At the NewSchools Summit on Wednesday, social gaming giant Zynga and NewSchools Venture Fund said they are partnering up for an entrepreneurship program to support startups developing learning games and apps.

Zynga will host the startups at its San Francisco office, where they’ll be able to interact with game designers and product managers, and Zynga.org, the company’s nonprofit arm, has committed $1 million for the first year.

“Through the efforts of Zynga.org, we’ve shown that social games can impact peoples’ lives for the better,” said Ken Weber, executive director of Zynga.org. “[With NewSchools], we want to help entrepreneurs create high quality, scalable learning games that will enhance learning experiences for all 21st century students.”

The announcement comes during something of a boom time in ed tech. Since the start of the year, a handful of other accelerators have also launched targeting education startups. And, according to CB Insights, education technology companies raised $1.1 billion in 2012.

The first cohort of the Zynga- and NewSchools-backed program will start this summer and include learning gaming apps Kidaptive, LocoMotiveLabs and Motion Math. Education social network Edmodo will join the cohort as a charter partner.

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The news, in case you missed it, came last Friday when a company called 888 confirmed it will begin operating online poker games as soon as May alongside established casinos like Treasure Island and Caesars. The move comes in response to the federal government’s decision in 2011 that online gambling is no longer illegal if states explicitly permit it; Nevada, New Jersey and Delaware have so far passed laws to allow it.

So why is the 888 news not a big deal? According to a source who works in the gambling industry, 888′s opportunity comes with two major strings attached: it is limited to players physically in the state of Nevada and it only covers poker. The second condition is important because poker depends on player liquidity, which means it is less lucrative for the house than games like roulette or slots.

The source, who did not want to be identified, added that the online gambling industry is focusing instead on developments in New Jersey which has a much larger population (8.8M versus 2.7M in Nevada) and where the state law permits all casino floor games, not just poker.

In the bigger picture, even New Jersey is unlikely to be a game changer given that online gaming companies still have to cater to players on a state by state basis.

“It’s like taking the stock exchange and dividing it by 50. You have to ring fence players, and then account for whether the legal age is 18 or 21,” said the source, adding that the industry is crossing their fingers for a big state to come on board. “If Texas or California falls, that would be a more interesting thing.”

The online gaming industry, which was chased out of the United States in 2006, is also hoping for a bigger breakthrough in the form of new federal legislation that would establish unified rules and protocols across the country.

The outcome is important because potentially hundreds of millions of dollars are at stake for online gaming giants like Bwin that currently operate in Britain and elsewhere, and for fading social gaming sites like Zynga that are desperate for a new revenue stream. Finally, casino centers like Atlantic City are desperate to get a piece of the online action to make up for business they’ve lost to other states and venues.

(Image by  Doug Stevensvia Shutterstock)

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According to CEO Brandon Ramsey, a former engineer at Yahoo and Zynga, Fanhood is aimed at the millions of Americans who make casual sports bets with friends for fun and bragging rights. He claims the site, which relies on Facebook’s platform, has 50,000 active users who can use virtual currency tokens to bet on everything from the Superbowl to NHL hockey games.

“It’s the same kind of psychology as taking $5 from a friend,” said Ramsey, claiming that Fanhood’s message boards and ongoing tallies of bet outcomes will keep users coming back. He adds virtual currency sales can sustain Fanhood because, unlike social games like Farmville, it doesn’t need fresh content — the sports matches supply that.

While Fanhood may succeed with virtual betting and sports chatter (much like the thriving fantasy sports industry), a big payoff would come through real money betting — a New York Times report pegged online betting as worth between $6 and $100 billion. But, for sports, this is a longshot at best.

Like Zynga Poker, Fanhood is only legal because players can’t cash out. If they could, these sites would be violating federal laws that forbid online betting unless states permit it.

In recent months, the prospects for social gaming companies have brightened as Nevada, New Jersey and Delaware have legalized online gambling. The process, however, is far from smooth sailing. Companies still must navigate established casino interests and, in the case of poker, assemble a critical mass of players (you can only gamble across state lines if all states involved permit it).

The legal challenge is even bigger when it comes to sports betting. According to Jim Gatto, a lawyer who specializes in gambling issues, the federal government deliberately excluded sports when they loosened online gambling rules in 2011. The reason, he said, is that sports depend on human action for the result — meaning there is an incentive to fix the results when there’s money on the outcome (history, including the NBA, shows he’s right).

This means Fanhood and other social sports betting sites will have to be content with virtual currency for the foreseeable future. There is also a chance too, of course, that a casino or other large gambling company will acquire them in the hopes of luring casual sports betters to a gambling site.

