[In a piece that's already caused a bit of a comments firestorm, Gamasutra's Christian Nutt returns from this week's Social Gaming Summit in San Francisco with a provocative, but I think reasonably fair, look at social network gaming's hardheaded business attitude, the iPhone, and what 'virality' really means.]

I was more optimistic going into the Social Gaming Summit this year -- which we've written two other in-depth write-ups from -- than I was heading out of it. Last year, it seemed young and hopeful.

This year, the mini-conference focused on Facebook and MySpace social network gaming -- led by firms like Playfish and Zynga and microtransaction-based games like Mafia Wars -- seemed a bit more dry. There was lots of emphasis on marketing, metrics, retention, and was constantly punctuated by what seemed to be an endless repetition of the terrible, made-up word "virality".

Okay: that's the cynical take on the conference. And I missed the last session featuring the quite un-cynical Daniel James from Three Rings who can't help but bring personality into any proceeding.

But for all last year's feeling of hope, after hearing about harnessing the power of social relationships to bring gaming to new heights, about collaboration with the established game industry to create something greater than either... this year's left me wondering what I was hoping for.

Sponsors of the conference included SuperRewards, Offerpal Media, Daopay, GlobalCollect, and Social Gold. If you don't know what these companies do, you can pretty much guess from their names.

No, console and PC developers don't just do it for the love. But their passion for more than the dollar makes sessions at Game Developers Conference, Microsoft Gamefest, IGDA Leadership Forum and other industry summits inspirational, as well as good business.

You can easily and quite often rightly accuse game developers of being naive. On the other hand, during the "expert talk" on metrics, (Lil) Green Patch CEO David King delivered a design lesson that seems to sum up social gaming -- or does if you're feeling uncharitable, anyway.

Pointing to a slide that showed that one quest in one of the company's Mafia Wars clones was particularly popular, King said, "You can use this kind of data to inform game design." I expected the follow-up to be along the line of "you can make more quests like this."

But no: per King, "You can say 'Well, maybe this is too good of a payout, and we could use this as a point to push more monetization.'" Players, in other words, should be forced to pay real-world currency to take on that quest they enjoy so much. It's carrot-and-stick design.

As The Joker says in The Dark Knight, "If you're good at something, never do it for free." Game developers who sell packaged software for $60 a hit certainly don't. In 2009, data mining and focus testing are integral tools in game creation.

But still: the immediacy of both the granularity of the metric (they like this!) and the suggested developer response (charge them!) were a little uncomfortable.

Creativity vs. Analysis

The battle between creative game design and the drive to create a Pavlovian response (and hopefully induce payment) in the game audience was a major theme of the conference.

Hi5, a gaming-focused social network based in the U.S. but much more popular in Latin America, skewed the discussion towards "fun" -- with spokesman and executive producer Andrew Sheppard, one of the few to even use that word all day.

"We're now focusing on fun and defining the social graph around that," he said. "It's an important nuance but it's a very key thing to call out." Facebook and MySpace aren't game platforms; they're social platforms that support games. They don't necessarily understand "fun", nor shape their systems around promoting it.

"There are more things about social gaming that are different than similar," says Mark Pincus, founder and CEO of Facebook's top game developer, Zynga, of comparing the medium to traditional console and PC games. And Zynga takes a very analytical approach to the market.

There's infinite room for competition on social networks, as the web is vast -- Pincus said Zynga "welcomes" newcomers to the market. But that infinite space means that there is infinite duplication. Jeremy Liew, managing director of Lightspeed Venture Partners, has the obvious response: "I think you guys welcomed [massively popular Facebook game] Farm Town with FarmVille, yesterday," referring to Zynga's own casual farming game -- and drawing big laughs from the audience.

How does Zynga decide what games to make? "We look at success metrics around virality and retention before we launch." The company, according to Pincus, spent $2 million developing a game called Guild of Heroes, but never launched it because "it didn't drive the right metrics."

This makes business sense; these kinds of decisions are made everywhere all of the time. The disquieting thing is that the topics of fun or creativity -- or any of the virtues most in the game industry like to inject into their commercial products -- were rarely if ever addressed.

On 'Virality'

If there was one word that was painfully overused at the conference, it was "virality". I mean, first up, it's not even a word. It's a neologism, and a pretty tortured one at that.

But it's still the core of the social gaming biz, at present. The basic idea is that the best form of marketing on a social network is user-to-user. Why? "Virality discounts user acquisition costs, potentially down to zero," says Siqi Chen, founder of Serious Business, makers of the hugely popular app Friends for Sale.

Chen is convinced that gaming virality is crucial: "We spend a lot of time making small incremental changes in our app, because a 10% change could separate a dying app from a growing app." He has the charts and equations to back this up, believe me. He's a man obsessed by data (we'll get to metrics in a minute.)

Virality has actually been run into the ground, to an extent, argues James Currier, CEO of WonderHill. "People tend to be less viral now, because viral [marketing] started in the U.S. in '97, '98."

There are other options, too, says Greg Tseng, of social networking site Tagged. "There are lots and lots of other type of user acquisitions than virality. There's word of mouth, there's cross-promoting, and there's search engine optimization. If the lifetime value of your customer is high enough that you can spend money to acquire users, then you should, by all means, do that. In Silicon Valley, there's almost a religion around 'viral at all costs'... But if you look at the biggest players, they spend a lot of money."

Offerpal Media acquires users through incentives, so it's no surprise that CEO Anu Shukla isn't totally convinced of the efficacy of virality. "We've seen less and less applications really use the viral loop effectively," she says. "I think more commonly what we're seeing is that you need a sustained effort to buy an audience."

