METANOMICS: MONETIZING THE METAVERSE

                                    OCTOBER 13, 2008



ROBERT BLOOMFIELD: Good afte...
Amphitheater, Meta Partners Conference Area, Rockliffe University, New Media Consortium

Educational Community Sims, or Or...
are reminiscent of Van Gogh. But then you tell me this is actually two by three inches in

Real Life, is that right?



ES...
through selling your work, in part, through your storefront in Bloomfield Island Chambre du

Chocolat. One question I had ...
and you have a lovely avatar, so you could be next.



Now I know you also sell quite a bit of your stuff through the comp...
minutes with you, Eshi, before we go on to our main guests, and I know that this is a

business show and that I am an acco...
[Star Ridge Falls?], and Dizzy Banjo. They were just around me documenting everything

single one. So thanks to them, I st...
will take this opportunity announce that this particular design called the Samurai in the

Storm will be released in a ver...
see the whole thing. Because a lot of people asked me, “Oh, do you even care? Do you

even care?” To me, of course, I care...
placed her in the Twenty Women to Watch in Business Under 30, by Working Woman

Magazine.



So, Stevie, I guess before we...
funding or anything like that, I couldn’t figure out how to do it. Basically, since then,

amazon.com has gone and done ex...
It really could be anything. It could be a social network, a browser game, whatever their

interface is. They would plug o...
World itself.



ROBERT BLOOMFIELD: You’re a relatively recent startup, but you have announced some

partnerships and, in ...
STEVANA CASE: They do, yeah. They need a separate relationship with us so they would

have to sign a licensing agreement, ...
So we’ve got a number of ways that we can kind of control the sale of items and the flow of

goods. And then we can also m...
Xstreet in SL. Now I know that Linden Lab has taken the position that a name like

SL Exchange infringes on their brand. I...
JAY GEESEMAN: This is something that I actually had a little discussion about with one or

two of the Lindens at Second Li...
enhancement?



JAY GEESEMAN: Sure. When you list a product for sale through our marketplace, there’s a

number of options...
to sign a nondisclosure agreement. Let me move on to some other topics that I’m sure both

of you are struggling with, and...
and a European focus, but we’re broadening that every day and bringing in new payment

methods and supporting new currenci...
ROBERT BLOOMFIELD: And so for those who aren’t following the backchat, Bjorlyn Loon

was asking about international contra...
complaints. That said, we also do track all of our items in the system as well. So in a similar

way, we can pull back the...
items, and the content will usually be taken down that same day. We follow the process to

the letter of the law. There’s ...
I know we have a graph that shows this pretty steady growth in resident-to-resident

transactions that are coming through ...
STEVANA CASE: Thank you. Thanks for having me.



JAY GEESEMAN: Okay. Thanks for having us.



ROBERT BLOOMFIELD: Now befo...
the new tighter markets are likely to play out for entrepreneurs. So my producer,

Bjorlyn Loon, will pop some of those li...
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101308 Moentizing The Metaverse Metanomics Transcript

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Metanomics is a weekly Web-based show on the serious uses of virtual worlds. This transcript is from a past show.

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101308 Moentizing The Metaverse Metanomics Transcript

