(Photo: Instagram)

"Rage Against Rules," declares a bolded headline in The New York Post today, which collected stats from App Data to paint a portrait of a flailing Instagram. The Post claims that following the terms of service debacle, which supposedly had both normals and celebrities fleeing the app, Instagram's total active users has plunged 25 percent.

The app reportedly peaked at 16.4 million daily active users the week of Dec. 17, but has decreased to 12.4 million as of Dec. 27.

“[We are] pretty sure the decline in Instagram users was due to the terms of service announcement," a spokesperson for AppData told the Post.

However, as Quartz reminds everyone, AppData only collects information on a subset of Instagram users: those who have connected their Facebook account. Thus, "The claim that Instagram has lost a quarter of its users isn’t supported by this data." What's more despite the well-documented outrage, it seems unlikely that a dip in daily active users, even those who connect through Facebook, is due to Instagram's terms of service fumble. The TOS change was on the 17th and the decline shown by AppData doesn't happen until Christmas.

Couldn't it be that, due to the holidays, people are actually spending time with their families, disconnecting from their devices and trying to, like, enjoy relaxing without documenting every single moment? From the looks of our own Instagram feed, it certainly is moving at a slower pace than usual, barring the occasional snap of smiling families and freshly unwrapped presents.

In fact, Instagram isn't alone in bleeding daily active users this week. The Next Web reports that many Facebook-connected apps have seen drops in users this week, including Spotify (9.9 percent down), Farmville (15.5 percent down) and Pinterest (27.5 percent down).

Perhaps we all need to take another sip of that spiked eggnog and be thankful people are still capable of disconnecting from the Facebook apps that dominate our lives every other week of the year.

FarmVille

This is the Summer of Zynga's discontent. There are Zynga's stock woes, which have prompted Forbes to question whether the gaming company is really worth any money at all. Forbes's Eric Savitz writes that "the market is basically saying it simply does not see any long-term value in the company’s ongoing business."

Then there's also this class action suit filed against Zynga in a California Superior Court on July 16, which alleges Zynga failed to pay overtime and has unfair business practices.

According to the suit filed by Richard Ashley, Zynga allegedly bypassed California laws governing overtime wages, so they could use the fancy job titles ("Senior Analyst," etc.) to keep those workers exempt from overtime pay.

Mr. Ashley's suit, filed on behalf of current and former employees of the company, alleges Zynga "misclassified" IT and engineering jobs, giving overblown titles to positions that were essentially "performing routine production work, not requiring special expertise." Jobs the lawsuit states needed "little or no exercise of discretion."

The court papers indicate Zynga was "regularly and generally" working the plaintiffs more than 40 hours a week and never paying them for the additional labor. California law clearly states that non-exempt workers putting in more than the regular 40 get time-and-a-half for their work.

Writing in the Times DealBook in November, 2011, Evelyn M. Rusli described a "tough culture" at Zynga, which was at the time riding high on the popularity of games like FarmVille. At least one paragraph reads now like a warning:

While such a culture is not uncommon in the game industry, it can create problems. Employees at Electronic Arts and Activision Blizzard have filed lawsuits against their employers, with claims of hostile work conditions and withheld compensation. In 2006, Electronic Arts settled two class-action lawsuits by game artists and programmers for about $15 million each. The Activision suit is still pending.

Employees told the Times they were afraid at the time to speak out against Zynga at the time for fear of reprisals.

Though Mr. Ashley's association with Zynga could only be found buried in one cached Google result (he was described as a "CS Senior Lead"), it looks like he and others have decided to exact some sort of reprisal of their own.

This dude wants some butterbeer. (Photo: insideipo.com)

It appears that Zynga, the evil mastermind behind FarmVille and Mafia Wars, is not completely hell-bent on destroying the world. The online game producer turned super villain announced today that it would help design a Facebook game to fight the oppression of women around the world.

The game is based on the novel Half the Sky, which follows the lives of women who have been victimized through sexual violence and trafficking, insufficient educational and financial opportunities and poor healthcare. It is part of a larger multimedia effort based on the book’s themes that will include a PBS miniseries as well as mobile games in India and Africa.

