Impact of Virtual Worlds

1
Impact of Virtual Worlds

• The online destination
• for the next generation?
• Dr. Pete Markiewicz
• Indiespace/Lifecourse Associates
• pindiespace_at_gmail.com

2
Topics

• What are virtual worlds?
• How do vworlds differ from MMOGs?
• Why are vworlds important?
• Numbers and growth
• What vworlds will need in 2019
• Follow the money
• Barriers to growth
• Unique features of US market
• US teens where will they go?

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What are virtual worlds?

• Extend sense of place characteristic of
  cyberspace (Web, chat, MMOGs)
• Games may be present, but not a game
• Virtual land or rooms
• Social interaction like Web 2.0 (chat, friends
  lists, exchange of virtual objects)
• Customized avatars, for real-time interaction
• Support for real work, education
• Economic models for payment, barter, sales

4
Two kinds of vworlds
Tween and kid vworlds
Adult vworlds
Second Life
Cyworld

• 25 of US teens
• Web-based (2.5D)
• Prebuilt
• Social networking
• PG-13

• 3 of US adults
• Custom browser (3D)
• User-generated
• Social networking
• Commerce, Education

5
Virtual world examples (teen/adult)
6
Virtual World Examples (kids)
7
Virtual world environments
There
Habbo
Empire of Sports
Club Penguin
8
Sports-based vworlds

• Multiple sports-based worlds in development
• Empire of Sports (teen/adult) multiple sports
• Football Superstars (teen adult) virtual football
  challenges
• TechDeck Live (kids/teen) virtual skate park

9
Vworlds and RL exergaming

• Irwin Toys strap-on Me2 Hardware measures how
  hard kids exercise
• Plugs into computer for gameplay in the Me2
  virtual world
• Kids expend as much energy in active games as
  in regular sports

SOURCE http//www.nzherald.co.nz/health/news/arti
cle.cfm?c_id204objectid10493847 SOURCE
http//www.360kid.com/blog/?p43
10
Virtual Worlds and Politics
Watching Obama in Second Life Jul 11,
2009http//foo.secondlifeherald.com/slh/2009/07/w
atching-obama-in-ghana-from-metaplacesecond-life.h
tml
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Virtual products

• Offered for sale or free
• Used in-world
• Fashion
• Buildings, furniture
• Connect to outer word
• E-commerce
• Teaching tools
• Virtual phones
• Prototype real-world
• CAD/CAM prints to vworlds

Vodaphone virtual cellphone HUD
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Vworld creation

• Development cycle similar to games
• Must create/maintain associated website
• 3-5 years needed to develop
• 30-60 million required for launch of full 3D
• 5-10 million required for 2.5D/Flash launch
• gt200 competitors

Google Lively
Mike Hirshland, Polaris Venture Partners
13
Vworlds are NOT MMOGs

• Members play the game of life
• Members are themselves
• Members define goals, scores, rank
• Members reflect general population
• Members may sell virtual products, own IP
• Virtual economy tied to the real economy
• Members can do real work (education, business)

Stardoll
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Vworlds are not empty
MYSPACE
HONG KONG ISLAND

• Compared to MySpace
• 300 million pageviews/day 1 minute per page per
  day
• 1/3600 pages being viewed at any time
• If MySpace pages are laid out as real estate in
  a 60x60 grid, occupancy resembles the Second Life
  grid
• RPGs in Second Life look 10x-100x better than the
  average MySpace real estate

MIDIAN CITY RPG
EVERWIND RPG
Take-home Vworlds arent emptythey just look
that way!
15
Vworlds are NOT MMOGs

• The game industry may have created the idea of
  online entertainment, but the days of orcs and
  elves ruling the online space is drawing to a
  close"
• - Christopher Sherman, Executive director of the
  upcoming Virtual Worlds Fall 2008 Conference

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Vworlds versus MMOGs
Goals, scores community created by members
Virtual Worlds
Prebuilt
User-created
Online Games
Pre-defined goals, scores
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Vworlds versus MMOGs
Goals, scores, community created by members
Second Life
Web 2.0
IMVU
Kaneva
Kid tween vworlds (Club Penguin, Habbo,
There Gaia Online, Cyworld, Stardoll)
MoiPal
vSide
Prebuilt
User-created
Entropia
Second Life RPGs
WoW and Similar 3D RPGs
Kid/tween gaming(Neopets, Nicktropolis,
KartRider)
Pre-defined goals, scores
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Why are vworlds important?