  1. 1. METANOMICS: MONETIZING THE METAVERSE OCTOBER 13, 2008 ROBERT BLOOMFIELD: Good afternoon, and welcome to the 51st edition of Metanomics. This is Rob Bloomfield, Beyers Sellers, speaking to you from the top floor of the Embassy Suites Hotel in downtown Cleveland, Ohio, looking out my window at beautiful Lake Erie, as I prepare to go to the Cleveland Browns--New York Giants Monday night football game. Here with my family. I actually have my mother and father here in the room, listening to the broadcast. Would you like to say hello? BLOOMFIELD’S MOTHER: Hello, hello, everybody. I have an avatar too. ROBERT BLOOMFIELD: My mom has an avatar too, but actually doesn’t remember its name. So anyway, we have a great show today. In the midst of so much economic uncertainty in the Real World, we’re going to be focusing on in-world commerce. We’re going to be hearing from Stevana Case, of fatfoogoo, and Jay Geeseman, of Xstreet in Second Life, formerly SL Exchange. Fatfoogoo works directly with game and Virtual World developers to provide a system to support virtual transactions, while Xstreet provides a solution directly focused on Second Life transactions. As always, thanks to our sponsors: InterSection Unlimited, Kelly Services, Language Lab, Learning Tree International and, of course, Cornell University’s Johnson Graduate School of Management. We are coming to you from inside Johnson School of Management’s Sage Hall atrium. Well, I should say most of you are watching from one of our event partners: Colonia Nova
  2. 2. Amphitheater, Meta Partners Conference Area, Rockliffe University, New Media Consortium Educational Community Sims, or Orange Island or JenzZa Misfit’s historic Muse Isle. As our audience has grown, so have the number of event partners that we are bringing in to let you all see. Many of you are probably watching on the web at metanomics.net, which is a great way to do this if you can’t get into Second Life. We use InterSection Unlimited’s ChatBridge technology to transmit local chat to the website, website chat to our event partners and the event partner chat from one Sim to another. ChatBridge brings you in touch with people all around Second Life and on the web, wherever you are. So speak up, and let everyone know your thoughts. Today I’m pleased to have the opportunity to put Eshi Otawara On The Spot. Eshi is one of the high profile members of Second Life’s large community of artists and builders. She’s famous for her virtual fishhook dress, which recently sold for a whopping 1,750 real U.S. dollars in a charity auction. And she’s also known for her creative one-hour Sim builds, in which she rebuilds a region of Second Life in about as much time as it takes to watch an episode of Metanomics. In real life, Eshi is Irena Morris, a Croatian-American artist. Eshi, welcome to the show. ESHI OTAWARA: Hello there. Thank you for having me. ROBERT BLOOMFIELD: Well, I’m really delighted to have a chance to talk with you about the things that you have been doing in-world. If I could, I’d actually like to start with a very intriguing Real Life portrait, that you provided, of your husband. And so if SLCN can bring this up, this is a really nice piece of work, to me, the brush strokes, the heavy brush strokes
  3. 3. are reminiscent of Van Gogh. But then you tell me this is actually two by three inches in Real Life, is that right? ESHI OTAWARA: Yeah. Yeah, there’s reverse painted on glass, and it’s only two by three inches. It's small. I’d done this about five years ago, and it really could fit into the palm of the hands. It’s one of my favorite portraits of my late husband. So for people that don’t know my background, this is basically who I am. I am primarily a painter. ROBERT BLOOMFIELD: And you mentioned this is your late husband so first let me just offer my condolences to you. And also I understand that is one of the events that led you into Second Life. ESHI OTAWARA: Yes, absolutely. I really just came across Second Life because I was looking for a three dimensional chat, and that is the phrase that I put into Google. And I couldn’t find anything. I found just silly kids’ communities and kind of kid chats, and I didn’t like any of them, of course. And basically I found Second Life, and I realized I can have social contacts without the necessity of actually leaving the house, because I was really stricken by my grief, and that’s how I ended up in Second Life. Oh, my! When I found out that I can actually make stuff here, even better. ROBERT BLOOMFIELD: And so now you’re something of a celebrity in Second Life. You’ve got your website, and you have made quite a bit of fascinating clothing, in-world art, but I’m sorry to say I am an accounting professor and business on the mind. I mean one of the things that is really pretty interesting to me is that this is now how you make your living
  4. 4. through selling your work, in part, through your storefront in Bloomfield Island Chambre du Chocolat. One question I had is: How do people find your store, to find your stuff? Foot traffic isn’t quite the same in Second Life as it is in Real Life. ESHI OTAWARA: Yeah. Well, I do have a little advertisement in my profile, and my profile pics have the direct teleport to the store, under “business” tab. Mostly people find me just through word of mouth, and I would like to take this opportunity actually to announce that I will very likely abandon the Chambre du Chocolat because neither I speak French nor am I French. And it turns out most people do know me by Eshi rather than the clothing brand that I’d chosen so many months ago. So makes this the official that I will be re-branding myself to just simply my avatar name. ROBERT BLOOMFIELD: Eshi Otawara. Now there’s an Australian clothes line named Eshi. Is that something you’ll have to be careful of as you brand yourself thoroughly as Eshi Otawara? ESHI OTAWARA: I don’t think so because it is going to be Eshi Otawara, which is quite different than just simply Eshi. So I don’t think I should be worried about--but I will definitely discuss this with more businesspeople as I am not a businessperson. I’m more of an artist than anything else so I’m open for suggestions [for that though?]. ROBERT BLOOMFIELD: Well, I have to say I just want to point out in the backchat I’m seeing IYan Writer, who mentions: Next step is avatar trademarking. I think many Metanomics viewers probably know that Amy Weber has already trademarked her avatar,
