Sacramento-based Kershaw, Cutter & Ratinoff, LLP is looking for people who faced "unauthorized charges imposed on Facebook and MySpace users who participate in social games like 'Farmville' and 'Mafia Wars.'" The firm, which said it has launched an investigation into such scams, specializes in class action suits, among other areas.

Mike Arrington's TechCrunch has posted a series of articles on the issue of sleazy revenue models for online games, exposing the practice of sneaking mobile data subscriptions and pricey "learning CD" packages past players trying to earn online "points." Mafia Wars and Farmville creator Zynga gets a third of its revenue from such "commercial offers," while Facebook in turn gets 10-20 percent of its money from Zynga, according to Arrington.

Zynga has yanked some of its ads; Facebook, in turn, has suspended one of Zynga's smaller games. But there's evidence this issue could have been addressed much sooner. TechCrunch found video (below) shot this past spring in which Zynga's CEO said he "did every horrible thing in the book to, just to get revenues right away."

That sounded bad enough when it was reprinted on a tech blog; imagine how it's going to sound in court.

(Top pic: Zynga CEO Mark Pincus, possibly calling his lawyer, by Joi Ito.)

Build, or perhaps buy. In July, RockYou acquired Speed Racing, one of the top games on Facebook. But RockYou, in diverting its attention from its rivalry with Slide, will face well-funded competitors in startups Zynga and SGN. By the time all this becomes a serious business, isn't it just as likely Electronic Arts will be the Electronic Arts of social games?

But he is not above a little strategic flaunting. Slide hired a Hollywood props firm to create life-sized versions of the sheep and other icons from its SuperPoke Facebook app, displayed like museum exhibits at the party. Could rival RockYou afford such a gratuitous show of wealth? With their latest funding round not quite locked down, unlikely. It's considered bad form to spend money while you're out raising more. And that was Levchin's point in throwing the party: It's not quite that he was spending money for the sake of spending money. He was spending money to show that he could.

Rival widgetmaker Slide went through similar traffic troubles a couple weeks ago when Facebook shut down its popular Top Friends app over privacy concerns. But in an earlier conversation, Slide executive Keith Rabois told us that in instead of buying up smaller apps, Slide is pursuing a different strategy:

Slide is in the business of building deeply engaging branded applications, at the same level of complexity and quality as a destination website, and is not interested in assembling a broad portfolio of light weight applications that are merely impression-drivers in an ad network.

There are policies Facebook has issued, but there is always room for interpretation - and in light of current changes, the interpretation is a lot more stringent now in contrast to before.

Facebook's probably getting strict because its preparing for a relaunch of its design in July. Or — and this pure speculation — the third-party security firm Rock You's rival Slide hired to audit its own privacy might have gotten paid a little extra to take a close look at the competition and alert Facebook to any infractions. We wouldn't put it past hypercompetitive Slide founder Max Levchin and his crafty sidekick, Keith Rabois.

Slide rival Rock You's Super Wall saw traffic plummet 70 percent in the last week. InsideFacebook's Justin Smith speculates the dip is due to "some kind of punitive action against the application" over privacy concerns by Facebook, "perhaps by restricting feed access or by lowering the application’s notification or invitation limits." Another source tells us Flixster, the widgetmaker behind the Movies app, is going through similar punishment from Facebook over privacy concerns.

When I politely declined, he wanted to know why, and I said something to the effect of 'I have no interest in working for companies whose sole existence is, and always will be, dependent on outside funding and other people’s platforms…not to mention those without any real business plans or actual use value.'His response? A resounding “I don’t think they would have gotten [insert large number here] of funding if they didn’t have value or a business plan.”

A smart move, especially as Facebook's ban of Slide's Top Friends application demonstrated how precarious the position of widgetmakers can be.

Despite the blow from Facebook, Shen told SAI that unlike its closest competitor, Max Levchin's Slide, RockYou intends to keep developing for the platform. RockYou will need to — especially if developer Blake Commagere wrestles back control of his popular Vampires and Zombies apps. (Photo by califrayray)

Commagere, in the past, hasn't helped clarify matters. Last year, he told GigaOm that RockYou hosted his applications and provided some cross-promotion, then hastened to give the company more credit:

At this point I’ve partnered with them on the app and they are contributing far more resources than just infrastructure. It’s eased my pain of looking for more programmers and I’m now enjoying being able to focus more on the creative aspect of it.

He must now regret those comments, which won't help his case in breaking free from RockYou — if that's even his goal. Talk about your words coming back to bite you.

Why the $150 million drop from March to June? In part, RockYou founders Lance Tokuda and Jia Shen can blame Facebook's spam-killing redesign, which will eliminate some of the tools RockYou used to increase the popularity of its widgets. But our source takes a shot at Tokuda and Shen, too. He tells us:

The reason the round took so much time was because the valuation expectation was inflated. They had unrealistic expectations and "team" really matters when you raise capital.