The game’s users will be tasked with ensuring the safety and prosperity of women and girls in their virtual village, overcoming various challenges in an effort to allow their avatars to eventually achieve independence. Players’ actions in the game will also translate into real donations that will go towards financing schools, supporting farmers and contributing to micro-saving campaigns.

Zynga’s game engineers will help Half the Sky’s Facebook game developer, Frima Studio, and its executive producer, Games for Change, finish before the game's debut on November 13. Ken Weber, Zynga.org’s executive director, expressed his excitement over the collaboration in a Games for Change blog post.

The mission of Zynga.org is to help make the world a better place through games … Zynga’s employees are eager to leverage social games for good, and we are honored to be collaborating with Games for Change and Frima on this important initiative.

So is Zynga’s sudden prep-school charm to be trusted, or is it all a ruse, their true intentions only to be revealed in a dying tear collected by a bespectacled wizard (Snape-style!)? Former employers have previously alleged that Zynga’s CEO Mark Pincus encourages workers to steal ideas from other companies. These disgruntled workers even darkly joked that Zynga’s internal motto is “Do Evil.”

But apparently these Darth Vader tactics aren’t having their desired effect. Zynga’s stocks suffered this summer, sinking below $5 in June. Looks like it’s time for the classic reputation cleansing move, "invest in a philanthropic Facebook game."

However, the ambiguously intentioned Zynga seems to have won over the book’s authors, Nicholas Kristof and Sheryl WuDunn. (Just like Snape did with Dumbledore in Harry Potter. Gasp!)

“Zynga’s role in bringing this game to life is particularly special to us,” Mr. Kristof and Ms. WuDunn said in the blog post. “Using a game to potentially reach great numbers of people helps send a message not only that there are challenges women face around the world, but also that they bring great spirit and joy to their communities when they can live safe, normal lives.”

We should probably figure out who Voldemort is in this whole scenario--ASAP.

Plotting? (Photo: flickr.com/joi)

Today, Zynga is hosting the press (and their dogs) at its San Francisco HQ for something called "Unleashed," where the company will presumably be "unleashing" some new games. Let's hope they're a little more entertaining than that pun, because, as the New York Times points out, the company could use some help.

It's not like Zynga's woes are a secret: Shares are currently at $6.07, having debuted at $10 and spent time under $5. More people are gaming on mobile devices, and Facebook's growth is slowing. The company shelled out $180 million for Draw Something, which is currently cratering. That just goes to show you how quickly games fall out of fashion, which makes planning awfully hard.

Also, just yesterday, EA launched the open beta of its social take on SimCity, which was previously announced with a trailer proclaiming "more city, less ville," to the sounds of Best Coast's "The Only Place." Ouch, guys.

Nevertheless, CEO Mark Pincus comes off as pretty carefree in his remarks to the Times, insisting he wasn't worried about the stock price and claiming, "We’re focused on inventing a new consumer industry and looking to build that over the long term." He also disagrees that gamers are a fickle, flighty bunch: “The vast majority of our games have grown steadily over time and then seen slow decline after they peaked, but they maintain player engagement."

Nor would Mr. Pincus give up any details in advance of today's splashy event. But--and this sounds like a hint--he doesn't seem to see any limit to the expansion of the Ville franchise:

“We focus on evergreen categories and brands and game types,” Mr. Pincus said. “We think that the Ville games are fun, and as long as we keep making the game play fun, social and accessible, people will continue to want to engage with each other through those games.”

So expect a series of increasingly more ludicrous concepts, we guess? Here, we've got one for you: BubbleVille.

The Future of Literature?

Obviously, regular old ebooks have arrived and they’re not going anywhere. Amazon now sells more Kindle books than print; ebook sales are the fastest-growing in the business. But now that readers have embraced the digital, here comes the next wave, says Wired: “enhanced ebooks,” which incorporate video and interactive elements. That’s all well and good, until someone starts throwing around the term “literary Farmville.”

