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Google reached out this evening to Web publishers using its advertising, warning them to review their privacy policies now that Google is about to track their users more closely.

The notification comes a day after Google announced it is starting to track users’ Web surfing preferences in order to target them with advertising that closely matches their tastes. Google reaches about 74 percent of U.S. Web users, according to Comscore, and so is collecting an immense amount of information when those users visit different sites.

To conduct its targeting, Google is dropping “cookies” on your browser each time you visit a Web page owned by a publisher that users Google advertising. Those cookies track you as you surf from page to page. If you tend to visit lots of sports pages, for example, Google classifies you as a “sports enthusiast” and chooses to serve up advertisement related to sports.

Google is essentially giving publishers a heads-up that they should tell their users about this new targeting by revising their privacy policies. (In separate but related, the NYT’s Saul Hansell has an excellent review of how Google’s practices compare to those of other companies, including privacy policies Though it’s too bad he doesn’t mention AOL’s Advertising.com, which reaches 91 percent of U.S. Web users, according to Comscore, and so has a greater reach than Google.). Here’s the message Google just sent to publishers:

Interest-based advertising will allow advertisers to show ads based on a user’s previous interactions with them, such as visits to advertiser website and also to reach users based on their interests (e.g. “sports enthusiast”). To develop interest categories, we will recognize the types of web pages users visit throughout the Google content network. As an example, if they visit a number of sports pages, we will add them to the “sports enthusiast” interest category. To learn more about your associated account settings, please visit the AdSense Help Center at http://www.google.com/adsense/support/bin/topic.py?topic=20310.

As a result of this announcement, your privacy policy will now need to reflect the use of interest-based advertising. Please review the information at https://www.google.com/adsense/support/bin/answer.py?answer=100557 to ensure that your site’s privacy policies are up-to-date, and make any necessary changes by April 8, 2009. Because publisher sites and laws vary across countries, we’re unfortunately unable to suggest specific privacy policy language.

For more information about interest-based advertising, you can also visit the Inside AdSense Blog at http://adsense.blogspot.com/2009/03/driving-monetization-with-ads-that.html.

Making an online social game a hit is about more than owning the intellectual property for the concept, as game-makers Hasbro and Mattel have been finding out over the last year or so. They shut down a popular Facebook application called Scrabulous last summer, because it too closely resembled Scrabble, the word-forming board game they shared the worldwide rights to. But the Scrabulous creators — two brothers in India — came back with a new version of the game late last year that dodges Scrabulous’ legal issues by using a slightly more different interface and name. Called Lexulous, the new version has been catching up with the offical Scrabble apps that Hasbro and Mattel had previously launched.

Here are some numbers. Hasbro owns the rights to Scrabble in the U.S. and Canada, and partnered with video game giant EA to build an app for these users called Scrabble Beta. It now has 595,934 monthly active users. Mattel pursued a similar strategy, developing a version inelegantly called SCRABBLE® Worldwide (excluding U.S. and Canada) — that now has 370,203 monthly active users. We covered the relatively poor performance of these apps back in early January. And to be sure, they’ve grown some since then. But the real story is Lexulous: As of today it has 566,815 monthly active users. And, while the Hasbro and Mattel versions have received overwhelmingly poor reviews from users, Lexulous is almost universally loved.

For those unfamiliar with the Scrabble concept, players receive a random bunch of letters and compete to form dictionary-defined words. The more words a player can create, the more points they win (details here). Scrabulous has been a hit on Facebook because it paired the well-known game with communication channels on the site, encouraging friends to invite more friends and play more often — it’s not just a game, it’s a way to stay connected to people you care about.

Which points to some issues for Hasbro and Mattel. By dividing up the license geographically, they have prohibited Scrabble fans in the U.S. and Canada from playing with the rest of the world. Lexulous, meanwhile, can be played by friends everywhere. Users of both the Hasbro/EA app and the Mattel app have complained about bugs and usability issues, as reviews from Facebook users indicate. Some users have also complained to us about spammy notifications from the EA app (Facebook says EA hasn’t violated Facebook’s developer terms of service, that it is aware of).

