Impact of Virtual Worlds
The online destination
for the next generation?
Dr. Pete Markiewicz
Indiespace/Lifecourse Associates
pindiespace@gmail.com
Topics
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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?
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
Two kinds of vworlds
Tween and kid vworlds
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Cyworld
~25% of US teens
Web-based (2.5D)
Prebuilt
Social networking
PG-13
Adult vworlds
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Second Life
~3% of US adults
Custom browser (3D)
User-generated
Social networking
Commerce, Education
Virtual world examples
(teen/adult)
Virtual World Examples (kids)
Virtual world environments
There
Habbo
Empire of Sports
Club Penguin
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
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/article.cfm?c_id=204&objectid=10493847
http://www.360kid.com/blog/?p=43
Virtual Worlds and Politics
Watching Obama in Second Life Jul 11, 2009
http://foo.secondlifeherald.com/slh/2009/07/watching-obama-in-ghana-from-metaplacesecond-life.html
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
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
• >200 competitors
Google Lively
*Mike Hirshland, Polaris Venture Partners
Vworlds are NOT MMOGs
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Members play “the game of life”
Members are themselves
Members define goals, scores, rank
Members reflect general population
Stardoll
Members may sell virtual products, own IP
Virtual economy tied to the real economy
Members can do “real” work (education, business)
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
Take-home: Vworlds aren’t empty…
they just look that way!
EVERWIND RPG
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
Vworlds versus MMOGs
Goals, scores community created by members
Virtual Worlds
Prebuilt
User-created
Online Games
Pre-defined goals, scores
Vworlds versus MMOGs
Goals, scores, community created by members
Web 2.0
MoiPal
vSide
Prebuilt
Second Life
IMVU
Kaneva
Kid & tween vworlds
(Club Penguin, Habbo, There
Gaia Online, Cyworld, Stardoll)
Entropia
Second Life RPGs
WoW and
Similar 3D RPGs
Kid/tween gaming
(Neopets, Nicktropolis, KartRider)
Pre-defined goals, scores
User-created
Why are vworlds important?
• 2009
– 15% of Internet users MMOG or vworld members (Mark Kern, team
lead, WoW)
– Growth Q1 => 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
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80% of Internet users in virtual worlds by 2011 (Gartner)
Average user age: >20
Vworlds make the most money
Vworlds replace the web for the new (“Millennial”) generation
Vworlds become Web 3.0
Vworld accounts in Q4 2008
Virtual World
Registered Users
Monthly logins
Technology
Demographic
Yahoo
500 million
300 million
Web S/N
General audience
Facebook (web)
120 million
124 million
Web S/N
College students
MySpace (web)
150 million
114 million
Web S/N
Teen and adults
Neopets
60 million
12 million
Web Flash
Kids and teens
Cyworld (Korean)
30 million
21 million
Web Flash
Teens and adults
World of Warcraft
12 million
??? (high engagement)
3D Client
Adult
Habbo Hotel
100 million
10 million
Web Flash
Kids and teens
Stardoll
18 million
6 million
Web Flash
Kids and teens
Gaia Online
15 million
7 million
Web Flash
Kids and teens
Webkinz
10 million?
6 million (high recurring)
Web Flash
Kids
Club Penguin (Disney)
17 million
4.5 million
Web Flash
Kids
Zwinky
16 million
4.5 million
Web Flash
Kids and teens
Barbie Girls (Mattel)
13 million
2.3 million
Web Flash
Kids and teens
Home
7 million
??? (high engagement)
3D Client
Teens and adults
Nicktropolis
6 million
1 million
Web Flash
Kids
TOTAL VIRTUAL
WORLD
~300 million (330
million in 2009)
~90 million
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)
‘Kid worlds’ have high traffic
Monthly Unique Visitor (millions in 2008)
Second Life
Kaneva
Redlightcenter
Habbo
Gaia Online
Barbiegirls
IMVU
Neopets
Zwinky
Club Penguin
Webkinz
0
1
2
3
4
5
6
7
SOURCE: Patrick Collins of Brand Architect
http://www.collings.co.za/2007/11/the-march-of-th.html
Vworld members skew younger
SOURCE: Kzero Blog - http://www.kzero.co.uk/blog/?p=2793
Predicted growth of “kid” vworlds
60%
Percentage of US child/tweens (3-17)
Expected to visit a virtual world at least once a month
50%
40%
Child &
Tween
Visitors
30%
20%
10%
0%
2006
2007
2008
2009
2010
2011
SOURCE: http://www.emarketer.com/Article.aspx?id=1006166
Time spent in vworlds
Total time spent logged-in by Second Life Users,
March 2007-March 2008 (millions of hours)
35
30
25
20
Growth was unaffected by
negative media stories in
Fall 2007, and economic
slowdown in “real” economy
15
10
Time Spent
in SL
5
0
ar
M
r
Ap
ay
M
Ju
Ju
l
g
Au
p
Se
t
v
Oc No
c
De
r
n
b
Ja Fe Ma
SOURCE: http://www.emarketer.com/Article.aspx?id=1006166
Provided to eMarketer by Linden Labs
