New Breeds of Virtual Goods in Second Life


Published on

Presentation I gave at Virtual Goods World Europe 2010. Covers Second Life Economy in Q3 of 2010 and new breeds of virtual goods in Second Life. A look at Second Life social gaming. User generated goods... that generate goods!

  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

New Breeds of Virtual Goods in Second Life

  1. 1. New breeds of Virtual Goods in Second Life Thor Olof Philogène Second Life Monetization
  2. 2. New breeds of Virtual Goods in Second Life Session themes 1. Overview of Second Life’s Economy Q3 2010 1. 3D Virtual Goods that function as social games 2. Externalities and vertical impact
  3. 3. Second Life Economy in Q3 2010 Largest changes compared Q3 2009: – increase of 7.2% in World Size – decline of 11% in User Hours – 115% increase in Web Merchandise Volume
  4. 4. Second Life Economy in Q3 2010 – Average Monthly Repeat Logins rose 5.3% year over year – Stable amount of participants in the economy (currently at 486,000) – Linden Dollar (L$) supply at a 12-month high in Q3
  5. 5. 3D Virtual Goods functioning as social games Timelin e
  6. 6. User generated goods … that generate goods • 3D pets (or plants) with AI and genetics • Operate as social games requiring regular caretaking • "Breed" and generate offspring of variable rarity level
  7. 7. How we got here…
  8. 8. “Breedable” High Level Business Model Food Boosters Nests “Performanc e Stats” Pets
  9. 9. Virtual Good Value “Typical” Virtual Good Value Models • Virtual Good value largely determined by the context • Game type virtual worlds use context design to set Virtual Good value (functional) • Open type virtual worlds largely see social contexts determine Virtual Good value (can influence value through artificial scarcity) Reference to the “The Virtual Goods Business Model” by Juho Hamari  Second Life SG Virtual Good Value Model • Content exogenous, as the virtual world is not designed to affect Virtual Good value • Virtual Good value mainly determined by design of the Virtual Good itself (and its inherent characteristics) • Virtual Good $ value a result of functional characteristics
  10. 10. Virtual Good Value Components Functional Social Hedonistic References to: “Virtual item sales as a revenue model” and “Virtual Consumption” by Vili Lehdonvirta 2009 Performance & Breeding Pedigree Appearance & Customizability Genetics creates value within context of social game Design creates non-$ value within broader context of Second Life Socially Desired Provenance & Rarity “Breedable” Virtual Good Consumer Value
  11. 11. Mechanics Used Second Life SG Virtual Goods integrate all the game mechanics that promote their usage and sale Purchase promoting mechanics: • Item degradation • Artificial Scarcity • Limited Inventory • Special Events Content • Upgrade Induced Devaluation Viral mechanics directly tied to performance: • Social game success duplicates amount of animals that need care (and costs) • Emotional Attachment • Results in: Social Crew Mechanic Virtual Good Game Mechanics Second Life SG Virtual Goods Context
  12. 12. Examining the Money Earning Logic In summary we’ve seen a new generation of Second Life entrepreneurs put together 3D social game in the shape of Virtual Goods where: • Virtual Good design = business model • Viral mechanic leverages free-to-play strength without ever actually being free • Business model and game design based on perfect price discrimination logic • Retention and acquisition mechanism are one 
  13. 13. Externalities & Vertical Impact The usage and increasing popularity of these Virtual Goods has induced economic activity in the form of: • Sale of niche products • Sale of niche services • Sale of complimentary goods • Needs from Virtual World setting Positive spillover effect on Second Life in terms of: • Content creation • Retention • Social interaction
  14. 14. Impact on Social Setting Second Life SG Virtual Goods migrate from the game sphere into social contexts contributing to: • Exterior identity as accessories • Settings for social interaction • Strengthened social identity • Game knowledge (Cultural capital) • Game performance (Symbolic capital) • Viral “generosity” (Social capital) With purchase promotion being an integral part of the Virtual Good design the next generation of these Second Life SG should embrace mechanics & optimization around the connector Reference to framework of Pierre Bourdieu
  15. 15. Successful Virtual Good Entrepreneurs The equivalent US$ value of all Second Life Resident-held L$ amounted to $26 million US Dollars in Q3 2010 Thanks to a new generation of entrepreneurs complex social games have established themselves in Second Life leveraging a unique approach and innovative business model expressed in the shape of this new category of virtual goods. These entrepreneurs have successfully: • Operated in Small teams • Joined ranks of top revenue earners • Created top selling category
  16. 16. Thank You! Thor Linden Ultravox A link to this slide deck will be posted on my Twitter