• 2009
• 15 of Internet users MMOG or vworld members
  (Mark Kern, team lead, WoW)
• Growth Q1 gt Q2 2009 39
• Average user age 14 year old (Kzero)
• MMOGs and S/N web make the most money
• Vworlds populated by older early-adopters
• Vworlds offer limited value compared to Web 2.0
• 2019
• 80 of Internet users in virtual worlds by 2011
  (Gartner)
• Average user age gt20
• Vworlds make the most money
• Vworlds replace the web for the new
  (Millennial) generation
• Vworlds become Web 3.0

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Vworlds versus web 2.0
20
Vworld accounts in Q4 2008
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Virtual world simultaneous users

• Second Life (3D)
• 150 users/island
• 70,000 simultaneous during Q3 2008 (up from
  about 2,000 in early 2006)
• Gaia Online (2.5D)
• 100,000 simultaneous (2007)

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Kid worlds have high traffic
SOURCE Patrick Collins of Brand
Architect http//www.collings.co.za/2007/11/the-ma
rch-of-th.html
23
Vworld members skew younger
SOURCE Kzero Blog - http//www.kzero.co.uk/blog/?
p2793
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Predicted growth of kid vworlds
Percentage of US child/tweens (3-17) Expected to
visit a virtual world at least once a month
SOURCE http//www.emarketer.com/Article.aspx?id1
006166
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Time spent in vworlds
Total time spent logged-in by Second Life Users,
March 2007-March 2008 (millions of hours)
Growth was unaffected by negative media stories
in Fall 2007, and economic slowdown in real
economy
SOURCE http//www.emarketer.com/Article.aspx?id1
006166 Provided to eMarketer by Linden Labs
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Vworld members are engaged

• Wow (Aug 2007)
• 80-100 hours/month(!)
• Second Life (Aug 2007)
• 24 hours/month (counting actual monthly logins)
• 3.7 hours/month (counting unique accounts)
• MySpace (Aug 2007)
• 30-90 minutes/month per page (depending on how
  you count)
• Habbo (Sept 2008)
• 40 minutes/month

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Take-home
Second Life classroom
Vworld audiences are small, but their members
are MUCH more engaged than Web 2.0 users
28
Monetization

• 2008 Dollar revenue, monthly users per month
• Second Life 9.30/mthly user/month(higher due
  to virtual land sales)
• Club Penguin 1.62/mthly user/moth
• Habbo 1.30/mthly user/month
• Runescape 0.84/mthly user/month
• Puzzle Pirates 1.50/mthly user/month
• Average 1.40/mthly user/month.
• Excluding Second Life, 1.25/mthly user/month

SOURCE LIghtspeed Partners Bloghttp//lsvp.wordp
ress.com/2008/06/09/successful-mmogs-can-see-1-2-i
n-monthly-arpu/
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Virtual products are hot!

• Total US Market (December 2008)
• Estimated at 200 million
• Stardoll (September 2008)
• 1.8 million virtual products were purchased from
  the Kohl's back to school store within its
  first 16 days
• Zwinky (August 2008)
• Sears sold more than 850,000 vproducts in
  Zwintopia during the first 16 days after launch
• Habbo (Sept 2008)
• 2.5 million US users spend 18/month
• 85 of revenue from sale of virtual products,
  only 15 from advertising
• Nexon (creators of KartRider) June 2007
• Worldwide revenues of 230 million in 2007,
• 85 of it from sale of virtual items
• IMVU (Sept 2008)
• 4 million/month revenue
• 90 comes from a cut from sales of virtual
  products between members
• Facebook (June 2009)
• 75 million/year from sales of 100 million
  digital gifts

SOURCES Lightspeed Partners bloghttp//lsvp.word
press.com/?sRPGSecondLifesearchbuttongo!
http//lsvp.wordpress.com/2008/09/02/facebook-sel
ling-digital-gifts-at-a-35m-run-rate/ Business
Weekhttp//www.businessweek.com/magazine/content/
07_13/b4027047.htm?campaign_idrss_daily Virtual
Goods News - http//www.charleshudson.net/?p512
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What will vworld teens buy?
SOURCE WeeWorld Member Surveyhttp//www.virtualw
orldsnews.com/2009/07/weeworld-survey-teens-still-
spend-girls-are-major-influencers-.htmlmore
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For teens, branding in virtual worlds is effective
Link to K-Zeros age breakdownhttp//www.kzero.c
o.uk/blog/wp-content/uploads/2008/04/kids-world-ag
es001.png
SOURCE http//www.emarketer.com/Article.aspx?id1
006166 Deloitte Development and Harrison Group,
The State of the Media Democracy Second Edition
32
Take-home

• By 2019, vWorlds will become the place the next
  generation lives and works
• Web 2.0 and classic MMOGs will decline in
  importance

There.com
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What will virtual worlds need to succeed in 2019?

• Fit the audience
• My generation, age group, gender, lifestyle,
  politics
• Im special here
• My friends are all here
• Its a regular, normal part of my life
• Give the audience what it wants
• I have control
• I can find out what I need to know
• I can buy anything I can find on the web
• I can do my work here

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Follow the money

• Near-term
• Market research
• Flat-fee subscriptions
• Advertising
• (virtual) Sex
• Long-term
• Virtual products
• Real product prototyping
• MMOGs inside larger vworlds
• Virtual education
• Government/military use
• Business work environments

Vproduct Store in Second Life
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Popular Second Life destinations

