Below are my slides, a little descriptive text below that and at the bottom of this post some deeper insight into SmallWorlds (given most of my readers probably know Habbo already? – If not, Why Not!? ). I included one slide from Jeff Brookes set looking at Hitwise’s stats on browser worlds and other sites in terms of session length which will no doubt raise a few eyebrows!

Virtual Worlds & Business: What’s The ROI?

Virtual worlds are maturing at a rapid rate and brands are realising there are valuable business opportunities within them. Whether the objective is engagement, research or brand presence, virtual worlds are proving to be a legitimate marketing channel. In this session our panel will look to provide insights into the business benefits of working within a virtual world.

Presenters

• Gary Hayes, Director, Laboratory for Advanced Media Production, AFTRS & CEO MUVEDesign (Australia’s leading SL developer!)
• Jeff Brookes, Regional Director – Asia Pacific, Sulake Corporation (habbo.com.au)
• Mitch Olson, Co-Founder, SmallWorlds.com

There were several important messages in my introduction. Firstly making sure we all understand the different platforms social virtual worlds are operating on so I briefly described

1. Layered or Parallel worlds – cute 2D type avatars that move over the top of 2D web
2. Browser Worlds – walled garden that run inside web browsers, often as isometric views as flash or shockwave
3. Client Worlds – anything from 20MB to 3GB downloads of data and the world is obviously much richer than browser worlds but do need higher spec computers
4. Console Worlds – a relatively new kid on the block, social spaces that exist on games consoles. All the rendering grunt is there and the avatars are often linked to the PS3, Wii or XBox360 real life account. PS3 Home is the easiest way to match to worlds like Habbo or There.com
5. Note there are hybrids of the above and I would put ExitReality down as a hybrid of 1 and 3 as it turns a web page into a client style world

Here are the images of the above part of the presentation

I decided that a good ‘spine’ to hang the introduction on was the sort of negative questions floating around from those who don’t really understand what’s happening with web 3.0, the live virtual world space. This includes the paranoid printed press, a few out-of-touch businesses, and digital media companies/consultants more interested in iPhone/mobile games or Facebook widgets which is something they can truly explain (read: make money off).

Press hyperbole or myths?

• Virtual Worlds are on the decline?
• There’s no one in them?
• & people don’t spend long there?
• They are for kids or social ‘games’ not business?
• There are no marketing models?

But I then addressed each question in turn showing real world stats and examples. Obviously in recession investment in new tech/services are going to be hit and recent reports do suggest a consolidation of investment into kids worlds, hinting at a lowering of VC in the ones I highlighted in my presentation, but this whole area is still something education & business are advised to R&D and understand fully – as a minimum. As we know it will be new ways of doing business, more immersive and efficient ways to collaborate and alternate forms of entertainment that will be partly what will bring us out of recession.

I finished the talk with a quick overview of the main models that virtual worlds (and most online games) can be monetized. Items 1, 3 and 4 were picked up in a talk on the 2nd day of ad:tech looking at how Nike engaged with console ingame campaign experts Massive across a few platforms.

1. Static Advertising
2. Promotions & Sponsored events
3. Virtual Goods & Product Placement
4. Dynamic InWorld Advertising
5. Branded Spaces
6. AdverWorlds & AdverGames

After my talk some great examples from Jeff Brookes from Habbo followed by Mitch from Smallworlds. I am always fascinated by the methods Habbo engages with its loyal and large community and was equally fascinated by Small worlds thinking too and how they are ‘integrating’ themselves with the existing 2D social networked web. This video by the infamous Robert Scoble features Mitch Olsen and Ted of SmallWorlds

They talk about the main traditional world features but then go onto the interesting areas of embeddable worlds (the Google Lively Killer app – not exploited), API integration with almost anything (twitter feeds, YouTube vids, FB updates on walls anyone) and the most interesting ‘missions’. You are encouraged to explore, meet folk, shop and basically get involved – Mitch says this is like the LinkedIn profile thinking, until your profile is 100% filled in you feel like you are missing out. I likened it much more like World of Warcraft, set players tasks, set them group tasks, give them rewards. This to me could be SmallWorlds real killer applet. At the moment they have around 400 000 users and that looks set to take off in the next months.

Tony Fendall blogged about a particularly cute feature that allows (his words) -

One important thing which was missed is that they didn’t have time to talk about all the cool micropayment features (which Ted alludes near the end) such as Gambit, OfferPal and Zong. Gambit and OfferPal are both services which allow users to earn SmallWorlds currency by completing tasks. These tasks include things such as answering surveys and give amounts of currency proportional to the amount of effort put in. This is a great way for players (who may not have a credit card) to still be able to earn a premium SmallWorlds experience. Zong is a simple cell phone payment service, where by users can pay for a premium SmallWorlds experience using their mobile phone. For an excellent look at how we have integrated Zong into SmallWorlds, check out this YouTube video created by the developers at Zong:

Note a cross post from Gary’s other main blog personalizemedia

“Imagine a business Web site where you can see what visitors are looking at and go and talk to them. Imagine a classroom with educational content like a real 3D exploding volcano and students physically located all over the world. Imagine a family or staff spread around the globe meeting up in a virtual space and being able to see each other and share photos, video and documents. The scenarios are endless with virtual worlds and until now, have been little more than pipe dreams to the average Web user,” says Vincent Teubler, co-founder of Gogofrog.