  5. 5. and you have a lovely avatar, so you could be next. Now I know you also sell quite a bit of your stuff through the companies that support resident to resident transactions. SL Exchange, now Xstreet, and OnRez. And you mentioned to me before the show that actually you have one; I guess Xstreet is primarily selling your auditoriums, the buildings that you created in Second Life quite a while ago. Whereas, your clothing tends to end up selling through OnRez. Do you have a sense of why that is? ESHI OTAWARA: Well, I started selling my products on Xstreet quite a while back before I even started the clothing business. And basically I just couldn’t stop myself from creating, and I figured there was a need for a kind of a commercial building such as auditoriums. So I’ve created about three or four auditoriums in different sizes, and I just posted them up on Xstreet just to see how they would sell, and they kept selling. So eventually, as I ended up in the clothing business, I put some items up there, but I think I don’t have as many clothing items up there because shopping--and I make mostly clothing, well, pretty much exclusively clothing for female avatars. I think it’s because female avatars, they like to shop in-world, and it’s quite a social experience rather than just clicking a button and having the stuff delivered to you. So I would say that would be a reason why I don’t sell as much on Xstreet as far as clothing goes. But other stuff is always on FLX--I mean Xstreet catches the building components and my commercial builds. ROBERT BLOOMFIELD: Mm-hmm. Okay, great! Well, we only have a couple more
  6. 6. minutes with you, Eshi, before we go on to our main guests, and I know that this is a business show and that I am an accountant, but I don’t want to be one of those people who, as they say, know the price of everything but the value of nothing. So if I could, I’d like to spend just the last few minutes here taking a look at some of the work that you’ve done in Second Life. One of this is, I guess, the Flower Tower. This is one of your very short builds. I think you told me this took about an hour to create an enormous tower of lotus flowers. So I know SLCN can bring that up for us. Can you just tell us a little bit about that? ESHI OTAWARA: Well, Flower Tower was the eleventh and the very last one of the series called One-Hour Sim Project, which I really fell into spontaneously. A friend of mine, Dirk Talamasca, had a void simulator, and I was the management of that particular Sim. He went idle one day, and I decided that I would completely change the look of the Sim so when he would come back, he would not recognize where he was. And it was so much fun because I was so speedy, and I was just rushing to change everything I could possibly change for him to not recognize where he is. It took me about an hour so I figured, after people came over, and they really liked it, I figured that I would just keep redoing it, and I’ve redone the same Sim eleven times. It was so much fun just basically using the simplest component that I have handy in my inventory and just to see how much I can create with it. I’m very, very, very proud of this very last one because actually Philip Linden came over to see it, and he really liked it a lot, and he sent a bunch of other Lindens to come see it as well. And he recognized me by that particular art piece at Second Life Community Convention. None of the other ones exist anymore because I would just wipe them and rebuild, then wipe and rebuild. But they can see short videos on my website, under One Hour Sim Project, and it’s eshiotawara.com, and the videos were taken by Crap Mariner, of
  7. 7. [Star Ridge Falls?], and Dizzy Banjo. They were just around me documenting everything single one. So thanks to them, I still have them so people to see videos of them. ROBERT BLOOMFIELD: And the Flower Tower is still in place on Dusan Writer’s Remedy Sim, isn’t that right? ESHI OTAWARA: Yes. Yes. That was the last one, and they just basically begged me to save it and not destroy it because I was about to wipe that one as well. ROBERT BLOOMFIELD: Well, I, for one, am happy that they let it stay. ESHI OTAWARA: The whole experience was just phenomenal because, from the first one where 150 people showed up in 24 hours to see the first one, and the last one, over 2,000 people came to see it in one day. I’ve learned that, as far as the Metaverse goes in the arts, you really have to keep a certain dynamic to keep the audience. It was a great experiment as well. ROBERT BLOOMFIELD: Okay. Now I guess I know you best as a clothing designer, and you have a new dress, I understand, and I think SLCN has a picture of you wearing the dress, surrounded by flowers. So can you just tell us quickly about this dress? ESHI OTAWARA: Yeah. This dress is not really new. I’ve had it for quite a while. My designs are like my children, and I kind of have this issue of just releasing them to the public right after I make them. I’ve had this one for months now, and I haven’t released it yet, and I