• Top Second Life destinations, with sex and
  dwell regions stripped, Sept. 2007
• Shopping
• - New Brussel Mega Mall (shopping and dance
  club) - 106K - Phat Cat's Jazzy Blue Lounge (PG
  ballroom dancing/shopping) - 92K - Hedonistic
  Isle (beach/nightclub/shopping/etc.) - 55K-
  IceDragon's Playpen Island (casual
  gaming/shopping) - 53K- BareRose
  (Japanese-themed shopping/social area, multiple
  locations) - 49K
• RPGs
• - NORSIM MultiSIM (Mature goth/cyberpunk RPG,
  multiple areas) - 78K- City of Lost Angels
  (Mature Goth/Cyberpunk RPG) - 46K - Midian City
  (Mature goth/cyberpunk RPG, Multiple locations)
  43K- Toxian City (Mature Goth/cyberpunk RPG) -
  39K- Avilion Grove (romance/fantasy RPG
  community) - 35k- City of Midgaard (Gorean RPG)
  - 35K
• Romantic
• - Heavenly Rose Gardens (romance and wedding) -
  54K- Blackhearts Cafe (80's lounge/music/dancing/
  romance, multiple areas) - 53K- The Lost Gardens
  of Apollo (romantic PG, multiple locations) - 45K

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Take-home
Eliminate sex and casual social networking
traffic in vworlds aimed at older users, and
whats left is themed shopping and in-world
MMOGs to succeed in 2018, Vworlds must have
real economies and allow users (including
business and educational companies) to develop
products and services
Stardoll virtual fashion
37
Barriers to growth
SOURCE Thinkbalm - http//www.thinkbalm.com
38
Barriers to growth

• User interface is hard to learn (key commands and
  complex HUDs)
• If users are impeded from creating their own
  content, they dont (Philip Rosendale)
• Flat fee structure assumed
• Massive infrastructure needed

Avatar configuration HUD, Entropia Universe
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Barriers to growth - US market

• Most users log in from home (less sense of
  community)
• Backlash from Second Life hype
• Limited mobile power precludes use of mobile
  vworlds
• Internet connections in US are slow

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Where will US teens go?
Second Life (Social)
Second Life (shopping)
IMVU
Moove
Second Life (RPGs)
There
User-Created lt- Vproducts lt-Dressup
Dressup -gt Vproducts -gtUser-created
Kaneva
Most tween teen 2.5 vworlds, e.g.Stardoll,
Habbo,Whyville, Club Penguin, Virtual pet sites
Entropia
WoW
MySpace
Gaming -gtThemed Shopping -gt Social Networking
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Sources for Virtual Worlds

• Virtual Worlds News general newsfeedhttp//www.
  virtualgoodsnews.com/
• Virtual Goods News virtual productshttp//www.v
  irtualgoodsnews.com/
• Pearl Research China Asian markethttp//www.p
  earlresearch.com
• Kzero - 1 virtual vorlds consultancyhttp//www.k
  zero.co.uk
• Thinkbalm The Immersive Webhttp//thinkbalm.c
  om/

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More References

• Online traffice at compete.comhttp//siteanalytic
  s.compete.com
• Cnet - Neilsen 2008 results for social networking
  siteshttp//news.cnet.com/8301-13577_3-9948219-36
  .html
• Why virtual worlds are overtaking the game
  industryhttp//www.virtualworldsnews.com/2007/10/
  why-virtual-wor.html
• New World Notes - New World Notes' True Community
  Search Top Twenty Popular Second Life Sites,
  September 20http//nwn.blogs.com/nwn/2007/09/new-
  world-notes.html
• Total minutes netratings for web 2.0
  siteshttp//www.netratings.com/pr/pr_070710.pdf
• MySpace real pageviewshttp//www.mikeindustries.c
  om/blog/archive/2006/04/myspace-click-factory
• Fun with numbers Do New Ratings Mean New
  Valuations?http//voices.allthingsd.com/20070712/
  robert-seidman/
• Second Life statisticshttp//secondlife.com/whati
  s/economy-graphs.php
• Second Life engagement Second Grade Math(Oct.
  5th 2007)http//blog.secondlife.com/category/econ
  omy/
• Kids worlds poised for growth spurthttp//www.em
  arketer.com/Article.aspx?id1005410srcarticle_he
  ad_sitesearch
• Harvard Business School Conference, Nov
  2007http//www.gamasutra.com/php-bin/news_index.p
  hp?story16326
• There.com demographics (2004)http//findarticles.
  com/p/articles/mi_m0PJQ/is_6_2/ai_114573226
• Daedalus Project - The Psychology of
  MMORGshttp//www.nickyee.com/daedalus/archives/00
  1369.php http//www.nickyee.com/daedalus/archives
  /pdf/3-4.pdf
• Comparing virtual worldshttp//www.kzero.co.uk/bl
  og/?p978
• Virtual World Growth Projectionshttp//www.slides
  hare.net/nicmitham/virtual-world-growth-projection
  s/
• Round-up of 50 virtual worldshttp//fabricoffolly
  .blogspot.com/2007/10/second-life-in-perspective-r
  ound-up-of.html
• eMarketer report on virtual worldshttp//www.emar
  keter.com/Article.aspx?id1005410srcarticle_head
  _sitesearch