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
Take-home
Second Life classroom
Vworld audiences are small, but their
members are MUCH more engaged
than Web 2.0 users
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 Blog
http://lsvp.wordpress.com/2008/06/09/successful-mmogs-can-see-1-2-in-monthly-arpu/
Monetization sources
• Free Sites, optional subscription (“freemium”)
– Virtual products – up to 85%
– Subscription – 10%
– Advertising – 5%
• Paid Sites
– Subscription – 75%
– Virtual products – 25%
• Coupled Sites (need real-world product to join)
– Subscription – 50%
– Real-world product – 50%
Virtual products are the key
• Emulate a real-world thing
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Seeds
clothing
Housing
Pets
• Reproduced electronically
– Near-zero costs
• Sold for real money
– “Game money” bought with real currency
– Direct credit card purchases
• Secondary barter economy
– Users swap vproducts
– Users design and sell custom vproducts
Virtual Products overview
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In July 2009, analyst firm Frank N. Magid that found that 12%
of Americans had purchased a virtual gift within the past 12
months
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Most sales (around 80%) of sales occur within online games
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Over half of players in online games purchase virtual
products
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Thirtysomethings purchase the most by revenue, while teens
and twentysomethings purchase the most per user
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Players in online games typically purchase $60-75 dollars in
virtual products each year
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Virtual good buyers are often sellers – Playspan estimated
that 31% of its buyers also sold virtual products
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Asia leads the virtual goods market, with the largest share
coming from China
SOURCES: Frank M. Magrid 2009 Media Futures Study
Lightspeed Partners blog, Virtual Goods News
Growth of virtual product sales
7.00
6.00
5.00
US Sales
Billions
4.00
Global Sales
Billions
3.00
2.00
1.00
0.00
2007
2008
2009
2010
SOURCES: Frank M. Magrid 2009 Media Futures Study
Lightspeed Partners blog, Virtual Goods News
vProduct case studies
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Zanga (October 2009
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Ning (October 2009)
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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
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Sears sold more than 850,000 vproducts in Zwintopia during the first 16 days after launch
Habbo (Sept 2008)
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1.8 million virtual products were purchased from the Kohl's “back to school” store within its first 16
days
Zwinky (August 2008)
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$75 million/year from sales of ~100 million digital gifts, or about 10% of total sales
Stardoll (September 2008)
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A new Virtual Gifts Incentive program will allow anyone creating a Ning site to sell virtual products,
with a common currency between all Ning networks
Facebook (June 2009)
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FarmVille Players bought $500,000 virtual seeds, 50% of revenues were used to buy real seeds
for nonprofits in Hati
Worldwide revenues of $230 million in 2007,
85% of it from sale of virtual items
IMVU (Sept 2008)
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$4 million/month revenue
90% comes from a “cut” from sales of virtual products between members
SOURCES: Lightspeed Partners blog, Business
Week, Virtual Goods News
What teens buy in virtual worlds
35
30
25
20
15
10
5
0
Anything
Express
Give Me
Fun
Myself
More
Access
Make Me
Not
Look Good Everyone
Send To
Friends
Can Have
SOURCE: WeeWorld Member Survey
http://www.virtualworldsnews.com/2009/07/weeworld-survey-teens-still-spend-girls-are-major-influencers-.html#more
For teens, branding in virtual
worlds is effective
Media Type
Millennial
GenX
Boomers
Matures
Interactive web ads
66
68
68
73
Banner Ads
52
58
63
71
Video preroll ads
36
30
27
28
Video postroll ads
21
19
19
17
Embedded video ads
22
22
12
9
Ads in virtual worlds
23
19
14
7
Ad in videogames
23
16
8
8
Link to K-Zero’s age breakdown:
http://www.kzero.co.uk/blog/wp-content/uploads/2008/04/kids-world-ages001.png
SOURCE: http://www.emarketer.com/Article.aspx?id=1006166
Deloitte Development and Harrison Group, “The State of the Media Democracy Second Edition”
Take-home
There.com
By 2019, vWorlds will become the place the
next generation lives and works…
…Web 2.0 and classic MMOGs will decline in importance
What will virtual worlds need to
succeed in 2019?
