Dec 112008

…and a little end of 2008 Virtual Worlds, State of Play…

Broome Australia 2008_07

Just back from a short break in the lovely town of Broome in NW Australia (my pics). It was interesting being disconnected from ‘the cloud’ but in the process having a few ‘virtual experiential’ moments. One of these was watching the controversial film ‘Australia’ in the worlds oldest picture gardens, Sun Pictures (pictured below). Several parts of the film are set in an open air cinema in the 40s and it was so odd to actually be ‘in’ more or less the same scene of deck chairs, insects buzzing around – as the real sun set, the wind blew off the Northern Territories outback while the film panned around those environments, and lizards crawled around on the screen, bats flew overhead, propeller planes took off from the nearby Broome airport and in the audience several from the Broome aboriginal community. A kind of forget 3D lets get to 4D film experiences.

In other parts of Broome I talked to a few people about some of my work, y’know, the web, cross-media, film and virtual worlds (and just like those low hanging fruit journalists who are constantly predicting the end of 3D worlds) even out here in the styzx a couple of folk suggested that games & social virtual worlds especially will really suffer in this economic downturn and may not survive. Which leads to the point of this post to put things in a little perspective.


First lets look at investor confidence in them. From Virtual Worlds Management Reports there was $1 billion US invested in 35 virtual world companies between Oct 06-07 – and since Oct 07 to the present day there has already been $918 million trusted to the success of this particular industry. This breaks down roughly as:

  • Q3 08 – $148.5 million invested in 12 VW companies
  • Q2 08 – $161 million in 16 VW companies
  • Q1 08 – $184 million in 23 VW companies
  • Q4 07 – $425 million in 15 VW companies

As a topical reference, and to put things into heritage media perspective the total spend on all film and tv drama in Australia in 07-08 was $420 million US (at current exchanges). Now the majority of these worlds invested in are youth based but many specialised ones aimed at the Gen Y hole (see charts for more info) that are focusing on key niches. These start to fill in the gaps that ‘generic’, jack-of-all-trades, social virtual worlds such as Second Life cannot truly cut the mustard as sub-builds inside the service. So we have recently had in the last week the to user launches of a dedicated real life buy with real cash Virtual eShopping just in time for XMas and what will be a real winner in my view (having just tried it finally) the social sports virtual world, Football Superstars which combines EA-like footy with social activity and even has a bit of WoW-like quest giving challenges.

The social aspect of virtual worlds are not lost on the big consoles either with the Launch of XBox and PS3 virtual worlds that I covered in a recent post and also the Inquirer’s article Sony, Microsoft begin battle of Virtual Worlds. I was going to talk a lot about how during hard economic times people turn to escapist activities. In the past it used to be film or TV, but now there are many more choices and as we haven’t seen a global economic downturn of this scale since the 2nd world war – the escapism of choice is now immersive interactive media. This will not be lost on advertisers who also need to optimise their spend across the many variants of shared social worlds.

Shared Social Worlds Diagram


Savvy businesses have now moved beyond the hype bubble of Second Life’s superficiality and realise the power of social collective collaboration. As well as education and science virtual worlds as ‘tools’ are developing into major economic government initiatives. The Athena Alliance have released a report called “Virtual Worlds and the Transformation of Business” with some optimistic summary lines.

The rise of the collaborative enterprise that is likely to result from the successful deployment of Virtual World technologies will usher in a new era of business. It will change the way firms compete with one another for customers in both goods and services industries. It is our firm belief that if our nation accelerates the development and maturation of Virtual Worlds, it will encourage a more collaborative and enterprising form of business. This will lead to greater innovation, sustained productivity, and competitive growth in the world economy.. the companies and workers can use the tools of Virtual Worlds to transform the United States into a collaborative enterprise-driven economy.”