Meanwhile, Lexulous has focused on building an application that people want to use — and it’s been busy taking advantage of new communication channels on Facebook. Last week, for example, it became one of the first applications to integrate Facebook’s new chat invite feature, a way for a user playing a gaming application to send invites to friends on Facebook who are logged into its chat service. Hasbro and Mattel have yet to make a move on that front.

The two game-makers reportedly looked into buying Scrabulous before they got courts to shut it down. Given all the effort they’ve put into building their own not-so-popular versions — and the ongoing success of the Scrabulous/Lexulous team — perhaps they should have worked out a deal. Scrabulous was getting more than half a million daily active users before the schism, and was beginning to make money. A business deal between its creators and the gaming companies could have paid off for everyone.

[Image via Gear Diary]

Electronic Arts showed off its latest sports games today, with a heavy emphasis on new kinds of games that could reach wider audiences.

Among the big titles coming soon is EA Sports Active, a fitness title for the Nintendo Wii that resembles the Nintendo Wii Fit title that topped ten million unit sales last year. But EA Sports Active isn’t just a knock-off of Wii Fit, which comes with a Wii Balance Board.

The game has a deep fitness program for people who are serious about losing weight or keeping fit. They can use the advice and tools to track their activities and exercise and then design workouts that let them have fun while they’re exercising with the game. You can do things like simulate rollerblading jumps by tying the Wii controller to your thigh and then jumping up and down. You can use a stretch band to exercise your arms and see how precisely you’re following the instructions by looking at your on-screen avatar. The game isn’t as cutesy as Wii Fit and so it may appeal to people who thought the Nintendo game was a little silly.

Jen Riley, an EA spokeswoman pictured at bottom, showed how you can use the Wii controller with the game to shoot baskets, do bicep curls or flex your legs or box. You can design the workout so that it gets harder every day that you do it. You can design the workout to focus on cardio, upper body, lower body, or sports activities. And the game keeps track of your progress and gives you trophies for achievements. It also lets you enter physical activities that you’ve done outside of the game. The game launches on the Wii on May 19.

EA Sports generates billions of dollars in revenues for Redwood City, Calif.-based EA each year, with hardcore console games such as Madden NFL generating the meet of the business. But it’s innovative titles like EA Sports Active that can help EA reach new audiences and grab better market share on Nintendo’s fast-growing Wii console.

“This is about transforming the business and innovating,” said Peter Moore, head of EA Sports.

EA needs transforming because it’s losing money, despite the EA Sports cash cow. The company has been trying to come up with original hits, but some have flopped and EA’s game development costs have been rising faster than revenues. As a result, EA has been cutting back on staff and canceling games.

Moore pointed out that EA’s traditional console sports games are now garnering big online audiences. The FIFA soccer and Madden football games generate as many as two million game sessions per day online. In one day, the equivalent of 150 full NFL seasons are played on Madden. EA is adding a lot of digital-only content that can be downloaded to game systems. One example is the NCAA Basketball 09 March Madness title, which can be downloaded to an Xbox 360 for the equivalent of $15. That game will be updated with some of the latest developments in the ongoing tournament.

But the sports world is changing. Free-to-play, short session games are being offered (or launched soon) by rival start-ups such as Cybersports, GamesCampus, Six Degrees and Quick Hit. The web, iPhone, the Wii and other new platforms are becoming increasingly appealing. EA has experiment with these new platforms as it tries to hang on to its fans and attract new ones, Moore told me.

EA’s mobile game division showed off a version of its Tiger Woods PGA Tour game for the iPhone. That game debuts in the coming months with seven 18-hole golf courses, five pro golfers, and customizable players as well (so you can make the player look like you). You play the game by flicking your finger across the touch screen to swing at a golf ball. Over the next nine months, EA plans to roll out a bunch of iPhone games.

“We’re taking the iPhone extremely seriously,” said Josh Milton, producer at EA Mobile.

Please check out our GamesBeat 09 game conference on March 24.

Me and my fellow VentureBeatnik Eric Eldon are here on the ground in Austin, Texas for this year’s SXSW conference. Right now, nothing too exciting is going on, as we’re sitting alone in a cafe writing, but tomorrow the conference starts. For those not at the conference, there’s an interesting, visual way to follow along.