But users you acquire might not be valuable, Shukla admits. "We've found that the users that we acquire don't have the ROI, they don't monetize. It's a delicate balance." No other platform can allow developers to attract such a huge audience so quickly, but an easily-gained audience may not be that valuable.

Despite his obsession with statistics, Chen doesn't want virality to steal the show. "We didn't want this to be, 'Social gaming is all about metrics, so you make something crappy and add a virality engine to it.' You have to have a good game. Metrics will not replace design."

Playfish COO Sebastien de Halleux was even more overt. "The core metric -- I hear a lot of people talk about 'virality.' The Playfish approach is to focus on something quite different, which is fun," he argues. "This puts game design as the core metric of game distribution."

Playfish does subtly encourage its players to recommend its games to friends, but only based on whether or not they truly enjoy them: "Quality drives distribution because it's up to the users," he said.

How? "We [want to] ensure that only people who are deeply engaged with the content invite their friends." Common tactics in other Facebook games include forcing players to recruit friends to access advanced content, by contrast.

The iPhone Isn't There Yet

It's hard to tell whether the speakers like the iPhone just because everybody likes the iPhone, or because they do see value in it. The only consensus about the device seemed to be that it hasn't quite arrived as a social gaming platform just yet.

"We think that iPhone and other smart phones represent a really important platform for social gaming, because it's going to make social gaming accessible to a lot of people who would never get it," Zynga's Pincus says. "We've made a big commitment to iPhone and mobile far ahead of the business opportunity."

Of course, with its Facebook Connect API, which allows outside applications to pull Facebook user data and feed information back to user accounts, the company's Gareth Davis was bullish on what he called "multi device gaming" (Connect will also interface with Xbox 360 and Nintendo DSi later this year.) "If I have an iPhone and you're on Facebook, we can game together," he observes. But nobody else who spoke about it seemed that impressed so far.

In a world of limitless space, the App Store limitations were even more grating to the social network crowd. Lightspeed's Jeremy Liew thinks the current state of the app store works counter to the natural growth of social gaming on platforms like Facebook: "I think this is a really important difference between social and iPhone games... It's a lot more like retail because there can only be top 25 games on the shelf." In web culture, "retail" is a dirty word.

Words like "nascent" were tossed around about the platform, with Shukla adding there's "not a lot of money" in it. The opportunities, for social games companies, seem to still be computer-based.

Convergence is a Tough Road

So, yes: Facebook integration is coming to Xbox 360 and, in a more limited way, to Nintendo DSi, by the end of the year.

But the integration and collaboration between the traditional games industry and the social gaming industry has not seemingly gotten much further in the year since the last Social Games Summit, despite the obvious hopes of last year's speakers.

I think that there are really obvious reasons this isn't currently happening. Tech-oriented, web-trained, fast-paced, hard-nosed Silicon Valley culture is not really that similar to game developer culture. Outside of GDC Austin (operated by Think Services, which also owns Gamasutra) I haven't seen a lot of opportunities for the two industries to mix.

Most crucially, everybody's too damn busy trying to get their jobs done to really spend a lot of time or thought on the issue.

That said, Facebook's Davis is still optimistic that we're just in the run-up period. "I think we're at the beginning and it's going to take a few years. There's a lot to learn as both industries converge, and they're both complementary."

The reason for his optimism? Davis has seen unannounced projects from big companies that work with Facebook Connect. "It's still very early, and I don't think any of these projects are announced, but I'm very impressed." He describes them as "fundamentally social" and "device-based and hooked into a social network," with the "device" in question most likely to be an iPhone or Xbox 360.

Most developers get into games because they're fundamentally interested in the medium. Zynga's Mark Pincus has a different perspective on the function games serve on social networks: "People get fatigued on the news feeds and they want another experience they can share with their friends."

Games have always been used to kill boredom; but with all the statistics the packaged game industry trumpets about being the primary form of entertainment for so many, these days, the mindset that they're just second-string timewasters may be tough to swallow for many developers.

James Liu, COO of Oak Pacific Interactive, one of the biggest social networking companies in China and home to a 400-strong MMO development team made a really interesting observation about the reading material the OPI engineers have by their desks.

"These guys are [engineering] PhDs from top notch schools, but they study economy right now," as well as psychology: the better to understand and motivate user behavior in social networks. That's simply not broadly the case in the game industry as we think of it, right now.

The cultural difference between the extant game industry and the social gaming people does seem to be rooted in pretty deeply in pure terms of organization and process. The Silicon Valley term "engineer" was constantly thrown around; the game industry's "designer" was never really spoken of.

Back to Siqi Chen's obsession with metrics: "Internally I always consider metrics our most important project, probably to our detriment," he says, while Dave King pegs his engineering staff at "60 or 80 percent metrics and analysis, 20-ish percent to other stuff."

His engineers are experts in analysis, too -- they have to understand what the data represents to make the required changes to the games. The granularity that Chen and King showed on stage was extremely impressive.

These include RPG games broken down by level 1-100 showing exactly where users dropped off; multicolored charts showing every quest in the game and how frequently each is completed at a per-level basis; hourly reports on clickthroughs of different variations on promotional copy for the same game.

King's games are simple -- really, really simple -- but the thought that goes into making them sticky and making users pay is conversely rather complicated. In a weird way, it's almost the reverse of the packaged game industry.

As noted above, it's simple to get a lot of users quickly, but they may not be useful -- which is why King wants to figure out why the ones that are playing continue to do so, and make them pay when they reach content they enjoy. His engineers respond instantly with tweaks. He doesn't have a business otherwise.

With packaged software, it's primarily making a holistic experience that's worth $60 after years of hype -- and that's (more or less) the end of the story, till the sequel rolls around. And that cultural difference may be tougher to surmount than getting people to attend the same conferences.