  8. 8. will take this opportunity announce that this particular design called the Samurai in the Storm will be released in a very, very small edition of the total of seven on the grid. And, for people who like to spend a buck on something that is unique, I will announce the sale of this pretty soon. They can join either my group, Eshi, or they can follow Fast-Time or my website when this is going to be released. ROBERT BLOOMFIELD: Okay. Wonderful. I’d like to close just by taking a look at one of your recent of your Real World--I’m sorry, not a recent painting, but one of your Real World paintings “Victims of Terror,” which I understand you painted shortly after 9/11. I’m wondering if you can just sort of talk us through this work. Give us a sense of its scale in Real Life, and the two striking things I see in this painting myself are, one, that there are a lot of faceless people in sort of dark colors, and, two, that there is a young girl in a very colorful dress turning away from the scene. I’m just wondering if you could talk about that a little bit. ESHI OTAWARA: Sure. I painted this shortly after the attacks on the Towers. Because back then I was still in college, and I was getting my painting degree, and a lot of people just kind of, you know--the climate after that for immigrants was just not good because everybody who was an immigrant was just not welcome. I went to a college in a really small community, and I didn’t feel like they liked me the same way after the attacks. And this was just something because I grew up in war in Croatia, from ’89 to ’95. And war is something that is very, very personal to me. I have a lot of emotions that I can put out on canvas or in any other medium that I express myself with. So this particular painting came out in about a couple of hours and was just kind of my intuitive reaction to whatever happened and how I
  9. 9. see the whole thing. Because a lot of people asked me, “Oh, do you even care? Do you even care?” To me, of course, I care. It’s people. I don’t see the world as a map. I see it as people on the planet, and we all share it. And I show a lot of my emotion in my work. So this is one example of how I express that. ROBERT BLOOMFIELD: That definitely does come through in this piece. So thank you so much, Eshi, for talking with us and sharing your Real Life and your Second Life creations on Metanomics. And I wish you the best of luck selling all of your art. Perhaps the Real World art is for sale as well-- ESHI OTAWARA: Yes, it’s for sale. ROBERT BLOOMFIELD: --and people can contact you through eshiotawara.com. Okay. Well, again, best of luck, and thanks for talking with us. ESHI OTAWARA: Thank you very much. Absolutely. Thank you very much for having me. ROBERT BLOOMFIELD: Let’s move on to our main event for the day. We have two guests, and our first is Stevana Case, a 15-year video game industry veteran, who is currently serving as vice president of business development and sales at fatfoogoo, heading up the company’s North American business. But Stevie is also one of the first professional female gamers in the cyber-athlete professional league and is famous for defeating John Romero in Quake Deathmatch, single-handedly beating him the first time they played. Stevana worked then on game design at Ion Storm, co-founded Monkeystone Games. And then her move into business development at Tira Wireless and Spleak Media. Spleak Media Network
  10. 10. placed her in the Twenty Women to Watch in Business Under 30, by Working Woman Magazine. So, Stevie, I guess before we get into fatfoogoo, I just want to say that I love your story here. You’re a competitive gamer turned game designer, now in the sort of back-in-business side of gaming in Virtual Worlds. I feel like I’m interview a Superbowl quarterback turned football commentator. There just haven’t been enough competitive gamers out there to know what the career path is. Do you think this is pretty standard? STEVANA CASE: Thank you. Well, I feel very lucky to be here. I mean I think that you’re right, there just isn’t enough history yet in professional gaming to kind of know what the career path is from there. I think we’ve seen so many people do just completely different things, and, for me, this was always really the end goal. So I’m just excited to be doing what I’m doing now. ROBERT BLOOMFIELD: Well, it’s great to have you on Metanomics. Our second guest, Jay Geeseman, is the owner and operator of Virtual Trade and Xstreet SL. Xstreet SL touts itself as the premier Second Life integrated commerce website featuring real-time shopping, real estate listings and full-fledged currency exchange. So, Jay, it sounds like you got into this because you were thinking a long time ago, before you even heard of Second Life, that you’d like to set up some sort of large online mall. So this is what came of it? JAY GEESEMAN: Yeah, basically. Back in, I guess, 2002, I had an idea for a large online shopping mall for Real World products at the time. But being just one person, no access to
  11. 11. funding or anything like that, I couldn’t figure out how to do it. Basically, since then, amazon.com has gone and done exactly what I had in mind. What I found was, when I found Second Life, I realized it was possible and immediately went to making it. ROBERT BLOOMFIELD: And I understand it’s not just a one-person thing anymore. Is that right? You have, what, seven employees? JAY GEESEMAN: Yeah, we have seven full time employees and a few contractors. ROBERT BLOOMFIELD: Well, that will definitely keep you busy, and we’re all very interested in hearing more about Xstreet. But first, Stevie, let’s go back and take a look at fatfoogoo, and question number one on this is the name. Is this like the killer sushi? STEVANA CASE: Yeah, I guess you could think of it that way. Yeah. I am told at least--I was not involved in the naming--but I’m told that the name comes from the foogoo, the puffer fish, so it’s a fat puffer fish. But I don’t claim credit for that one. ROBERT BLOOMFIELD: Well, it’s certainly a memorable name and a good conversation starter. Now let’s talk a bit about your business plan. You refer to basically three buckets for your business: subscriptions, the primary market and the secondary market. Can you walk us through those? STEVANA CASE: Sure. So essentially what we have is a piece of technology, a platform that we license to anyone who has created a Virtual World or a massively multiplayer game.
