Virtual worlds, real results

Virtual worlds, real results

Since its launch by Linden Labs in 2003, Second Life, in which people wander around in the form of 3D avatars, chatting, exchanging goods and building an entire world from scratch, has become not just a popular internet distraction but the latest technology to make business people the world over wonder whether they should be involved in it.
Perhaps inspired by the notion that early movers gained much of the advantage in the initial internet boom (although Netscape might beg to differ), companies are racing to establish some form of virtual world identity.
The list of global brand names that have established a presence in Second Life is certainly extensive.
A presence means different things to different organisations. It could be anything from a virtual store with a link to an existing internet site to employing staff to permanently reside in the world and interact with residents.
IBM, Nokia, and Toyota are among the retail brands to have participated, while media organisations such as Reuters, the ABC and the BBC also have a presence.
Second Life may be the most discussed of the virtual worlds, but it's certainly not the only one. Other game-based environments such as World of Warcraft, The Sims and Habbo have attracted devoted audiences of millions, and new environments (such as the online version of The Lord of the Rings, which debuted in April this year) continue to emerge.
All of these platforms combine an immersive 3D environment accessed by the internet, but offering an entire world to explore and interact in, complete with its own currency.
All offer the potential to make real-world money by creating objects or environments desirable to existing users or promoting existing real-world brands.
If Second Life has attracted more attention from businesses, that probably reflects its more diffuse nature. A World of Warcraft player is ultimately concerned with completing quests, no matter how distracted they get by social activities and general fighting along the way.
However, Second Life has no defined central purpose, making its audience ripe for distraction, at least in theory.
Analyst Forrester usefully divides virtual worlds along two axes: the degree to which they resemble a traditional computer game, and the amount of time users typically spend in them.
Second Life sits at the extreme of both dimensions, which means it has most potential for adaptation to individual business needs. Second Life also more openly encourages economic activity, with a set exchange rate between its own currency of Linden dollars and the US greenback, and a guarantee that users retain rights to intellectual property they create in the environment.
That doesn't mean business success is at all assured. Some individuals have made a reasonable living by amassing or creating unique in-world objects, adapting that strategy to an existing business is much more difficult.
"Revenues from successful virtual world services can be substantial, but success can be fleeting and risks are involved," Forrester analyst Paul Jackson points out in a recent analysis of the possibilities that Second Life and its ilk offer businesses.
Relatively few users of Second Life spend large amounts of currency, with the vast majority spending little more than the $10 a month or so they pay to use the service.
As well as being economically challenging, the virtual world isn't entirely free of hassles associated with real-world businesses. In one well-documented case in February, a group identifying itself as the Second Life Liberation Army "bombed" the online presences of clothing store American Apparel.
Although no pixels were permanently damaged, the incident highlighted the fact that an online presence isn't in itself a guarantee of favourable publicity.
Telstra learned that lesson earlier this year when its Second Life presence, branded via its internet operation BigPond, came under attack for incorporating images of Uluru and the Sydney Opera House without asking the owners and managers if they minded.
The subsequent media coverage proved embarrassing for the telco, although any business prepared to launch virtual environments called Ponderosa, Ponderama, Pondessa, Pondfield and Pondillion presumably doesn't mind being red-faced.
In many instances, business that have set up in Second Life or other virtual worlds have effectively replicated their existing internet presence, offering links to online stores and a 3D version of the internet presence they've also developed for the web.
This was the approach in the recent Transformers movie, for instance, which promised Second Life residents the ability to "interact with a wealth of rich-media production material including stills and video exclusives".
To be honest, that sounds like just about every official movie website ever created. Even Playboy launched itself on Second Life with its own rabbit-head shaped island in June, promising unidentified "social opportunities" for residents and (inevitably) the ability to buy Playboy-branded merchandise and interact with bunny-suited avatars.
Such duplication may be reasonable for a multinational corporation with marketing cash to burn, but it could be more difficult to justify for a small business aiming to make its presence felt.
Other companies, such as US hotel chain Starwood, have used Second Life as a research tool, building prototypes in the virtual environment and inviting users to comment on them.
That can also be risky. "Virtual worlds are often little more than elite social clubs, populated by gamers or uber-geeks," Jackson warns.
"As such, they can't even be used for representative consumer research."
Many businesses made a splash on Second Life by boasting of being the first to complete a particular task, but that may prove more difficult now most obvious milestones have been achieved.
The first concert (by Duran Duran), stand-up comedy gig (by British comic Jimmy Carr), embassy (Sweden) and even the first co-ordinated attack by virtual flying penises (on technology publisher Cnet) have all taken place.
We haven't yet encountered anyone boasting of the first Second Life brothel, but even that sector now appears somewhat overcrowded, with almost a fifth of the world's activities devoted to "mature" content, by some reckonings.
Opinion is divided as to whether Second Life and its ilk will prove a long-term success
"Although many commercial companies (including many global brands) have established presences in virtual worlds, none has yet converted them into an effective, profitable sales channel," Gartner analyst Stephen Prentice says.
Similar arguments took place over the launch of internet presences for businesses a decade ago (an issue that's now entirely settled) and it's worth remembering all the largely failed technologies (desktop push clients, ASPs, WAP) that have disappeared amid general enthusiasm for online systems.
On the other hand, staying away permanently from virtual worlds may not be a great option either. As Prentice notes: "With top brands now valued in billions of dollars (in the real world), failure to protect them in the virtual world is potentially disastrous for major enterprises."
In other words, companies may (like Telstra) well be caught between Ayers Rock and a hard place.

Land of the small spenders
SECOND Life certainly is the most visible of the virtual worlds touting for business involvement, but just how big is the audience, really?
It's often reported that Second Life has in excess of 8 million members, but that includes duplicate accounts and people who have signed up for a trial but then abandoned their account.
The company's own most recent figures suggest that in a typical week, about 500,000 unique users sign into the service.
In a 60-day period, that figure rises to 1.6 million, still less than a fifth of total user numbers.
Half a million users isn't to be sneezed at, of course, but it represents a drop in the (actual) ocean compared with the estimated 6.6 million internet subscribers in Australia alone.
An even more telling statistic is how much money those virtual residents are making.
Linden Labs' own figures suggest that in June, less than 1500 Second Life businesses were turning over more than $US500 a month. That doesn't include the monthly charges levied on users and businesses.
It's possible to participate in Second Life for free, but you have to sign up as a paying member (for a minimum of $US9.95 a month) to purchase virtual land, and then pay more to develop the land.
Such real estate shenanigans notwithstanding, the vast majority of transactions are for relatively small amounts, which may not justify the time and money spent developing a virtual presence.
Forrester estimates that early adopters have spent more than $US200,000 on establishing virtual world business presences, which seems like a lot for what might not amount to much more than bragging rights down at the virtual pub.