Some numbers from the report and the earnings call struck me as particularly interesting:

$392.2 million: Zynga’s most important revenue metric is one a lot of people might not grok. The bulk of Zynga’s revenue is for virtual goods to use in its games like FarmVille and the new CastleVille. The accounting isn’t as simple as selling something outright. Instead, the company reports it as “bookings” — and those hit $392.2 million in Q1, up 15 percent year over year and 7 percent over the previous quarter.

Actual revenue for the quarter was $321 million. That was up 32 percent over last year but only 3 percent over Q4. Online game revenue hit $292.8 million, up 27 percent year over year but the same 3 percent over last quarter.

$28.2 million: Advertising rose 117 percent year over year, which sounds impressive until you realize that it’s less than $30 million of Zynga’s quarterly revenue and that it, too, was up only 3 percent over the fourth quarter. (Zynga sees a positive in that it is up at all over what is typically the strongest quarter.) Zynga should continue to improve in advertising as it figures out how to best use its games to deliver. As a WWF user, the ads often make me want to pay for the ad-free version, so either way Zynga has a shot at improving ad-related income.

Zynga added reward-based ads to some games in Q1 and plans to expand the concept to more games this quarter. Players can acquire virtual goods by watching ads.

22 million: Zynga’s mobile daily active users nearly doubled in Q1, to more than 22 million compared to 12 million for the previous quarter, thanks largely to Words With Friends, Words With Friends brand extension Scramble with Friends, and Zynga Poker. (Draw Something was only part of the company for 10 days before the quarter ended, so contributed little to Q1.)

Mobile is a trick box for Zynga. It needs mobile for growth but so far mobile users spend less. You need energy to run Cityville but you don’t need to buy letters to play WWF. The rapid growth of mobile draws another important Zynga metric down: average bookings per user or ABPU.

Zynga CEO Mark Pincus talked about the differences between mobile and web with Om recently:

One of the lessons we learned from the FarmVille for iPhone was that web and iOS are entirely different and have different mechanics. That is why we did FarmVille Express. The difference is that on mobile it is a 2-minute session versus a 45-minute session on the computer.

Words for Friends doesn’t do as well on Facebook as it does on the iPhone, because they are a mobile first experience. Our poker game does well on the mobile as well. Even Facebook is trying to figure it (mobile) out, we are all trying to figure it out.

4 million : Zynga introduced its first arcade game, Zynga Slingo. It turned on promotion in late March (sort of like using a portal firehose) and it’s now up to 4 million active daily users.

$180 Million: Post-acquisition comments from Zynga execs, including Pincus, about looking for more deals, gave investors the yips, which in turn helped send shares down from decent double digits to below $9 recently. Pincus used the call to reset expectations, stressing plans to follow the example of Words with Friends by using the new asset to then create more organic growth.

Zynga bought WWF parent Newtoy in late 2010 for $53.3 million, mostly in cash. It’s extended the brand twice, meshing that with in-house games to spur mobile growth. Pincus said WWF has grown more than five times to 14 million daily active users. They hope to do the same with already-more-popular Draw Something and OMGPOP.

As for shopping for more deals, Pincus said when asked directly on the call:

The strategy hasn’t changed since the road show … Our primary focus, the way we’ve built this business, has been organic development and growth of games that have led to a network that we have further leveraged to bring more successful games to market and that’s what you should expect us to continue to do for the bulk of our growth. This product line was the second major product line that we went out and acquired so it was a rare instance for us. … We felt we could organically build more from it but it does not represent a change in strategy.

Macquarie Securities’ Ben Schachter sees potential — and uncertainty:

We continue to like the free-to-play model and the advertising potential inherent in ZNGA’s structural model; however, this is a crowded, competitive space that has few barriers to entry.

Gleacher & Co. analyst Yun Kim captured Wall Street’s conventional view on Google, writing in a recent note to clients: “We expect overall top-line results to be solid, with both pricing and volume trends remaining positive. However, we remain concerned regarding the unpredictable nature of GOOG’s capex (capital expenditure) spending and investments into new and existing strategic initiatives.”

