Badgeville, a startup that adds the dynamics of gamification to e-commerce and web publishing websites to engage users, recently launched a new product called Social Fabric.

The startup company is looking to add social networking features on websites on top of providing badges, awards, and leaderboards. The new tool will allow users to see activity and interaction with friends and other people within the circle of interest in real time.

“The more immediate opportunity is that Facebook is getting four hours per day of user attention,” Duggan says. “All other sites that aren’t Facebook aren’t social-enabled, and are not real-time or immersive. The idea (with Badgeville) is, ‘What happened while I was away?’ and, ‘Who was doing stuff that I care about?’ We’re creating those same kinds of experiences using social and game mechanics.”

When someone comments or reviews a product, and other users engage on it, “Likes” it and such, the activities will appear in the Activity Stream. The activity stream need not to only register a user’s Facebook friends in the stream since it banners an interest graph and not a social graph (such as the one used by Facebook). However, it will only show actions within a user’s chosen interest graph or behavior graph.

“Companies are not buying gamification,” Kris Duggan, CEO of Badgeville, says. “They’re buying the ability to drive user behavior.”

Badgeville goal is a lofty one.  Many who are looking at increasing engagement are developing their services in house and are not eager to put their customer data in the cloud.   Badgeville is heavily venture financed so they will have money to pivot if the market shifts away from them.

Badgeville is hoping to take advantage of the hype around social gaming and social networking.  There will be a “following” feature as well that will allow users to keep track of any product, object or person from a website.  Badgeville is trying to transform company websites into smaller versions of Facebook by embedding much of the social network’s features.

Indeed, gamification is effective in filling business gaps. What’s more is that it’s also used by terrorists to gain more followers and inspire terrorism. Al Qaeda has been using it with a built in reputation point system to promote social status within an online community. Google’s also resorting to gamification for social news reading. The system will track a user’s reading while they are logged onto their Google accounts. The more users read, the higher level of badges awarded to them. There will be 50 varieties of badge to be given away.

Badgeville has a long road to climb and big competitors looming.