Pepsi has teamed up with the teams behind two great Twitter apps, Twistori and Twennis, to bring us PepsiCoZeitgeist, a new Twitter visualization tool that showcases tweets about SXSW. For those familiar with Twistori, it looks similar, but rather than focus on the words “love,” “hate,” “think,” “believe,” “feel,” and “wish,” it focuses on more SXSW-appropriate terms: “arriving,” “registering,” “eating,” “connecting,” and perhaps most importantly, “partying” and “drinking.” But those evolve as the conference goes on, Twitter co-founder Biz Stone notes in a post about the feature today.

And you can change the visualizations too. The default is a stream like Twistori, but you can also use “Popular” view, which is sort of like a tag cloud, “Swarm” view, which shows tweets on a map, “Party Watch,” which will focus on parties on any given night and “Overheard” view, which will seperate out all the tweets that start with “OH:”

For those of you here at SXSW, Pepsi will be displaying these visualizations on displays throughout the Austin Convention Center. Those who were here two years ago may recall that is similar to what Twitter itself did back then. That move was perhaps the big catalyst that made the service a staple in the tech community, and allowed it to grow into what it has become today.

Of course, while this will be a nice tool for some of you who couldn’t make SXSW, I know a lot of you would prefer a way to filter out all SXSW-related tweets. Sorry, can’t help you there.

You can find me on Twitter here along with fellow VentureBeatniks Eric Eldon, Dean Takahashi, Anthony Ha, Camille Ricketts, Dan Kaplan and Matt Marshall. We have a VentureBeat account (for our posts) as well.

Google co-founder backs major Parkinson’s study –  Sergey Brin says he plans to contribute money and DNA to a study run by his wife Anne Wojcicki’s startup 23andMe.

Dockers introduces shakable iPhone ad — Users will need to shake their iPhones to spur urban street dancer Dufon to perform his moves. The ad was created by mobile ad company Medialets.

Twofish launches analytics platform for social games — The company’s Elements platform will help social game and virtual world developers understand and make more money from their virtual economies. Inside Social Games says the tools are “very powerful.”

Mayfield Fund has appoints Kendall Cooper as chief financial officer — Cooper joins Mayfield from Dominion Ventures, where he held the same title.

Oprah to interview Zuckerberg tomorrow — The talk show host will probably ask Zuckerberg to demo the show’s new Facebook page, according to the Wall Street Journal.

Jason Calacanis offers $250,000 for a prominent spot on Twitter — The Mahalo founder predicts that having a profile that’s promoted through Twitter’s “suggested users” feature will be worth “$1 million — Super Bowl commercial level” in five years.

Microsoft exec appointed to protect nation’s computers — Philip Reitinger, who currently has the unwieldy title of Chief Trustworthy Infrastructure Strategist at Microsoft, has been given a spot in the Department of Homeland Security, where it will be his responsibility to protect federal computing systems.

The switch to daylight savings time costs the US $480M — At least according to RescueTime, which extrapolated from data collected by its time tracking software.

Adify updates its platform for building and managing ad networks — The company says Adify 4.0 offers allows advertisers to track the success of up to four conversion points after a user has clicked on an ad.

imeem CEO on monetizing social networks — In the video, Dalton Caldwell talks to hypebot about the music-focused social network service, and outlines (vaguely) some of the targeted advertising projects coming later this year.

Plaxo adds comments in activity feeds – The social networking site also announced integration with travel site TripIt.

In an interview with Variety magazine, Lionsgate president Curt Marvis let slip that the Wii presents a major opportunity for Hollywood studios to distribute movies and television shows — and that this might be a reality before the year is out. While it isn’t written in stone, someone of Marvis’ stature probably isn’t just blowing smoke.

There are other indications that this might be in the works: Nintendo has already started developing a video-on-demand service to deliver original content via the Wii in Japan. The next logical step would be to partner with U.S. studios and agencies to add American films and shows to its roster. If it does, the Wii would instantly come toe-to-toe with Microsoft’s XBox Live, which already offers this feature through a partnership with Netflix, and Sony PlayStation Network, which has just joined forces with NBC Universal — not to mention the pack of set-top boxes that also serve internet video straight to living room televisions like Roku, Boxee, ZillionTV and Apple TV.

