Today's post is a great read from Hiro Pendragon (Ron Blechner), former CTO of Involve, Inc. and a long-time writer and analyst of business and professional trends in virtual worlds. Hiro recently sat as a guest for a Second Life panel discussion about PBS's "Digital Nation" documentary.
This year will see increasing corporate and academic use of virtual worlds for private, individual ventures. Marketing efforts in virtual worlds are pretty much frozen solid, but will thaw a little proportionate to the recovery of the economy.
Second Life will continue to be the industry leader for interactive virtual worlds, while opensim-based and Second Life spinoff worlds will enjoy success for ones that stay cheap or that cater to a specific niche. But first, let's rewind to 2009.
2009: The Year Of The Social Media App
Let's look at 2009 and see how we arrived here. In one year, we have seen a number of large, well-funded and publicized virtual worlds close. We have seen the explosion of “free-to-play” (F2P – or “Free to Pay” as I like to call them) games on social networks; we also see traditional Massive Multiplayer Online Games (MMOG) like Everquest 2 and World of Warcraft continue to draw millions of monthly recurring revenue subscribers.
Second Life is still industry king of non-game virtual worlds, though the hype-driven growth of 2006 to 2007 has slowed to a more gradual – yet steady – growth rate. Major virtual world focused developers are gone; only boutique and cross-media shops remain. The media's focus is on augmented reality and F2P, as well as mobile entertainment.
Who Turned Off The Lights?
We saw multiple virtual worlds close down in 2009. The ones that folded were marketing-focused; companies just are not spending significant money for marketing projects with virtual worlds. This is a combined fault of a lame economy and a vicious push-back in the media against the over-hype of 2006 and 2007. There are examples of great virtual world marketing projects I have worked on (such as with Involve) and by many colleagues.
Virtual worlds offer fantastic marketing opportunities to have extended brand immersion with thousands of users, but big brand companies just will not listen anymore. In a bad economy, the money is spent on more traditional projects. Combine this with sour-grapes media who tried virtual worlds and failed horribly; they were old media trying to use new media without understanding it.
Add a fine layer of “journalists and bloggers don't seem to bother to do any research and mis-portray virtual worlds constantly”. The result is that there are much easier things to pitch as marketing solutions, like Twitter and Facebook and iPhone.
First to close was Google Lively, which closed the first day of 2009. This whole story was surprising to me. One would assume Google needed only to grow its Google Earth team, perhaps grow alternate planets and allow private spaces to which one can link and teleport. No, instead we saw a IMVU-clone, minus the wacky IMVU nested-item economy. With all the media power and money Google had, it only took half a year for them to close down Lively, and retroactively call it an “experiment”.
Meanwhile, Google's Sketchup and Google Earth community continues to post tons of content that is easily accessible and contextually relevant. If I want to find National Geographic pictures of wonders of the natural world, I can. If I want to learn about the genocide in Sudan, I can. If I want to see Rome as it was in its golden age, I can download that and place it on top of modern day Rome.
Towards the end of the year, Metaplace announced its imminent closing. I had been rooting for Raph Koster and the Metaplace promise of pocket virtual worlds that could be embedded in Facebook and websites. Unfortunately (again, hindsight is 20/20), the focus was initially on developers and marketing.
The platform needed third party developers to sell it to clients, and the virtual worlds marketing trend was in the midst of a cooling. Koster and company were smart enough to realize this and switch to a more game-centric approach that appealed to end-users. I thought they were starting to have it down, but it appears that the funding ran out, and they needed to move on. Whatever's left of Metaplace is working on F2P games on Facebook, as far as I can tell, and will probably do just fine.
In addition to the closing down of several virtual worlds, we saw the stagnation of several other worlds who have re-branded themselves to try and stay fresh . Multiverse continued to seek out developers and brands to make worlds, and while it has a lot of “Multiverse Places” that are listed “in progress”, we still have not seen any specific examples of the MMOG-in-a-box that Multiverse promised when it opened. Open Croquet was reanimated, again, as Open Cobalt, and enjoys similar levels of open-development talk as previous incarnations of Open Croquet; it's a very promising platform that needs serious funding and focus.
VastPark has not needed to re-brand, but are still seeking developers with funded projects to show off the platform. The ill-named Qwaq smartly renamed into Teleplace, and offers a variety of virtual world in-a-box solutions that play nice with Windows Office applications and easy document sharing. Teleplace shows, in my opinion, the most promise to grow out of any of these, being that they had a good product to start with, and now have a sensible name.
Virtual World Developers Scatter
We used to have an industry called “Metaverse Developers”. Now we have a whole bunch of independent artists and boutique shops, most of whom specialize in multiple social media platforms. This is, in the end, a good thing, as my own practice has been to work cross-platform. Have a web micro-site with video and tie-ins to community forums, a Second Life destination, and extend into Facebook and mobile applications. That's the smart way to go.