  12. 12. It really could be anything. It could be a social network, a browser game, whatever their interface is. They would plug our platform in, and we would enable them to charge for really anything you could imagine: a subscription to play the game monthly or to access features, a primary market in which they would sell items directly to their users or their players, or a secondary market which is when users sell to other users. So for us, the World itself is great, but we leave that to the World designers, and we just handle the management of the economy related to the selling of digital goods and all those micro transactions that happen along with it. ROBERT BLOOMFIELD: Now your business plan sounds really quite similar to another company that I know of, Live Gamer, which also has partnered with some Virtual World MMOs. I’m wondering if you could talk about how you differentiate yourselves from them. STEVANA CASE: Sure. There are a few differences. I mean one of the bigger differentiators is that we are what you call white label solutions. So when we offer our platform to someone who’s created a World, they would integrate it on the back end. We provide access to APIs, and it would tie directly into their systems, so as a user you would come into the World, and you would make purchases in the World that’s familiar to you. You would never see the fatfoogoo name or our branding. It would just look like your World, and you would make purchases in the way that the creators of that World wanted it to look and feel. So we’re completely on the back end, and we just enable the transaction; whereas, the Live Gamer is more of a network. So you would be in your World or your game, and then you would log into the Live Gamer network, and there are some interesting things that come along with that, but it’s a second login. It’s a separate network from the game itself or the
  13. 13. World itself. ROBERT BLOOMFIELD: You’re a relatively recent startup, but you have announced some partnerships and, in particular through Sun’s Open Source Virtual World platform Project Darkstar you have announced a partnership with Gamalocus. They’re makers of Call of the Kings. Do I have that right? STEVANA CASE: That’s correct. Yeah. We announced this integration with Project Darkstar. So essentially what we’re doing there with Sun is, we’ve taken our platform and pre-integrated it with the Project Darkstar code so that anybody who comes in and creates a World or a game using Project Darkstar has very, very simple integration with our platform. I mean the Gamalocus guys were the first partnership we announced. They’re out of Europe, and Call of the Kings is their browser-based MMO that they’re working to wrap up now. They had kind of a custom use of Darkstar, and they told us it took about ten hours to integrate our technology, but that if you follow the Darkstar code to the letter, it should be about a ten-minute integration. So it really just simplifies that process, and anybody using Darkstar should have very easy access to plug our technology in and be able to start processing micro transactions very quickly. ROBERT BLOOMFIELD: Now Project Darkstar as purely Open Source project, I’m just wondering how your revenue model works. Do people need a licensing agreement with you, separately, in order to integrate your software into the Open Source Project Darkstar application they’re trying to create?
  14. 14. STEVANA CASE: They do, yeah. They need a separate relationship with us so they would have to sign a licensing agreement, but, in particular, with the Project Darkstar partners, we make it as painless a process as possible. And our business model is very flexible, so any time we’re dealing with smaller Project Darkstar partners, we can typically do something that’s a rev share only or a rev share on their transactions, with just a small setup fee to make it very easy for them to do. So typically it’s really quick and simple. We just do the licensing agreement, and they’re good to go. ROBERT BLOOMFIELD: Well, let me ask. I see in our backchat we have a question from Tammy Nowotny, which is: Can you deliver PG ads to teenage virtual residents and mature ads to adult ones in the same World? Do you have technology for dealing with those? We had a long discussion last week on Metanomics about government policies protecting children, so this is also of interest to me. Do you have ways to deal with it? STEVANA CASE: Sure. So there are a couple of things to cover there. Number one, we don’t specifically do ads. We would enable the sale of items themselves, but what we can do there that’s applicable is that, based on a user’s profile, and that profile can take a pretty detailed form, what region they’re coming from, a user’s age, their subscription level, whatever it may be, we can use that profile to determine which items should be offered to them or which items can even be resold to them. So say you’ve got an item that you only want to sell to people who are over 18, we could do that either by using the age they’ve entered in a profile or by saying this item can only be bought by credit card, and therefore, it’s age verified.
  15. 15. So we’ve got a number of ways that we can kind of control the sale of items and the flow of goods. And then we can also make items that are re-sellable and other items that you may not ever be able to resell to other players. So we’ve got some pretty tight controls that allow you to manage your inventory in that way so you can certainly use that to control mature content versus content for kids. ROBERT BLOOMFIELD: One of our backchat audience members is cutting to the chase more quickly than I am. Austen Scanlan wants to know: What’s your cut? STEVANA CASE: It’s a very fair question. It’s a very fair question and not to be dodgy, but it is somewhat dependent on how much of the platform you use. I mean one of the nice things about our technology is that it’s very modular. So you could use anything from a single module that is, say, our payment gateway where we’ve got this payment gateway that manages transactions and would interact with the individual types of payment methods so it might interact directly with the credit card gateways or with a premium SMS provider or prepay cards. So if you use just that module, that’s one business model. If you use the entire platform, it’s a bigger business model. I mean I can’t give specifics, but I’ll tell you it is a percentage that is less than 20 percent, depending on how much you use. There is a pretty big range in there though. ROBERT BLOOMFIELD: Okay. Great! We’ll bring the two of you together to discuss some issues that I think you will both share. But let’s bring Jay into the conversation now. And, Jay, the first thing that I’d like to ask about is: SL Exchange is probably one of the most well recognized brands in Second Life, and, as of October 1st, you have changed over to