Google shares are down nearly 11 percent so far this year — from $604.35 on Jan. 3 to $538.26 when the market closed today. Here’s what to look for in Google’s earnings report:

Display: Google generates over 90 percent of its revenues from its core search/text ad business. But the booming display ad market is quickly becoming the next internet advertising battleground, as big players like Facebook, Yahoo (NSDQ: YHOO), and AOL (NYSE: AOL) move aggressively into the space. According to UBS analysts Brian J. Pitz and Brian P. Fitzgerald, display ads have 40 to 50 percent better click-through rates than text ads. Google executive chairman Eric Schmidt confirmed the company’s emphasis on — and high hopes for — display ads last month when he told reporters that the display business is “going to end up being a $10 billion, $20 billion kind of business.” Investors will want to hear how the company is progressing toward that goal.

Mobile: Last year, the company said it reached $1 billion in mobile revenues, but the Android platform faces fierce competition from Apple’s iPhone, which recently became available on Verizon Wireless (NYSE: VZ), a key Android launch partner. Investors will be eager for an update on Google’s efforts to monetize Android — and on its progress with mobile advertising. The company may tout the growth of the platform, but mobile revenues still account for a fraction of Google’s overall sales, though they’re growing quickly. Canaccord Genuity analyst Heath Terry predicts that Google’s mobile revenue will grow from $2.5 billion in 2011 to $14 billion by 2015.

Social: Google+ appears to be the company’s most promising entrant into the social market, following several failed attempts. It’s all too clear that Google took its eye off the ball by allowing Facebook to build up such a dominant position in the market, with over 750 million users. Google+ has gotten good reviews so far and is growing quickly, and Google executives view the initiative as central to the company’s long-term strategy. In a recent note to clients, Macquarie analyst Ben Schachter highlighted three reasons for this:

1. Search – the ability to use the social graph as a key signal for personalized search

2. Platform – the ability of a social site to become a platform on top of which users access applications, services, communication, etc…

3. *Time* – simply the time spent on social destinations (and not spent elsewhere), particularly mobile time (which is over-indexed to social)

Local: Google has officially launched trial runs of its Google Offers discount service in Portland, New York, and San Francisco, with more cities on the way, in a direct assault on daily deals market leader Groupon. Meanwhile, the company is moving aggressively into the digital payments space with Google Wallet. It’s not hard to see that the combination of Offers, Wallet and Google Maps — on top of the Android platform — could pose a serious competitive threat to Groupon. Schachter calls Android integration “a key point of differentiation for Google Offers vs. the other daily deal services (Groupon, LivingSocial, etc.)” As with other new initiatives, investors will want to hear about how this space will boost Google’s bottom line.

Expenses: Google is investing heavily in people and new products — and makes no apologies for it. Morgan Stanley analyst Scott Devitt wrote in a recent note to clients that he expects Google to hire as many as 7,000 new employees this year, up 19 percent from 2010, driven in part by red-hot competition for talent in the tech space. Google is also investing aggressively in the product categories listed above, as well as as print, online and TV advertising, which it traditionally eschewed. Meanwhile, Google continues to expand, with new office space in London; Kitchener, Ontario; and its hometown of Mountain View, California, where the the company has leased 630,000 square feet to expand its sprawling campus. As a result, Devitt expects profit margins to continue to decrease. For now, investors seem to accept Google increased spending, even if they’re not thrilled about it. Expect executives to reiterate their argument for spending growth.

Regulatory: Google is being investigated or faces investigations on a variety of fronts in both the U.S. and Europe. Last month, the Federal Trade Commission launched a wide-ranging investigation into Google’s dominance of the web search business. Last Friday, Google reversed course and said that Schmidt will testify before the U.S. Senate Judiciary Committee’s antitrust subcommittee, which is also probing the company’s market power. Investors will be interested in some color from company executives about the potential impact of these probes on the company’s business.

Paging Larry: Google CEO Larry Page irked come investors last quarter with his extremely brief comments. Shareholders and employees look to the CEO for leadership, so Page would be advised to take more visible role as he settles into his job. He seems to realize the need to expand into new markets and has streamlined the company’s management in an effort to recapture some of the company’s old start-up spirit. But questions remain about how visible the aloof and publicity-shy Page will be in his new role.

That evolution is the jumping-off point for our new editorial list “Fresh Faces in Tech: 10 Kid Entrepreneurs to Watch,” which will go live on our site Monday afternoon, after our EconAffinity event in New York. It will look at 10 kids — one as young as 15, and none yet of legal drinking age — who have created companies that in some cases are already bringing in millions of dollars in revenues.