I am aware of over 15 new worlds that are heading in the right direction and turning more immersive virtual worlds into social, business, educative and networking 3D windows inside browsers. One that has just press-released today is gogofrog (co-founder comes from Melbourne), with a tagline ‘Virtual Simplicity’. Its heart is in the right place and with 30 000 already using it might quickly become a dominant new player?

Gogofrog is breaking with convention to offer a new type of web experience. The basic idea is that you create your own 3D space (pad) that you can decorate the way you want and to reflect your personal style. In Gogofrog you can move from pad to pad discovering sites created by others and chat with people you meet along the way. You can also create your own place where you can invite your family and friends to visit and hang out.

It still has a few lessons for learn from the demise of Google Lively, but several area addressed already. Keen to know how it connects the ‘pads’ properly (vs non-linked rooms) and how easy the customisation (vs importing jpeg images) tools for the 3D elements are. The full press release gives a lot more information and shows how they are across the need for personalization and integrating existing social tools inside the environment (especially video conferencing etc) – this service and the others just about to peek out are definitely worth watching. Just before the release here is a slightly reversioned Gartner Cycle showing how browser worlds are going to have more significance over the next two years.

Virtual Worlds as Advanced Social Networks, Business and Education Tools Possible with Commercial Launch of Gogofrog

Los Angeles, California (PRWEB) February 10, 2009 — The power of virtual worlds as a means of advanced social networks, sophisticated business tools and education tools is now accessible to all Web users with the commercial launch of Gogofrog. Two years after its Beta launch, Gogofrog has taken the advice and input of its global user base of more than 30,000 to remove the prime impediments to making virtual worlds a mainstream Internet tool, access. Fully browser-based, Gogofrog enables anyone with an Internet connection to set up their own world: simple worlds for free and complex worlds for as little as a $10US monthly subscription. No software at all for Users or Visitors to download.

“Imagine a business Web site where you can see what visitors are looking at and go and talk to them. Imagine a classroom with educational content like a real 3D exploding volcano and students physically located all over the world. Imagine a family or staff spread around the globe meeting up in a virtual space and being able to see each other and share photos, video and documents. The scenarios are endless with virtual worlds and until now, have been little more than pipe dreams to the average Web user,” says Vincent Teubler, co-founder of Gogofrog.

Teubler was an early convert to virtual worlds and envisaged the power of worlds beyond the traditional realms of fantasy game play. These worlds traditionally require users to download software and usually participate in a single often poorly regulated world. Whilst businesses, educators and users of social networks saw the potential, Teubler believes the need to download software, poor security and costs associated with participating and developing content or real estate have all contributed to severely limiting the broader use of virtual worlds.

“Due to their complexity virtual worlds have faced a mountain of problems in reaching beyond game players and the odd company with deep pockets,” Teubler says. “As a browser-based platform, Gogofrog users and visitors to the various worlds need only have access to the Internet to fully participate. Since its Beta launch, Gogofrog users have built simple 3D spaces to meet with friends, students and customers. They’ve set about decorating their spaces with photos, simple objects and their writings and have variously created places to meet, educate and do business in.”

Among other enhancements, the commercial launch of Gogofrog includes greater communications tools.

“Anonymous text chat lends itself to fantasy game play but not much else. Our users demanded real-world communication, so we enabled avatar-to-avatar controlled webcam communication. It doesn’t get any better than that. You can request and start a webcam chat with anyone in your virtual Web space — friend, family, colleague or visitor,” Teubler says.

Gogofrog also features a variety of user-defined security measures. The capacity to communicate via webcam is a big security bonus not found in other virtual worlds, as an avatar’s profile can easily be matched against them with a simple webcam chat. Gogofrog further allows users to set who they will allow in their world. With the click of a button, users can set it so only people they know — friends, family, students or staff — can enter their world, or they can set it so only those who know a password can enter. Teubler says the latter was especially important to educators who wanted to ensure their students would have a completely safe virtual experience.

Gogofrog also found participation is crucial to users, so the commercial site enables users to participate in the world’s economy.

“Many worlds already have buoyant economies as a result of allowing users to participate,” Teubler says. “Users need to be able to personalize and brand their worlds and potentially sell items to the broader Gogofrog user and visitor community. Gogofrog allows users to sell their images, scenes, avatars, avatar clothing and accessories and 3D furniture and objects. Everyone can make real money through their contributions.”

With user feedback continuing to be incorporated into Gogofrog’s software development roadmap, Teubler believes his prediction of virtual worlds becoming a highly sophisticated, commercial and entertaining part of social networks and the mainstream Internet is fast becoming a “virtual” reality. For more information about Gogofrog, visit www.gogofrog.com.

Contacts
Vincent Teubler Co-Founder Gogofrog
Melbourne, Australia
http://www.gogofrog.com
+61411265715

Monica Dodi
CEO Gogofrog
LA, California, USA

IS THERE REAL INVESTMENT?

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 kzero.co.uk 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 there.com-like 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.

BUSINESS WAKES UP

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.”

SHOW ME THE VIRTUAL MONEY

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…