The use of virtual worlds for simulation is not lost on the military either. This goes way beyond using first person shooter games to train late teens for an army life using well, first person shooter game technology in war zones. Last week the largest global simulation conference ever was held “The Interservice/Industry Training, Simulation and Education Conference (I/ITSEC)” focused on the use of more social virtual worlds for training and education for military and scientific use. It was keynoted by General Wallace, the Commander, United States Army Training and Doctrine Command who talked with other big government players about the likely hundreds of billions of dollars that will be invested in virtual simulation technology. As we know most media developments have come about from love and death, porn and war. So this growth as always will resonate in the commercial entertainment industry. An example of how military and education are mixing here is The University of Florida recently announced too that it will be spending $1.25 million on building a Second China for the US Foreign Service and Military to understand the culture without the need to go there and fail-forward.

“The goal of the federally funded research project: To educate and prepare foreign service or other government professionals to arrive in the country prepared and ready to work.”


On the money side there is a great deal of research now going into how virtual world economic models and currencies will evolve from a range of closed systems to a state that may become viable alternatives to ‘real world’ currencies. The Virtual Economy Research Network just had an interesting article on the VW freemium model – free-to-play but encourages the adoption of the inworld currency rapidly, for example.

A brief look forward and in terms of users of these worlds there is going to be a big acceleration over the next 3 years with a recent Instat report suggesting that “registered users of virtual worlds are expected to exceed 1 billion” by 2012 and total revenue is expected to exceed US $3 billion. The majority of this revenue is not from an expected subscription or advertising but “90% of their revenue from the sale of virtual items, currency, land, and fees associated with these items”. Finally a reason why there is even more investment in youth worlds “70% of the more than 300 million registered users of virtual worlds are younger than 18.”

Forester and MillionsOfUs have just published a report looking at how traditional corporate business will begin to flourish in these spaces and to quote their executive four point summary:

  1. It grants unprecedented depth of engagement with consumers. Second only to inperson
    consumer meetings, virtual worlds allow marketers to get up close and personal
    with individual consumers. Using these interactions to allow for feedback, creative tasks,
    and just plain fun creates brand and product advocates in the user base who go far beyond
    in-world influence.
  2. It taps into an audience that is difficult to reach via other channels. Today’s virtual
    world users are seen as a minority vanguard for future usage, but they are also difficult to
    reach via other channels. This is especially true of youth groups and deeply creative
    communities supported by various virtual worlds.
  3. Newer worlds offer better opportunities for cross-channel tracking and more
    targeted audiences.
    Early virtual worlds, while technically groundbreaking and providing
    the necessary foundation for future worlds, often lacked audience-tracking tools and were
    open playgrounds without a specific purpose. New, recently launched worlds or those just
    around the corner will offer better tools for customer tracking and tend to target gamers,
    youth, conversation, or other specific tasks, rather than just being open. This allows better
    brand alignment and campaign integration.
  4. Virtual merchandizing resonates with youth — and can be very cost-effective. Virtual
    items and other digital assets resonate with Gen Y consumers far more than with older
    (physical-media-loving) consumers. They appreciate novel, unique items and accept brand
    involvement in these items and their distribution — provided it has been thought through.
    Needless to say, the creation, storage, and distribution of virtual items can be very costeffective
    compared with traditional merchandise like t-shirts and caps.

There is no decline happening. So journos, nay sayers, please look at your own industries please. To reiterate the above examples are social or simulation virtual worlds and there are around 78 currently being used by 360 million people. I haven’t touched on online game worlds or offline games which starts to turn the whole affair into a $40-50 billion industry overtaking movies (including home entertainment elements too). All suggestions are that VWs and Games will be the dominant entertainment form and a widely used tool for business and education and revenues will start to match that of the $300 billion TV industry within five years time. A big issue for me is the lack or real courses in higher education in this space too. Most training is on how to use software to make fps console-type games, there needs to be a paradigm shift otherwise media education will be irrelevant as the heritage media linear form falls into the background.


Now tell me again that these wacky 3D worlds are about to disappear?

