $200,000 to work with utilities.

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, today and tomorrow, Nov. 18-19, featuring keynotes from Nobel Prize winner Al Gore and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.

That number means it has beaten all other video game launches as well as generated more revenue in its first five days than any movie. It has done that in spite of, or because of, a controversial scene in the game where a player can choose to mow down civilians in a terrorist attack on an airport.

It was so controversial that the media reported that the game was banned in Russia, but the game’s publisher said that wasn’t true and that it deleted the scene from the PC version of the game in Russia and chose not to sell console versions there.

By comparison, the worldwide box office five-day worldwide record set by Harry Potter and the Half-Blood Prince film was $394 million. The opening revenues for The Dark Knight film was $203.8 million. The largest video game sales was held by Grand Theft Auto IV, which sold 6 million units and generated $500 million in its first five days.

On Microsoft’s Xbox Live online game service for the Xbox 360, more than 5.2 million multiplayer hours were logged playing Modern Warfare 2 on the first day alone. On Nov. 10, more than 2.2 million gamers played Modern Warfare 2 on Xbox Live, setting a one-day record.

That’s where the real danger of this game lies for the rest of the game industry. Players may breeze through the single-player campaign, which I finished playing last night, in a mere eight hours. But they may play multiplayer matches for months. In that sense, the game could occupy the time of hardcore gamers and suck out a lot of the oxygen from the rest of game sales. The single player experience was very cool, but I’m very much excited about playing multiplayer matches in the coming days.

Now the question is just how long Modern Warfare 2’s streak is going to last for its publisher, Activision Blizzard. The Santa Monica, Calif.-based company itself said it remained cautious about the global economy’s effect on its business and consumer spending overall.

“In just five days of sell through, Call of Duty: Modern Warfare 2 has become the largest entertainment launch in history and a pop culture phenomenon,” said Robert Kotick, chief executive of Activision Blizzard, in a statement. “The title’s success redefines entertainment as millions of consumers have chosen to play Modern Warfare 2 at unprecedented levels rather than engage in other forms of media.”

(Of course, games typically cost six times more than a movie ticket).