It seems a likely move for Nintendo, which has always been very TV-set-centric. It has a ripe chance to dominate the market in one fell swoop. There are 16.2 million Wiis in the U.S. right now, as opposed to 12.8 million XBox 360s and 6.3 million PlayStation 3s. Not only would it double the market for this kind of online video service (making it a Hollywood darling overnight), but it would beat the early adopters at their own game. And as a family-oriented entertainment system, the Wii is arguably a better fit for the business as well. Can’t you just see Disney rocking the Wii’s bubbly interface?

The only forseeable drawbacks are that the current Wii model wouldn’t be capable of high definition playback and lacks a hard drive for long-term storage. That being said, it’s more likely Nintendo would set up a quality streaming service through the device, and wait for another hardware roll-out to add in requirements for ehanced viewing and video storage.

Financially, it’s been a tough year for almost everyone, even the absurdly rich. Some of the tech world’s richest men are billionaires no more, according to Forbes’ new list of the world’s billionaires. Among the most notable dropoffs (for VentureBeat readers) are Facebook’s Mark Zuckerberg, Sequoia Capital’s Michael Moritz, and venture capital pioneer Arthur Rock.

Last year, Zuckerberg (then 23) was estimated to be worth $1.5 billion, making him the world’s youngest billionaire. Now he’s lost at least $600 million and is “simply a youthful multi-millionaire,” Forbes says. The Wall Street Journal’s DealBook blog, meanwhile, notes that Moritz and Rock have dropped off the list — and that’s despite Moritz hanging on to the number two spot on Forbes’ Midas List of the world’s top venture capitalists (based largely on his investment in Google ). Moritz was previously ranked 897 with a worth of $1.3 billion, while Rock ranked 1,014 and was worth $1.1 billion. Rock is famous for backing companies like Intel and Apple, but he also invested his money with fraudulent financier Bernard Madoff.

That doesn’t mean tech or venture capital have completely left from the billionaire’s club, of course. For one thing, Microsoft founder Bill Gates may have lost $18 billion, but he’s still worth $40 billion, putting him back at the top. Google co-founders Sergey Brin and Larry Page are tied for 26th with $12.0 billion each. Moritz’s fellow Google investors John Doerr (of Kleiner Perkins Caufield and Byers) and Ram Shiram tied for number 601, and are estimated to be worth of $1.2 billion each.

Other tidbits: The total number of billionaires has dropped from 1,125 to 793. The world’s richest bachelor is Michael Bloomberg. And New York City has the highest concentration of the world’s billionaires, with its 55 billionaires far outnumbering San Francisco’s 10. Man, my New York friends will never let me hear the end of this.

AOL announced today that it has hired away Tim Armstrong, the head of Google’s sales organization, to become the company’s next chairman and chief executive. Armstrong, whose official title is senior vice president of sales in North America and Latin America, has been credited by many with building the search giant’s goliath online advertising business — and will now try to work the same magic at its faltering peer.

Armstrong will replace chief executive Randy Falco and president Ron Grant after a short transition period. The change is clearly motivated by AOL’s poor performance in recent months and years. Industry insiders and tech pundits alike have been calling for its leaders’ dismissal for a while. Not only does it continue to hemorrhage dial-up subscribers, but it has failed to gain traction in any other major sector of the internet as consumer preferences evolve. Its revenue fell 20 percent in 2008 to $4.2 billion, led by a 31 percent drop in its subscriber business, which has now dipped below $1 billion.

Few people realize that AOL — which saw the bulk of its success in the 1990s as an online access service — has its own fledgling internet search engine. Google (and Armstrong, for that matter) is no stranger to this division of the AOL organization. In 2005, it invested $1 billion in the company in exchange for a 5 percent stake and profit-sharing to help it serve search advertising. AOL’s addition of Armstrong will no doubt magnify focus on this segment of its business. His primary charge, as Reuters notes, will be to prepare AOL to spin out of parent company Time Warner, either to stand on its own or merge with a partner like Yahoo. A smarter advertising strategy will obviously be vital in both scenarios.

Incidientally, it was speculated that Yahoo would be the one to tap Armstrong to replace departed chief executive Jerry Yang. But it was not to be. Armstrong’s tenure at Google stretches back to 2000. Before that, he held executive sales posts at Snowball.com, Starwave and ABC/ESPN Internet Ventures.