Not that that's so unfair of a shot, considering Tokuda and Shen's lawsuit-wracked history.

Social media advertising revenues across the Internet totaled only $600 million in 2007. Webwide ad revenues generated $18 billion. Social media gets such a small piece because ad buyers consider its inventory market-saturated junk at worst and too difficult of an ad buy at best. Not even Google's figured the trick out yet on MySpace. Nobody told DCM cofounder and general partner David Chao, who "believes that RockYou will be the catalyst of this new global ecosystem that delivers next-generation advertisements through its innovative advertising network and social applications," according to the press release. (Photo by califrayray)

Previously:

• A is for Adelson, who cofounded Digg
• B is for Botha, who sold YouTube big
• F is for Fitzpatrick, and "hookers and blow"
• L is for Levchin, who never goes slow
• P is for Parker, the Valley's bad boy

1. Current Facebook profiles allow users to move application boxes around their profile wherever they like. Zuckerberg's new profiles won't allow as much customization. "The question is whether users will like the return to a uniform "profile" that looks the same for everyone. I would bet that users actually prefer to customize the look & feel of their profiles," an exec at one of the major widgetmakers tells us.
   
2. Zuckerberg wants to integrate the News Feed with the Wall. One developer tells us: "Mixing in 'X wrote on Y's funwall" along with more personal messages from friends may deteriorate the quality of the new wall/feed feature as a whole."
   
3. Facebook widgetmakers hate the tabs on Zuckerberg's new profile. One complains that most apps will suffer due to them: "By default a few apps will get their own tab and most will be relegated to the 'more' tab." Another source tells us this is one area where Zuckerberg has definitely caved to developer pressure.

   Facebook has some improvements in the latest version which should mitigate some of this effect on developers. Nevertheless, a substantial fraction of traffic to developers' apps will likely be lost as navigation to new tabs is unlikely to equal current profile traffic.

   
   
4. This search bar better not disappear like it does in the other profile preview. If it does, one developer asks:

   How will users easily find their applications and search for new ones as well as do a quick search of their friends? Getting users to adopt to such a massive change without any major problems is going to be a huge x-factor.

At the very least, it's no longer a Mark Zuckerberg production. The widgetmakers have taken it over. Large Facebook-application developers — VC darlings like Slide, RockYou and Zynga which have thrived on Facebook's platform since it launched last May — panicked when they saw Zuckerberg's plans. And, perhaps because Google's rival app platform, OpenSocial, gave them leverage, the widgetmakers' collective kiboshed Zuckerberg's plan to launch the redesigned profiles in April. They wanted to see changes first. And now, we hear, they got them. Zuckerberg and his team are already "improving the design to have less radical implications for developers," one tells us.

Back when the Facebook platform launched, reporters compared Zuckerberg to Bill Gates. Gates ruled programmers who wrote applications for his Windows platform with such an iron fist that Europe's courts still aren't over it. But how often did third-party software makers push Gates into making Windows the way they wanted it? By contrast, Zuckerberg is hardly putting the "eek" in his ecosystem.

• Joe Green (top left) has raised $7.3 million for his Facebook application, Causes. Which would be more impressive had the funding not come from Peter Thiel's Founders Fund. Thiel is an investor in Facebook, and has a vested interest in creating the impression that Facebook appmakers are worth something.
• 
  
• Drew Houston (not pictured) runs a company, Dropbox, which offers online file storage, a service users can't get from anyone else. Except AOL, Google, Microsoft, and Yahoo, and a good dozen other startups.
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• VideoEgg CEO Matt Sanchez (top, second from left) tried to compete with YouTube and failed. Or "evolved," as BusinessWeek put it, into an ad network for Flash games, a crowded field that so far has garnered VideoEgg gross revenues of $300,000 a month. The magazine lauded Sanchez for raising $27 million in venture funding; it should have asked instead how much is left.
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• RockYou cofounder Jia Shen (bottom left) launched his widget startup while working for another company, Iconix, according to IM chats produced in court. He and cofounder Lance Tokuda settled a lawsuit with iconix last year. They're now trying — so far unsuccessfully — to raise another round of venture funding, or sell the company.

In Slide, RockYou now faces a very well-financed rival which took $50 million from its new investors. And Slide has real advertisers like McDonald's, AT&T, and BP; RockYou is better known for its plan to charge other Facebook-app makers to advertise their wares. (Does that strike anyone as a pyramid scheme?) Finally, there are RockYou's cofounders themselves — perhaps the biggest reason they won't get $400 million for RockYou.

Last year, they settled with their ex-employer Iconix, which charged them with developing the idea for RockYou while still working there. The episode was messy, and public. One would think RockYou's prospective investors would take it into account before putting their money in Shen and Tokuda's hands.