• Fit the audience
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My generation, age group, gender, lifestyle, politics
I’m special here
My friends are all here
It’s a regular, normal part of my life
• Give the audience what it wants
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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
Follow the money…
• Near-term
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Virtual products NOW!!!
Flat-fee subscriptions
Advertising
Market research
• Long-term
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Real product prototyping
MMOGs inside larger vworlds
Virtual education
Government/military use
Business work environments
Vproduct Store in Second Life
Barriers to growth
SOURCE: Thinkbalm - http://www.thinkbalm.com
Barriers to growth
• User interface is hard to learn (key
commands and complex HUDs)
• If users are impeded from creating
their own content, they don’t
(Philip Rosendale)
• Flat fee structure assumed
Avatar configuration HUD,
Entropia Universe
• Massive infrastructure needed
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
Second Life (Social)
Second Life (shopping)
Second Life (RPGs)
IMVU
Moove
There
Entropia
WoW
Kaneva
Most tween &
teen 2.5 vworlds,
e.g.Stardoll, Habbo,
Whyville, Club Penguin,
Virtual pet sites
MySpace
Gaming ->Themed Shopping -> Social Networking
User-Created <- Vproducts <-Dressup
Dressup -> Vproducts ->User-created
Where will US teens go?
Sources for Virtual Worlds
• Virtual Worlds News – general newsfeed
http://www.virtualgoodsnews.com/
• Virtual Goods News – virtual products
http://www.virtualgoodsnews.com/
• Virtual Economy Research Network
http://virtual-economy.org/
• Pearl Research – China & Asian market
http://www.pearlresearch.com
• Kzero - #1 virtual vorlds consultancy
http://www.kzero.co.uk
• Thinkbalm – “The Immersive Web”
http://thinkbalm.com/
References
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Virtual Economy Research Network
http://virtual-economy.org/
LightSpeed Partners Blogs
http://lsvp.wordpress.com/?s=RPG+Second+Life&searchbutton=go!
http://lsvp.wordpress.com/2008/09/02/facebook-selling-digital-gifts-at-a-35m-run-rate/
Business Week
http://www.businessweek.com/magazine/content/07_13/b4027047.htm?campaign_id=rss_daily
Virtual Goods News
http://www.charleshudson.net/?p=512
http://www.virtualgoodsnews.com/2009/11/asia-driving-the-virtual-goods-marketplace-.html#more
http://www.virtualgoodsnews.com/2009/09/over-half-of-gamers-purchasing-in-freemium-games.html
http://www.virtualgoodsnews.com/2009/10/ning-launches-virtual-gifts.html#more
Online traffice at compete.com
http://siteanalytics.compete.com
Cnet - Neilsen 2008 results for social networking sites
http://news.cnet.com/8301-13577_3-9948219-36.html
Why virtual worlds are overtaking the game industry
http://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 20
http://nwn.blogs.com/nwn/2007/09/new-world-notes.html
“Total minutes” netratings for web 2.0 sites
http://www.netratings.com/pr/pr_070710.pdf
MySpace real pageviews
http://www.mikeindustries.com/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 statistics
http://secondlife.com/whatis/economy-graphs.php
Second Life engagement “Second Grade Math”(Oct. 5th 2007)
http://blog.secondlife.com/category/economy/
Kid’s worlds poised for growth spurt
http://www.emarketer.com/Article.aspx?id=1005410&src=article_head_sitesearch
Harvard Business School Conference, Nov 2007
http://www.gamasutra.com/php-bin/news_index.php?story=16326
There.com demographics (2004)
http://findarticles.com/p/articles/mi_m0PJQ/is_6_2/ai_114573226
Daedalus Project - The Psychology of MMORGs
http://www.nickyee.com/daedalus/archives/001369.php
http://www.nickyee.com/daedalus/archives/pdf/3-4.pdf
Comparing virtual worlds
http://www.kzero.co.uk/blog/?p=978
Virtual World Growth Projections
http://www.slideshare.net/nicmitham/virtual-world-growth-projections/
Round-up of 50 virtual worlds
http://fabricoffolly.blogspot.com/2007/10/second-life-in-perspective-round-up-of.html
eMarketer report on virtual worlds
http://www.emarketer.com/Article.aspx?id=1005410&src=article_head_sitesearch