Really, the problem was that we developers walled ourselves off into a new industry, rather than integrating with the emerging social media industry. It's not really our fault; traditional media wouldn't have us. Traditional media is still convinced that eyeballs on a TV screen is still a great idea, in the age of DVR and Netflix. But I digress.
There were also big Metaverse shops that made big mistakes. Some, like Electric Sheep Company (ESC), grew too large with workers too specialized in one platform, and lost their ability to be agile and flexible. Others, like Rivers Run Red (RRR) and Millions of Us (MoU), delivered products with great launch events and nothing for visitors to do in a virtual destination after the launch.
Or, as with RRR and Duran Duran, garnered lots of media attention but never delivered a product in the end. ESC, MoU, and RRR were “The Big Three” in 2006 and 2007, and now they're basically out of the non-game virtual world space. It's not entirely their fault, either. The “Build it and they will come” mentality was prevalent, and media was swarming to cover the latest hype It was very difficult to say no to clients offering 5 and 6 digit contracts but demanded that the developer did things their way, rather than listening to common sense.
Ignored were things like, “You should have a staff member around at least part time.” or “A giant car vending machine as the focus of the attraction? After you do that for 5 minutes, then what?” Instead, we had things like Wired Magazine's circuit board logo, Reuters' tall office towers, and empty-car-lots-a-plenty from various auto-makers. RRR has switched gears and offered an business application for Second Life. MoU moved on to more game virtual worlds like Habbo and Gaia Online. ESC moved to game-worlds and their own platform.
I pick on Wired and Reuters particularly for a reason – besides being made by “Big Three” metaverse developers, they both complained about sour grapes. Chris Anderson wrote a piece in mid-2007 throwing Second Life under the bus. Wired would then publish Julian Dibbel's article six months later portraying anti-social behavior as the norm for online virtual worlds and games, and a wholly acceptable emergent behavior.
Reuters pulled both of its reporters by March 2009, who have both expressed dismissive comments of Second Life since, while Reuters declared its coverage “ground-breaking”. This sour grapes attitude was shared by a great deal of traditional news outlets, both network and online, who hyped Second Life far beyond reasonable expectations in 2006 and 2007, and then blasted or ignored it in 2008 and 2009.
Second Life is Still King
Second Life is still on top, as far as virtual worlds. In fact, it never went away. A 2009 Neilsen report put Second Life as second overall for all market share of hours-played, lumped in not just with virtual worlds, not just online games, but all PC games. Further, when it came to rating based on average hours per week per user, Second Life was number one, beating even World of Warcraft. Last quarter, Linden Lab released year-end numbers for Second Life. While the reality is not as shiny and happy as Linden Lab portrays, a steady 7 – 10% growth rate for a platform that's been out nearly a decade is nothing to scoff at.
At the same time, Linden Lab is moving forward with a variety of new initiatives. They launched the Second Life Enterprise (SLE) product last year, after successful closed beta testing. While the price-tag is high (about 50 grand US$), it provides behind-the-firewall control of a private grid of Second Life that many large companies (like IBM) have been clamoring for years to get. (And special customer support, as well.)
This year, Linden Lab has privately shown off their Viewer 2.0, a long and highly anticipated upgrade to the Second Life viewer both with interface improvements and new features. This should be released to the public any ... day ... now.
Focus On Education, Business Use
While marketing is off the agenda for most companies, education and business use have been strong. There are plenty of projects involving distance learning, remote business meetings, and simulation. Second Life has been used for many of these, which you can read about at SecondLifeGrid. There's Forterra's Olive platform, who has been doing simulations and drills for government and medical projects, which recently was acquired by Science Applications International Corporation (SAIC).
While there's speculation as to whether SAIC will shut down Olive, it's obvious that the client-base that uses Olive will be absorbed and continue to do business in virtual worlds. The recent PBS Frontline documentary, Digital Nation, featured a number of real-business applications, including IBM, education, and military. There are companies such as The Magicians and Global Kids who continue to use virtual worlds as educational platforms. The education and business uses don't get the press that marketing projects with virtual worlds get, but then again, marketing projects by their nature always push on news outlets for publicity.
We can safely assume that business and educational uses will continue with virtual wolds. We will see more universities and high schools develop classes that utilize virtual worlds, both as the focus (such as a class on social media interaction) and as a setting for meeting online. Businesses, especially given the need to cut back spending, will increase their use of virtual worlds as a way to do meetings of small and medium size.
For larger meetings – getting into the thousands, such as large conventions – virtual worlds may still have their place. But rather than trying to cram everyone into one place, virtual worlds will serve as an extension of a physical event that has limited space. The smart thing to do is to record video and audio from the event in-world, and make it available in podcast form so that people can watch an event asynchronously, in the same way they would any other event or piece of entertainment.