(Image by Jerry Sharp via Shutterstock)

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Nevada’s governor signed the law on Thursday with bipartisan support and described it as a “new frontier” for the gambling industry. The law came about after the federal government in late 2011 decided to change its policy and permit online gambling to take place in states that explicitly permit it.

The new policy is significant in light of research that predicts online gambling will be worth $100 billion worldwide on mobile devices alone by 2017. This potential market has attracted the established casino industry as well as tech companies that are vying to make gambling games or process back-end betting operations.

The new U.S. gambling rules are also a potential lifeline to social game maker Zynga which has seen its titles like Farmville and Mafia Wars stutter. And since being cast adrift by Facebook last year, Zynga has seen its shares fall around 80 percent.

The Nevada law, however, is unlikely to change Zynga’s fortunes anytime soon as it only applies to internet users in the state. The law is also primarily intended not to help social gaming sites but to ensure that Vegas casinos have a first-mover advantage in providing operational support when — and if — other states follow suit. As the Las Vegas Review-Journal reports, the Nevada law is written to keep out companies that already have existing player data. The story in question refers to “illegal operations” and those who “operated online gaming with U.S. patrons” — it’s unclear if this refers to organizations like Full Tilt Poker who broke the law in the past or to any company with gaming data.

The upshot is that the U.S. will, at best, have a patchwork of states in the foreseeable future where online gambling is permitted. If big states sit it out, it will not be easy for companies to guarantee that online poker tables are full. It also means operational headaches and potential criminal penalties for the game makers which must ensure, for example, that a player in Colorado doesn’t slip into a Nevada-based poker game.

The bottom line is that full-scale online gambling is still far on the horizon as the U.S. regulatory process shakes out. In the meantime, the winners and losers among Zynga and other tech companies like Big Fish are likely to be determined in the U.K. and elsewhere.

This story was updated at 12pm PT to clarify how the law may favor Nevada companies.

(Image by Beto Chagas via Shutterstock)

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The database in question is MemSQL, the eponymous offering from a startup company by former Facebook employees Eric Frenkiel and Nikita Shamgunov. The company, which launched in June, speeds up database operations by using in-memory storage and its own unique technique for converting SQL into C++, similar to what Facebook does for its PHP code. Frenkiel told me that other big-name customers already using the product include JPMorgan Chase, Hitachi and NY Life.

As of early January, Dan McCaffrey, GM of platform and analytics engineering at Zynga, told me that MemSQL was already storing about 70 billion rows of game data — from the server and database logs right up to social interactions. Right now, the biggest use of the MemSQL system is analyzing data from servers and databases about an application is performing. Compared with the company’s previous MySQL setup, McCaffrey said, “we can detect problems quickly and react to them much more quickly.”

Is a more personal Mafia Wars coming?

However, the deployment is just a few months old, and McCaffrey’s team has bigger plans for its new database. Among them is the ability to make decisions based on user behavior in real-time, rather than having to rely on pre-computed user segmentation and sampled datasets. That would mean applications could offer more-personalized decisions around in-game purchases or other recommendations, while Zynga’s burgeoning ad network could serve more-targeted and more-timely ads.

Both of these uses are important. Ninety-five percent of Zynga’s revenue currently comes from in-game purchases, although McCaffrey said it expects ad revenue to make up the lion’s share by 2015. Presently, Zynga pre-computes its user classifications nightly using its Vertica analytics system. If analysts want to query streaming data in real time, they can only do so against a sampled dataset that’s small enough to fit in memory.

With nearly 100 MemSQL nodes deployed already, Zynga can now store weeks worth of game data in memory versus merely days worth in its previous MySQL-plus-Membase setup.

In addition to improving the analytic process, the new database could help inspire entirely new types of games. McCaffrey noted that Zynga doesn’t have many games in which players interact simultaneously (most rely on players taking turns), nor does it have many multiplayer games. And although McCaffrey didn’t address the issue, one has to imagine Zynga’s expected foray into online gambling will also benefit from having a bigger, faster database to manage those real-time — and real-money — transactions.

One of the goals in the engineering group, he said, is “trying to introduce things that also get our game designers to think differently.”

Of course, a database alone isn’t going to make Zynga profitable and because MemSQL is commercially available, it’s hardly a trade secret. And as McCaffrey noted, although the experience has been good this far, MemSQL is still a small company and there’s a lot of work to do if it’s going to expand its presence throughout Zynga. But Zynga’s excitement about around a new database — and, in theory, it could have chosen any one of a number of new options — at least illustrates how critical the right technologies can be when trying to run a big business at web scale.

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There are a lot of interesting challenges in a shift like this, especially when you’re trying to provide a slick experience for Android’s enormous range of devices. Luckily, CEO Jens Begemann was more than forthcoming on the matter when I spoke to him ahead of the launch.