That’s not meant to be a condemnation, by the way. The term comes from Panio Gianopoulos, cofounder and publisher of digital YA startup Backlist Fiction. According to the article, Mr. Gianopoulos sees the ebooks of the future as "far more social experiences, incorporating what he calls 'literary Farmville' aspects."

For instance, secret chapters could be unlocked as a person’s friends read a book. He foresees readers using a reddit-like model to up-vote characters or storylines they enjoy, or publishers forming partnerships with Foursquare that could reveal clues to readers who check in at certain locations.

Did you hear that? It was the sound of the entire publishing industry simultaneously gnashing its teeth.

"Launched last week, FarmVille English Countryside gives players the opportunity to farm at a second location in the English Countryside, complete with new adventures, crops and animals," a press release said. "Live sheep paraded around New York City streets and visited London landmarks, bringing FarmVille--played by over 200 million people since its launch--to life." At least they're obeying traffic laws.

Virtual Rocks: The perfect pet?

It's all about Facebook.

That was the general consensus of the noisy and mildly-lubricated crowd that had gathered last night in the upstairs balcony of Stitch, an after-work bar in the Garment District.

It was the afterparty for the Social Gaming Summit, a conference that lured developers and entrepreneurs from as far as Montreal, Japan, San Francisco and Baltimore, to talk monetization, virality and distribution. And Facebook.

Social games only work if you have people to play with, explained one attendee from the New York-based game development company Funtank, and Facebook is where the people are.

Facebook is also the birthplace of the great social gaming success story: Farmville, the game in which players build virtual farms and interact with their friends' farms in real-time, with incentives to buy virtual goods for real money along the way.

More than 50 million people play Farmville and the average user spends an hour a day with the game. Farmville has become synonymous with wasting time. The satirical anti-game Cow Clicker boils Farmville down to its essence: click the cow, get a point.

New York has seen its share of hot gaming companies, but not all have stayed. The French distribution company Nexway acquired Boonty, Ngmoco claimed Brooklyn's Freeverse, and Farmville-maker Zynga claimed Boston-based Conduit Labs, which had an office in New York. Prices weren't disclosed for those acquisitions, but Boonty had raised a total of $10 million.

To illustrate how hot social gaming is, Zynga's value is now up to $5.5 billion, according to Bloomberg.

CHECK OUT NEW YORK"S FIVE HOTTEST SOCIAL GAMING COMPANIES

At one end of the bar, Sunil Madhu was evangelizing Hopskoch. The New York entrepreneur, petite and hypomanic, was detailing for his audience how Hopskoch lets players create, play and invite their friends into games facilitated by Twitter and Facebook.

The emphasis is on childhood games like "I Spy" and "Hide and Seek," Madhu said, but Hopskoch can work for any kind of social game — like a scavenger hunt that ends in a certain bar where you have to buy a specific drink. That could be sponsored by Heineken, he said.

Madhu seemed to be only halfway through his piece when two newcomers joined the conversation, and he had to relaunch from the beginning.

Others at the party had distilled their pitches down to one line: "You're like the manager of a celebrity, and you have to take care of them," or "It's like fantasy sports, for dating."

Most of these games are based on Facebook. But there was talk of alternatives: Myspace, Twitter, mobile apps, standalone sites. New York-based Funtank has its own gaming portal, Candystand.com. But at Candystand, just like on Myspace, users can and probably will sign in with their Facebook accounts.

The key, really, is not where your game is, but that is makes people happy, and keeps them coming back for more. Baltimore entrepreneur Yuzan Kang, for example, is working on a new game: My Pet Rock.

In My Pet Rock, players collect and care for animated rocks, customize them with outfits, and do activities with them.

You can set your rock up on a date with a friend's rock, for example, which may result in a baby rock.

The game has wide appeal, said Kang's business partner Ben Walsh, who founded the company. "It skews female," he said. "But the guys really get into the battling."

Kang screwed up his face during Walsh's explanation. "It sounds ridiculous when you talk about it," he said. He agreed to let The Observer be a beta tester.

CHECK OUT NEW YORK'S FIVE HOTTEST SOCIAL GAMING FIRMS

ajeffries [at] observer.com | @ADRjeffries