  16. 16. Xstreet in SL. Now I know that Linden Lab has taken the position that a name like SL Exchange infringes on their brand. I can understand that. On the other hand, other well known brands, including my broadcaster, SLCN, have not changed their name, and they are standing their ground. So can you tell us what considerations you were weighing when you made the choice you did? JAY GEESEMAN: Well, the main consideration is, we didn’t really want to fight. We’re kind of hundred percent dependent on Second Life right now so a fight wouldn’t be good for anyone at this point. Besides that, also when the new trademark policy came about, it really presented an opportunity to re-brand ourselves. Back when we first started SL Exchange, that name wasn’t really given a whole lot of consideration for future growth. So any new names, any kind of expansion we’d have to do, we’d have to come up with a whole new name every time. As we went through this re-branding process, the name Xstreet came up, and that name is really flexible. It can be used for multiple services. Figure we want to do the same service in multiple Worlds, it can be Xstreet this World, Xstreet that World, whatever, and that works a lot better. But the main consideration for changing the name in the first place was really to not fight about it because a fight doesn’t really help anyone. ROBERT BLOOMFIELD: Okay. So I’m actually looking already at the backchat. You talk for 30 seconds, and we get some things up. So Eshi Otawara says, “I forgot to mention Xstreet gives best rates on currency sales, significantly better than Second Life.” And I guess you know it’s true that, as you just said, you are dependent on Second Life at this point. On the other hand, you are in the currency markets, competitors. How does that work exactly?
  17. 17. JAY GEESEMAN: This is something that I actually had a little discussion about with one or two of the Lindens at Second Life Community Convention. We are competitors, but the competition between us actually works to the benefit of both of us, and, yeah, the prices are better. We actually take a loss on money that people send us, which is a little known fact that only a few people have realized to date. ROBERT BLOOMFIELD: Little known ‘til just now, Jay. JAY GEESEMAN: Yeah. Yeah. ROBERT BLOOMFIELD: Let’s just go there, I guess, into your revenue model. Currency exchange is a bit of a loss leader for you. Can you tell us how you’re making your revenues? JAY GEESEMAN: Well, when I say that that’s a loss leader, it’s not the currency exchange itself; it’s mainly the way that we allow payments to be sent to us. As with any payment processor, we mainly use PayPal right now. They take their cut. We give people more than that cut. That’s where we take our loss. But our main business model, the revenue model, is highly driven from advertising. The currency exchange is a small percentage. The marketplace commissions that we charge, those are a small percentage, and the great majority of our income actually comes from advertising, through banners in-world and item enhancements in the marketplace. ROBERT BLOOMFIELD: Can you give us just a little insight into what you mean by item
  18. 18. enhancement? JAY GEESEMAN: Sure. When you list a product for sale through our marketplace, there’s a number of options you can add to an item to increase the visibility. You can make it bold. You can outline it. You can highlight it. You can feature it, and you can feature it on the home page, the home page being the top tier. And basically, these are things very similar to what eBay allows with its own listing enhancements. As far as I’m aware, the home page featured ads actually really do increase sales for a lot of people, and, for that reason, it’s actually our most popular enhancement. ROBERT BLOOMFIELD: I guess we’ve gotten kind of on the floor a basic sense of the two businesses that you’re in. Fatfoogoo is partnering with game developers to allow the developers to create and support their own micro transactions. At this point, you’re saying you’re specifically in Second Life but that your name change is giving you a little more flexibility to move into other Worlds. So I guess first let me ask: Do you have specific plans, Jay, to move into other Worlds? And, in particular, Intlibber Brautigan asked about OpenSim, the Open Source Worlds that are created sort of on the structure of Second Life. Do you have specific plans for OpenSim or non-Second-Life-based Worlds? JAY GEESEMAN: Sure. We have plans; there’s nothing actually totally solid yet. Obviously OpenSim and the various OpenSim-based grids, sure, we’re going to look at those once they reach a certain level of maturity. But more near-term, we’re actually looking more at non-Second-Life Worlds, and I’m not going to go any further into that at this point. ROBERT BLOOMFIELD: Okay. Well, I understand that it’s hard to get our entire audience
  19. 19. to sign a nondisclosure agreement. Let me move on to some other topics that I’m sure both of you are struggling with, and the first one is the international dimension of Virtual Worlds. Virtual Worlds are global, and so you need to be able to handle a variety of languages. Actually, if I could, Stevana, can you talk a little bit about what fatfoogoo is doing on that front, to make sure you’re fostering not just U.S. sales? STEVANA CASE: Sure. Absolutely. I mean one of the things that really makes fatfoogoo stand apart from the competition is that we are, in fact, a European company. Our company’s run out of Vienna, Austria, and that’s where our technical team is. So from day one with the technology, we took a much more international view, both on the tool side and then on the payment side. So on the tool side what that means is, if you’re a business that has created a Virtual World and licensed our technology, it’s extremely easy to localize the tools for any of your development orgs around the world. So we’ve made that very simple. We’ve got a file you pull out, and it’s just very quick and easy to localize. It’s already localized into a few different languages. But, from a user standpoint, we also offer a couple of different things that are very meaningful. We offer the chance for game operators to create what we call offers in any language they would like to. So our platform supports all the languages available in the world, including Asian languages as well. And so we can create these offers that are bundles of items or individual items at a certain price, and they can be specific to a language or to a region so you can really customize them in them in that way. That said, we also offer a huge number of payment types, with the prepaid cards and premiums SMS and credit cards, really globally at this point. We started out with much more of a North American
