When casual gaming was young, Alex St. John started a company to “run away with the audience.” Now that social gaming is hot, he wants to do the same thing again.

The former head multimedia marketing strategist at Microsoft is a brash and salty-tongued new president and chief technical officer of San Francisco's hi5 Networks Inc., a struggling social network that sees salvation remaking itself into a gaming network.

“I thought this was a very exciting opportunity because obviously gaming works in social networking, and very, very few people understand why or how,” said St. John, who joined hi5 in November after stepping aside as CEO of WildTangent, a large, 12-year-old gaming sales and advertising network he co-founded in Seattle.

“Companies entering the area are naive,” he said. “I know how to advance the state of the art in business models in social gaming by 10 years into the future in one jump.”

Such cockiness might seem foolhardy, but St. John—who lightly refers to competitors as “dumbasses,” “amateurs,” and “morons"—is a well-known gaming-business veteran with technical chops. An engineer, St. John was one of the principal creators of Microsoft’s DirectX technology, which became the foundation for all Windows multimedia applications, 3-D graphics, media players, and casual multiplayer and Xbox games.

St. John was brought on in November to chart a new direction for hi5, a 64-person company that has seen traffic drop from 57.6 million monthly visitors in June 2009 to 36.8 million over 12 months, according to comScore (hi5 puts the number at just over 40 million).

The company became profitable on about $25 million in revenue by cutting nearly half its staff in April 2009, the same time that it recapitalized and replaced founder Ramu Yalamanchi as CEO with Bill Gossman, an executive in residence at main investor Mohr Davidow Ventures.

Started in 2003, hi5 is now the ninth-largest social network in the world, down from third, according to comScore. Traffic is primarily outside of the United States as a result of an innovative crowd-sourced translation program, and revenue comes mostly from advertising.

In an effort to make more money, the company has increasingly focused on gaming and virtual goods, for example, by introducing its own virtual currency.

St. John, who recently moved to the Bay Area, accelerated that process, but with a twist.

St. John said hi5’s strategy is to become the “playground” where people using both real and assumed identities can socialize around games. While not developing its own games, it will use “addictive” gaming features like 3-D avatars in Flash programming, a store for virtual goods, and gifting, he said.

Last week, for example, hi5 started selling “prank” gifts in which a user’s avatar can be dispatched to do mischief on other users’ homepages—like smashing what appear to be holes in their computer screens with a baseball bat. In the near future, St. John said he expects to introduce a set of graduated prank responses—like depositing a crater on someone’s page, with debris sent to friends’ pages.

“Instead of being confused about our business model, it’s going to be a giant MMO (massively multiplayer online game) built around socializing. People pay for that, and that’s a simple, well-understood business model that monetizes very well,” he said.

hi5’s moves inspired Crosslink Capital to lead a $14 million round of venture funding, bringing the total raised by the company to $34 million. Crosslink general partner Jim Feuille joined hi5’s board of directors.

Jia Wu, a gaming analyst with Strategy Analytics, said he remains skeptical of hi5’s new strategy because it has a much smaller user base than Facebook, and much of that is in Latin America.

St. John promises the company will become a significant U.S. presence.

He acts as though low-hanging social-gaming fruit is everywhere for the plucking, and the fact that Facebook and Zynga have hundreds of millions of people playing games and Google is widely expected to launch a major foray into gaming confirms only that a feast is waiting for someone with more savvy.

St. John argues that social gaming has many similarities to casual gaming, the easy-to-play, downloadable games that grew popular and lucrative on portals like Yahoo and MSN. Over time, specialized game networks like WildTangent, BigFish, and RealNetworks were able to siphon off huge amounts of traffic, he said.

“We were able to run away with the audiences,” he said.

WildTangent, which raised $76 million in venture capital, even developed a successful virtual currency called WildCoins that this year will register $100 million in sales, estimated St. John, who is no longer on staff at the company but is a stockholder.

Google is a big company with a different core competence, St. John says, and it will likely fail at gaming.

“Big companies suck at being fun,” he said.

Zynga, the No.1 game developer on Facebook, with huge titles like FarmVille, PetVille, MafiaWars, and Treasure Isle, makes “bad games” and is trapped by its dependence on Facebook, St. John says.

Facebook has taken a potentially large chunk of Zynga’s revenue by limiting the gaming company’s ability to communicate directly with users for free, thus forcing Zynga to spend more on advertising.

In addition, Facebook has pushed Zynga and other developers to use Facebook Credits to handle sales of virtual goods. Facebook is taking 30 percent of sales from other developers, though it recently signed a five-year deal with Zynga with terms that are not public.

Efforts to get comment from Zynga were unsuccessful, but the San Francisco company has been making big moves to diversify, announcing partnerships with Yahoo and SoftBank in Asia and reportedly taking a large investment from Google.

“Facebook is an example of a company that didn’t intend to be a gaming company,” St. John said. “It’s one accidentally. And that’s not a good situation to be in, because gaming is a very specialized, very sophisticated business,” said St. John.

Last October, the company stopped allowing developers to send out free notifications to users, and developers large and small have complained about dramatic losses in traffic. Facebook CEO Mark Zuckerberg said the constant flood of messages from developers was making Facebook “spammy.”

Facebook is hardly ceding ground, and it maintains that other changes already made and in the works, such as adding email notifications and a games dashboard, have made it possible for quality games to continue growing and raising money. Facebook users spend 40 percent of their time on the network gaming, and the company is preparing to hire a head of games partnerships, said spokeswoman Malorie Lucich.

hi5, however, is having some success attracting small game developers who don’t have resources to advertise on Facebook.

David Long, CEO of Seattle-based Exponential Entertainment, which makes movie-based trivia games and applications, said Facebook was “noisy,” and he is getting 100 times as much traffic from hi5 as Facebook.

“I really believe these guys are on to something,” said Long, who previously started and sold an 80-person gaming company to Paramount. “Right now, they’re really moving the needle for us, so we’ve been very happy with them.”

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Patrick Hoge writes for the San Francisco Business Times.