To get a read on which trends are having the biggest impact on new-business creation — and to find out what entrepreneurs need to do to make sure they’re set up for the long haul — we talked with three people who have been analyzing and investing in startups for years: George Zachary, a partner at Charles River Ventures; Ben Schachter, formerly an internet analyst at UBS; and Vivek Shah, group president of digital at Time Inc.

Their responses, after the jump.

– George Zachary: Zachary has led Charles River Ventures’ investments in startups like SocialMedia.com, GoTV, and, of course, Twitter. Zachary pointed to two developments in tech that had an outsize impact in sparking the Web 2.0 boom: increased use of open-source software and the shift toward “cloud-computing” services (like *Amazon* Web Services). “Startups can create a solid tech base with cheap hardware and a single server; once they get past that, they can rent CPU on demand from Rackspace or work in something like the *Google* App Engine,” Zachary said. “That’s having a huge impact; it’s leveling the playing field because the founders don’t have to put in all this money upfront.”

— Ben Schachter: Schacter has been asking CEOs the hard questions during earnings calls and investor conferences for about 10 years. (He joined Broadpoint AmTech as its Internet & Video Games analyst earlier this year.) He said it’s easier to be an entrepreneur now because service providers like *Akamai* and *Amazon* have made digital content distribution easy and cheap. “There’s zero incremental cost for digital goods — whether its a music track, an article or an app — so now anyone can put up a piece of content and sell it to a billion people,” he said. “That makes it much easier to start and reach a massive market.”

Schachter said the cost benefits extend to tangible goods too, noting that “on-demand” retail startups like CafePress and Zazzle had lower costs than their brick-and-mortar retail counterparts.

— Vivek Shah: Shah has seen publications like Fortune and CNNMoney.com chronicle the rise and fall of many startups. He said the biggest Web-based change has been in “audience accumulation”: “Traditionally, entrepreneurs were limited to a few obvious channels if they wanted to accumulate an audience and attract advertisers,” he said. “With channels like social media, apps and online video, you have multiple ways to grow a very specific audience very quickly — which is far more attractive from an advertising point of view.” Still, Shah said the days of just building an audience around content or a “feature set” were over. “Even a year ago, strategic buyers were interested in acquiring features and audiences,” he said. “Now that the market’s changed, if you don’t have a way to generate positive cash flow, those buyers aren’t going to be an exit for you.”

The caveat to all this innovation is that it lowers the bar for entry (and competition) across the board. “The startup that utilizes *Amazon* and manages its server costs more efficiently, for example, is going to have the advantage,” Schachter said. Zachary agreed. “If you have a good idea, the reality that you

– Jeff Lindsay, Bernstein: ” As it is, we think Yahoo! has done enough to hold on a little longer but has fallen short of being able to convince shareholders to reject Microsoft’s overtures. Unless Yahoo! has a real alternative in the form of a deal with Google (NSDQ: GOOG) or AOL (NYSE: TWX) or both, then we think it is only a matter of weeks before Microsoft prevails.”

– Ross Sandler, RBC: “The Q1 beat may be enough to give YHOO some leverage to seek a (slightly) raised bid, as estimates are heading higher. However, the lack of margin expansion in 2H08 may signal investment push-out vs. sustainable upside from 1Q.”

– Ben Schachter, UBS: Maintaining his view that Microsoft will up its bid just to get the deal done: “Given YHOO

From Schachter’s note to clients following the announcement on Rogers’ earnings call: “We believe that Yahoo’s access business represents ~66 percent of its Fees business, or ~$575 million in ’07. While Rogers is only a small piece of this, the public renegotiation raises questions about the quality of the revs from all the partners (VZ, BT, (NYSE: BT) and most importantly, ATT). … The main negative is that the economics (or at least the known and therefore the perceived economics) of the access business is changing. However, YHOO would likely make the case that while they are no longer getting subscription revenue, they’ve locked in a key advertising partner through 2011. At the end of the day, we will not be surprised to see YHOO alter how they report the ‘Fees’ line. And while we obviously wish we had more detail on all the access partnerships, it is clear that in today’s market, it