Meyer: How big is your push into mobile?
Begemann: At the moment a little more than half the team is working on mobile. A year ago it was 10 percent, but since then we’ve doubled our number of employees [to 250] and at the same time increased the share of people working on mobile.

You have many millions of users – how come you’re only targeting Android now?
A year ago, when we made this decision to invest heavily into mobile, we were very aware that we wouldn’t automatically be successful on mobile because we were successful on the web. Because of this, focus was extremely important. We decided to focus on one platform, and that was iOS. In the spring and summer, we saw downloads continue to grow and our new games were on the right track.

Diamond Dash is an extremely popular game – on Facebook we’ve seen 70 million people play it, and on iOS we had over 30 million downloads. We still have over 20 million active users every month, so the expectations from our fanbase are very high [regarding any new version]. We put up a page on November 21st where people could sign up for the Android version, and we have collected 850,000 email addresses.

How different was the experience, coding for Android?
You have so many devices out there, so many carriers, so many versions of Android. We don’t want to disappoint people and this has been the biggest challenge. Overall, development is obviously different for iOS than for Android, but I wouldn’t say one is easier than the other.

The amount of code we could take over from one platform to the other was relatively little. We could reuse graphics, but basically the game has been rewritten. We used Objective-C in the case of iOS and C++ on Android – it’s not such a huge difference, but because the APIs are different it was basically rewriting. This is to be expected if you don’t use something like Unity.

The biggest task in building a successful Android game is to make it run well on a large range of devices – it’s easy to make something run well on the Samsung Galaxy S III. In terms of testing, we used a mix of in-house testing and testing in the cloud. We have more than 50 devices in-house, covering a broad range of screen sizes, CPUs and GPUs, but then we use cloud-based solutions. There’s a couple of providers coming up just now, where via the internet you have remote access to devices running thousands of kilometers away. We do that currently for over 100 real devices.

So you’re covering a broad base then. How far back are you going, in terms of the Android versions you’ll support?
We set a limitation intentionally: we have said that Android 2.3 is required, and a minimum screen resolution of 320 x 480 pixels. The game would run on older devices, but we can’t ensure a good quality, and we want to make all users happy.

It used to be a truism that any developer should address iOS first. It certainly sounds like Android is a lot of work if you want to address it comprehensively, but is that offset by way in which Android is overtaking iOS by numbers? Also, there’s a bit more fragmentation of iOS itself these days, in terms of new resolutions and so on. In short, does that truism still hold?
Everybody has to make their own conclusions. Regarding fragmentation, what we see on iOS is that all the time Apple brings out new devices and OS versions, but we see that the upgrade cycle is very fast. This means devices that came out three years ago don’t need to be supported anymore and OS version that came out two years ago don’t need to be supported anymore.

For example, the iPhone 5 introduces a new screen resolution, but at the same time for new games you don’t need to support the iPhone 3GS and its non-Retina screen resolution anymore. The iOS upgrade cycle is also fast, so today it’s enough to support iOS 6 and iOS 5.

Wait – 3GS owners can run iOS 6, the latest version, but you’re still not going to support them?
For new games in early 2013, we won’t support the iPhone 3GS anymore. We want to create artwork that is really optimised for Retina, and the non-Retina market share is declining.

One other thing about iOS. It’s true you have different screen sizes, but besides that the devices behave unbelievably similarly. Some devices have the same chip – the iPhone 4S and the new iPad Mini and the iPad 2 and the new iPod Touch all have the same A5 chip. They’re virtually identical in terms of performance and RAM.

And this is something that may be relevant for Android developers. In the case of iOS, if you have an iPhone 5, that’s an iPhone 5 worldwide. With something like the Galaxy S III, internally it’s about 10-12 different models. They’re small and slight variations, but as a developer you should be aware of this fact.

So in other words, Android is still way more labor-intensive?
It depends a bit on the level of quality you’re aiming for and how broad you want to go. We try to support an awful lot of devices, so it’s a bit more work. But it’s encouraging that Google tries to standardize – the Nexus devices help.

Finally, any thoughts on being plugged into Facebook these days? Will that work the same on Android?
We obviously have experience from iOS and we don’t know how it will be on Android, but we expect it to be very similar. We have deep Facebook integration so you can see your score versus your friend’s score, and we found that makes the game much more interesting. People who log in with Facebook are about twice as active, and they monetize about nine times better – if they’re competing against their friends, they’re more likely to buy a power-up.

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Founded by a team of brothers, Tom, Walter and Bill Hessert, as well as CTO Eric Gay, after a trip to Preakness Stakes last year, the game launched in private beta in September. This week, the New York-based startup announced a partnership with payments company Dwolla and gave the New York tech world a chance to check it out at a special event.