To finish I will be adding a presentation I gave at the Online Distribution and Business Collaboration Conference two weeks ago as it contains many references to the above post…hold your breath…

Web 3.0

 Posted by on August 27, 2006 at 10:12 pm  Add comments

I have posted prolifically about MUVE’S (Multi User Virtual Environments) in the past, concentrating mainly on the ever customisable Second Life. It is interesting to watch the buzz spreading and consider if virtual worlds are really web 3.0, I think so. A quick look at the evolution of the intraweb from the mid 90’s. From text and graphics dominate 2D environments, immersive web sites with flash quickly followed combined with ubiquitous communication via IM and IRC chat. Then the early 00’s with the expontential growth of self publishing, blogs and wikis. From 2002 onwards the massive sharing social network communities of flickr and YouTube in sync with the explosion of portals containing all of the above in services such as MySpace, Yahoo and MSN etc: We are heading towards a rich media personal hub that points to and houses all of our ‘shareable’ content. But the current 2D web, mostly linear to linear linking, is about to be enhanced by virtual environments in which we meet as avatars, interact as 3D moving objects that takes sharing, co-creation and communication to the next, predictable level. The important component here is real time collaboration and communication as the paradigm shift.
Web 1.0 to 3.0

Web X.0. To me evolution of the web can be defined in single sentences:

    1.0 the pushed, one way only web
    2.0 the two-way shared web
    3.0 the real time collaborative web (3D, isometric or just 2D)

A sign that this is reaching a level of maturity is when big brands and subscriber numbers start to escalate. This item entitled Second Life Targets Existing Branded Web Communities succinctly sums up some of the major changes in one MUVE.

Major companies such as Major League Baseball, and institutions such as The University of Southern California, have already turned to Second Life to host virtual events synched with live real-world events. Organizations such as the New Media Consortium are using Second Life to convene meetings and conferences. Wells Fargo is teaching kids about finance in an engaging manner through Second Life. Clothing designers are using the community to prototype their designs and get community feedback and build buzz before they have to manufacture.

In 2 years time will the most effective way of communicating be through a variety of MUVEs rather than 2D web? As Second Life subscribers go above half a million, from less than 100 thousand less than 6 months ago one can see other players beside Linden Labs taking part of the action. Here are the Second Life stats from yesterday to give some idea of the scale

Statistics from 3:20pm Saturday 26 Aug 2006
Total Residents: 568,856
Logged In Last 60 Days: 256,425
Online Now: 8,369
US$ Spent Last 24 Hrs: 357,140

Many of the projects we are doing in LAMP start from a position of ‘experience design’ that has its ultimate incarnation in letting the users ‘live’ the story. Personalizable MUVE’s will shortly have real potential to enable any experience requirement you can throw at it. As the gaming generation take up lead roles in society (the average age of a Second Lifer is 32) I really believe that remote communication will exist more and more in virtual worlds. Entertainment, education and business is already taking root. The article continues by even pointing to the political engagement these environments afford…

Imagine a wiki-based web community now being able to collaboratively design detailed 3-dimensional objects, complete with nuanced permissions, instead of just text documents. …Imagine a dark horse political candidate with a virtual campaign headquarters in which campaign volunteers can collaborate regardless of geographic location and be trained personally by the avatars of real campaign staff, and where the candidate can conduct a virtual whistlestop tour to test new stump speeches and conversations with highly educated, affluent, and socially networked focus groups

Current MUVE’s do require decent computers, graphics and bandwidth but many millions of terminals are already capable. There are many posts that talk about a ten year from now predication of what a Virtual World may be, many not looking too deeply into the ethical or moral issues as that really is an unknown as this quickly cobbled together chart above suggests I think we are lucky to be at the dawning of ubiquitous MUVE’s across all devices (mobile devices are part of distribution in this context – not a movement in itself). The next challenge as I always point out is interoperability – how our personalized digital fingerprint can exist across an ever growing range of portals. To put it another way using the present day, can out MySpace profile work with our Second Life avatar, our flickr and YouTube accounts. Will our eBay positive rating be carried into World of Warcraft, can Amazon engines learn what we are buying in Second Life to recommend things to buy from eBay and so on. The brand and advertising targeting potential goes off the scale here. The first company that comes up with a profile engine that combines all of the above, sits above them, cross-relates them but needs to get started right now before it becomes way too complicated 😉

Posted by Gary Hayes ©2006