Industry Update is contributed by our friend and gaming junkie Alexander Liss

The old saying goes that “Bigger is Better,” but lately we are seeing the opposite happen in casual gaming. Mobile is HOT right now — and getting a piece of the mobile space is how companies will be able to grow in this increasingly crowded and fragmented market. A couple of key things have really jumped out at me lately:

1) Mobile gaming hits the next level with Facebook Connect:
Facebook recently rolled out its plug-and-play Connect app, which allows developers to link their iPhone games with users’ Facebook profiles, push out status updates and compete with friends. The iPhone has been a game-changer for handheld gaming, and with this its momentum only gets stronger. Soon it’s going to spread beyond just iPhone, with BlackBerry, Google Android, and Palm WebOS all making a hard bid to get a bigger piece of the smartphone market.

The rollout of Facebook Connect to iPhones (and probably other devices pretty soon down the road) is a big deal because it looks to make mobile gaming a success on its own terms, instead of porting existing IP to a bare-bones and disappointing mobile version. The strength of the mobile web experience is not in graphics or performance, as these inevitable pale in comparison to full PC’s. Instead mobile web is compelling because you’re constantly in touch with your friends through social network and persistent short-form communication. Adding social games to this mix is already a hit and it’s just going to get bigger.

2) Augmented Reality:
What is augmented reality? Well, aside from a buzzword you are going to hear more and more about in the future, it could be summed up as using technology to provide a layer of content on top of real-world experiences. In the mobile space, apps like Yelp are leading the way into bold new territory. How has this figured in mobile gaming? Well it hasn’t yet; but as this filters more and more through mobile apps you are going to see games take advantage of this feature.

A couple weeks ago I wrote about Booyah, an iPhone app that gave people in-game achievements for real-life activities. Joining in that trend you have Facebook apps like Kamu,a 3D avatar chat game, which encourages you to make a physical print-out of your digital avatar, and photograph yourself doing things with your buddy in real-life.

In a more figurative sense, the rapid increase in 3G smartphones is moving us toward another definition of augmented reality — one in which you are never cut-off from the internet. Old-definitions of online and offline will no longer apply as people will always be able to check their facebook, keep in touch with friends, and of course, play games, at any time. This is nothing less than a paradigm-shift for the traditional gaming model, which used to take place only when you were at your PC or your console. Right now we’re only at the beginning of a whole new era of gaming devices.

Even with console price cuts, a lot of analysts are crying doom-and-gloom for the traditional model of console hardware and software pricing. But with mobile gaming on smartphones starting to pick up steam, a whole new gaming market is literally just getting started.