“It’s the first social horse-betting game that makes it easy to bet, watch and win online,” said Walter Hessert, Derby Jackpot’s chief product officer.

Real money social gaming heats up

In the U.S., online horse betting is legal even though other kinds of online gambling are not.  But many anticipate that more legalized online betting is on the horizon. Last month, social gaming giant Zynga said it had closed a deal to offer real-money poker and other casino-type games in the U.K but, stateside, it has reportedly invested in state and federal lobbying efforts related to gambling.

Derby Jackpot’s founders said they believe that online horse-betting alone offers a big opportunity, but by being early to real-money social gaming the company could be well-positioned to grow with the market.

“Without a doubt there will be more regulated ways of gambling online,” Walter Hessert said. “There’s a lot of opportunity in real-money gaming online and we’re sure to take advantage of some of those opportunities.”

Signing up is straightforward but includes sharing the last four digits of your social security number to confirm players are over 18. Once players connect their account to a credit card (which requires a $10 minimum) or Dwolla account (no minimum required), they can start betting on live races across the country.  Races take place 364 days a year but only between noon and midnight, with increasing frequency later during the workweek and weekend.

From the site, users can see when the next live race starts, select their horses (and see their odds of winning) and then actually watch a live video feed of the race. As they place bets and watch the race, they can see friends’ actions and chat with others online. If they win, they’re informed right away and when winners want to cash out, they can easily indicate the amount they want to withdraw to receive a check in the mail.

More Zynga Poker than Angry Birds

The bets on Derby Jackpot are pretty small – from $2 to $5 per bet – but seem to be enough to keep people engaged. The company said that among their beta testers, when players deposit $10, they play for two hours and win $30 on average. Some big winners have won up to about $1,000 on a single race (players can place multiple bets on one race).  Derby Jackpot takes a cut of every dollar spent by its players.

The founders said they’re targeting people who are more into Zynga Poker than Angry Birds, hoping to bridge the gap between hardcore horse-betting and casual social gaming. But even as someone who isn’t into any kind of casino game, I have to admit that I quickly got hooked.  Derby Jackpot and Dwolla credited the account of each event attendee with $10 and, as soon as I saw my winnings mount (small though they were), I found myself clicking back to place the next bet.

The company declined to share how much money it’s raised from investors, saying only that its seven-person team is “well-funded.” But, interestingly, one of its advisors is economist and Freakonomics co-auther Steven Levitt, who was Bill Hessert’s professor at the University of Chicago. Prior to launching the startup, the pair had researched the art and science of picking horses. Derby Jackpot said it expects to open the site publicly in early 2013.

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“We need to make sure we have a greater set of games for a greater set of people,” said Alex Schultz, who works on user growth at Facebook. “It’s from users to gamers to payers. So how do we optimize that funnel?”

And the company is getting better at getting gamers to pay up, focusing their efforts on quality games and social games, company representatives said in a discussion with reporters Thursday at its Menlo Park headquarters.

Schultz said the company looks at revenue models and user activity for individual games in three ways: “Hit-based” games are those like Farmville or members of a franchise, which require the constant production of new versions to stay profitable (much like the Batman movies, he said), and tend to move slowly downward in active users over time.

Then the company has a “Success” category, which encompasses pretty solid games that grow slowly over time, a Facebook spokeswoman said, including games like Words with Friends or SongPop. But the category the company really wants to target is the “Awesome” category, which typically starts out strong, experiences a lull, and then grows rapidly, either through the release of a version for Android, or more likely through social word-of-mouth. They said Instagram has actually been a good example of an app with this kind of growth, and they’re hoping more games will soon display this kind of growth as well and keep users engaged.

Schultz emphasized once again Facebook’s push to mobile, which was a huge theme in the company’s earnings call Tuesday. All of those principles apply to games as well, which are slowly moving from desktop versions to mobile, or at least toward a platform that adapts and picks up on a variety of devices. He also said the App Center has been huge for Facebook’s gaming growth, connecting users with games their friends are playing without spamming someone’s newsfeed.

Over and over, Facebook’s gaming professionals referred to quality. Quality is what keeps users playing and engaged, and expands Facebook games to traditional gamers used to the deluxe console experience. Sean Ryan, who runs the games partnership team, said the bar has been raised so much higher than it was just a few years ago:

And finally, the company pointed to arcade games and “real money” games currently taking place overseas as areas where they expect to see growth going forward. They said they’ve seen arcade and “casual” gaming take off, moving into gaming groups like teenagers who haven’t typically adopted Facebook games yet:

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