  20. 20. and a European focus, but we’re broadening that every day and bringing in new payment methods and supporting new currencies that are meaningful to a wider audience. ROBERT BLOOMFIELD: Okay. Actually I have, Stevana, a follow-up on that for you from my producer, Bjorlyn Loon, who says: It’s great to see the disbursed model for fatfoogoo’s staff. I mean I believe you said U.S., UK and continental Europe. Do you use Virtual Worlds for meetings and internal communications? STEVANA CASE: You know, at this point, we don’t. We’re a fairly small team, and it’s just something we haven’t started to do yet. We make use typically of Skype, and then if we need to do distance presentations, so far they’ve all been more of the kind of WebX variety. And we’ve been able to make do with that, but it’s something I definitely see that we’ll need to explore, and we’ll be very likely to do over the next year or two. ROBERT BLOOMFIELD: Okay. Great! And on the international dimension for you, Jay, certainly Second Life is not known much in Asia, but certainly heavily in Europe and, I guess, South America shortly after that. Do you struggle to keep up with the international dimension? JAY GEESEMAN: Well, the main thing we’ve focused on really is internationalizing our website, which we did in the first part of this year. Now that effort isn’t done yet, but we plan to complete it and expand the number of languages we have, in the first part of next year. But, as for what Bjorlyn was talking about with contracts, I actually haven’t seen much of an issue there. All the contracts we have pretty much transverse that issue.
  21. 21. ROBERT BLOOMFIELD: And so for those who aren’t following the backchat, Bjorlyn Loon was asking about international contracts and enforcement of those. We’ll have to get our legal expert, Ben Duranske, back on the show to talk about international contract law. But that, I think, refers to contracts between you, Xstreet, and people you do business with. But another aspect of this is the contract that one resident makes with another when someone posts something for sale, and another gives them whatever type of money, and then, if either party is unhappy with the way that turned out, they have a problem, and you have a problem. So I’m wondering, to both of you, how you deal with resident-to-resident disputes. And, Jay, let’s start with you on that. JAY GEESEMAN: Sure. We have a basic procedure we go through with this. We do reserve the right to review items that our merchants have for sale so if we receive a complaint that item isn’t as advertised, we’ll actually grab a copy of it and review it in detail, to make sure it’s what the merchant advertised. Now, if it isn’t, we’ll usually refund the buyer out of our pocket and then take disciplinary action against the merchant at that point. Otherwise, it’s really a pretty smooth process. ROBERT BLOOMFIELD: Okay. And, Stevana, what does fatfoogoo do to deal with resident-to-resident disputes? STEVANA CASE: Well, we have a few modules, a few pieces of the platform that aim to avoid disputes whenever possible. So we do have an escrow system built in, and we’ve got a couple of other elements that really aim to reduce fraud and aim to reduce those kinds of
  22. 22. complaints. That said, we also do track all of our items in the system as well. So in a similar way, we can pull back the details of a transaction and, say, if a user complains that they never received an item, we’re actually able to go in and confirm that it was delivered and confirm all the details of transactions in that way. And then we do also have a customer-care module and a dispute-ticketing system, so we’ve got ways to track all this. And then, at the end of the day, there are customer-service representatives that sit with our partners, and they have to make the call, but we enable that entire process. And, if there’s a need for a refund or a need to credit something back to a user, even if it’s real money, we’re able to do that through our platform and through our payment gateways right there in the customer-care tool. ROBERT BLOOMFIELD: Okay. Great! Well, I’m looking at the backchat. There are a bunch of questions here. I do have to say thank you, Tizzy Teardrop, for putting in off topic: Dow is up 825 points, which is something that’s hard for me to track while I am doing this show. So thank you, Tizzy, for the news update. That’s some happy news to hear. Let’s see. We’ve got a few other questions I would like to get to, and one deals with content theft, and I think, Jay, this is probably mostly for you, since Second Life residents have concerns with content theft and especially with the possible move to OpenSim. Do you have firm, clear policies on that? What is your plan going forward? JAY GEESEMAN: Sure. We’re a registered DMCA service provider so what that means is, any time someone has a copyright complaint, they just send us a DMCA. It’s a fairly simple form. It only takes about ten minutes to make up. You send it to us. We review the item or