Private Grids Expand
The biggest change in 2010 and into 2011 is going to be the expansion of private virtual worlds. Unlike previous attempts, the successful ones will be based on easy-to-use software and out-of-the-box solutions. What we are looking at is pre-packaged content offered at a reasonable price, with the ability to customize with only a medium barrier of entry. “I'll take the conference room, but I want to put up different furniture and posters from my company's site.”
Linden Lab started selling starter sims in 2009 to this end. As people look for budget solutions, OpenSim and variants based on the open-source viewer technology of Second Life will grow. The key to their success is not to try and compete with Second Life, because they will never succeed at establishing the rich, large, diverse community. Instead, the smart thing is to make private solutions:
- Run your class in an OpenSim grid and play around with simulations
- Meet with your colleagues in a virtual office space
- Do a live event in a private space that you control and you sign up users via a website
There are already players in this space, and the world-makers are in store for lots of competition. But for developers who can keep overhead low, this is an ideal space, and will work like traditional event planning and Content Management System management.
Game worlds are hugely popular. If it was not obvious from how the Engage Expo is almost entirely game-focused, what should be fairly visible is the number of game worlds that are out there that continue to thrive. Online game worlds include Habbo, Gaia online, Dinokids, Webkinz, and so on. They thrive because they have an established overall world with a story, and they market to kids who are hungry for games that are interactive.
I predict growth in this industry, but not at the rate it has been going. There are literally hundreds of game-worlds from which to choose; some of them are going to have to close down simply due to competition. Established brand names like Disney, Barbie, et al, will find great success leveraging their existing, recognized brands. I think also that worlds that tie-in to real products have a clear ROI as consumers can go and buy more stuff and companies can give away the virtual world for free. (Or at least, F2P).
Keep it Small, Keep it Niche
While I would like to say that marketing with virtual worlds is on its way back, I think this is premature. This is not the fault of the technology, but of the publicity. Virtual world platforms have a big uphill battle that needs to be fought, and public relations people at these companies need to be working major overtime. Furthermore, developers need to be part of this push, and a unified, cohesive message will need to be delivered. “Virtual Worlds are Ready for Marketing, Just Don't Make The Same Mistakes!” And really, this is not a new issue. Virtual worlds already went through this in the 1990s, and marketing and advertising experts failed to retain much, if any, knowledge gained from it when they tried it again in the 2000s.
If your target is virtual events, private interaction
between users, and educational simulations, then you have a market that's
already ripe, and underdeveloped. Keep your costs low – things do not need to
be as fancy and detailed as marketing projects. That doesn't mean go to a
hobbyist, or even that companies ought to try and do things themselves – but jobs
need to be done by 2 to 5 people, rather than 10 to 20 as they have been. Stay
lean, stay flexible, stay agile, and leverage different social media
Or, If You Need To Be Bigger, Keep It Mixed
If you can offer cross-platform services, then you can take on larger projects. If there's a lack of new business, consider working on your network of developers, and go the contractor work for now. You may not need an iPhone or Facebook apps developer on staff unless you have a steady stream of these projects. At the same time, there are lots of hungry independent contractors looking to make friendly with development and social media marketing companies.
If you happen to be one of these contractors, well, I just told you who to buddy up with. If you instead want a salary, go knock on the door of the game-world developers and provide a portfolio of published games on which you have worked.
Businesses: Wake Up and Converse with Customers
Old media isn't dying, but it is completely changing. You will not get the reach with banner ads and television or magazine spots that you used to get. There are wonderful ways to reach consumers, and they all are social media based. They include platforms like Twitter, Facebook, iPhone and Android apps, augmented reality, and yes, virtual worlds. You want to be like newspapers and magazines who are downsizing like crazy?
Be my guests, but if you want to reach people, you need to make your brand relevant and not random. Meanwhile, if you have a good product, keeping the conversation with them going in any of these mediums means tremendous customer loyalty.
Want to paint your website green and take advantage of the Green Movement? Go virtual. Think less standees in supermarkets and more micro-games in social networking sites. Consider whether your staff – especially your highly-visible executives – really needs to travel by plane to meet more than once or thrice a year; instead, have them meet virtually for, as multiple accounts agree, is usually about 10% to 30% of the cost.
2010 is the year social media goes corporate. Don't miss out.
About the Author & Disclaimer:
Ron T Blechner is a social media and virtual worlds expert
professionally since 2005. Ron has contracted previously with multiple
companies listed in this article. Until January 2010, He has been CTO and
Software Project Manager at Involve, Inc. Clients have included Dell Computer,
General Electric, Linden Lab, US Holocaust Memorial Museum, The Weather
Channel, and many others. Ron maintains a blog about technology about virtual
worlds and social media at: www.secondtense.com.
None of this article is meant as investment advice. None of this article was sponsored by any company. The contents of the article are copyright 2010 Ron T Blechner and cannot be reproduced outside of Fair Use without express written consent of Ron T Blechner and Pixels and Policy.