  23. 23. items, and the content will usually be taken down that same day. We follow the process to the letter of the law. There’s no real flexibility there. Where we do have a little bit of flexibility is how we treat repeat offenders, and we’re actually fairly strict on it. If it looks like someone is intentionally breaking the law, we’ll kick them out pretty quick. And, in that case, we also have the standard policy for the counter-notifications. Say someone submits a copyright notification that’s either false or incorrect, there’s obviously a procedure to get that content re-enabled. Beyond that, there’s always the CopyBot issue, and we have a very strict policy about there. There have been a few times people actually tried selling CopyBot through SL Exchange, back when we were SL Exchange. We haven’t had it recently. But anybody that we can find that has actually done anything like that and who is actually willingly breaking the rules, we have a very hard stance against those people. And, for the most part, the process works when the content owners report the problems. ROBERT BLOOMFIELD: Okay. Thank you. We are just about out of time. I do have one last question specifically for you, Jay. You probably have better insight into the economy of Second Life than just about any resident. You were quoted in a recent article of Linux Insider saying, “Since we have a large number of transactions, we have unique insight into the Second Life economy. As a whole, the economy is steadily growing just as Linden Lab has stated. However,” you go on to say, “most individual businesses have seen a downturn in the past few months. From what I can see, it looks like this perceived downturn is because there are more and more people starting businesses in Second Life so there’s more competition.”
  24. 24. I know we have a graph that shows this pretty steady growth in resident-to-resident transactions that are coming through Xstreet so while SLCN pops that up on the screen for people to look at, could you just give us your take on where the economy is now and where it’s headed? JAY GEESEMAN: Yeah. I just want to make a note: The graph is actually item sales through our marketplace. It’s not all the transactions through our service. But, yeah, as you can see by the chart, if it’s up already, things are steadily growing. And there may be a seasonal downturn during the summertime. That’s what it seems like there usually is in the springtime and then in the summertime again. But, really, from what we see, it looks like there’s more competition so the people who might not keep up with marketing and advertising so much, they might see a downturn that they can’t really explain, and I think it’s really increased competition. I still see people spending money. I see people spending more money over time. ROBERT BLOOMFIELD: Well, I guess that increased competition is bad news to the people who are competing with one another as producers but good news for the consumers who are able to buy more and better creations from Second Life residents. So I guess there is mixed news in that. Nice to see overall that the economy is growing. So we are pretty much at the end of our show. I would like to thank both of you, Stevana Case, of fatfoogoo, and Jay Geeseman, of Xstreet, for taking the time to share your insights and business plans with us. So thanks a lot for coming in this week.
  25. 25. STEVANA CASE: Thank you. Thanks for having me. JAY GEESEMAN: Okay. Thanks for having us. ROBERT BLOOMFIELD: Now before we close today, after a talk mostly about the business of fun and games, I want to talk about something a little more serious in my brief closing remarks that we call Connecting The Dots. The Real World economy has very serious implications for the Virtual World industry, and a single day of strong news on the equity markets doesn’t personally give me a whole lot of confidence that all of our problems in the credit markets and the venture capital markets are going to be over. When times were getting a little tough a year or so ago, high oil prices started pricing a lot of firms out of the travel market, but the economy was doing well enough that people felt that they still had to travel because there was good reason they could bring in business. And so I thought things then looked pretty good for Virtual Worlds, that allow people to communicate without travel across the world. But now the economy has fallen on much harder times, and I think this means Virtual Worlds are going to get hit in two ways. First, demand for oil is expected to drop so much that the benefits of avoiding travel costs aren’t quite so appealing. And getting Virtual Worlds up to the standards demanded for enterprise use, that’s going to require a lot of capital, capital that right now looks like it simply isn’t going to be available. I’d like to give a hat tip to Roland Legrand at the business desk of Belgium’s Mediafin and a frequent contributor to Metanomics for pointing out some articles on the tech websites GigaOM and TechCrunch that are talking about how venture capital is drying up for tech firms and how
  26. 26. the new tighter markets are likely to play out for entrepreneurs. So my producer, Bjorlyn Loon, will pop some of those links into chat so you can follow these. The reason I’m discussing this now is that next week we are going to have the first in what I hope will be a number of serious discussions about these issues targeted specifically to the entrepreneurial and tech crowd. Next week our guest will be Maureen O’Hara, a colleague of mine at Cornell’s Johnson Graduate School of Management, former president of the American Finance Association, Western Finance Association and now president of the Financial Management Association, a world-recognized expert in both banking and financial markets. So Maureen will be in a great position to give us a better understanding of the roots and larger implications of the credit crisis. And, as the weeks go by, we will also be bringing in experts to hone to a finer point the implications for venture capital and tech investment. So I do hope you will join us here at Metanomics at noon Pacific Time, to talk about the credit crisis and hear from one of the world’s experts. So thank you so much for joining us this week. This is Rob Bloomfield sitting in downtown Cleveland, Ohio, and looking forward to my next show back home in Ithaca, New York. Thanks, everyone, for joining us, and, see you then. Document: cor1036.doc Transcribed by: http://www.hiredhand.com Second Life Avatar: Transcriptionist Writer

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