Fad Or Future Second Life And Virtual Worlds

Fad or Future - What Do Virtual Worlds Have to Offer? Dr. Robin Teigland Stockholm School of Economics [email_address] www.knowledgenetworking.org IFL Conference on Second Life & Virtual Worlds June 14, 2007

Today’s discussion

What’s happening today in virtual worlds?

Second Life

Others

The future - Four scenarios for 2012

What should you do?

What are real world companies doing in Second Life?

Branded Presence

Adidas, BMW, Dell, IBM, Sun, Cisco, Reebok, Nissan, Pontiac, Starwood, Leo Burnett, Vodafone

Marketing & Communications

BMW communicates its clean energy concept

Coca-Cola holds competitions

Product and Concept Development

Starwood, Toyota, PA Consulting for its clients

Sales

American Apparel, Coldwell Banker

Recruiting

ABN Amro interviews candidates’ avatars

PA Consulting uses it for anonymous contact

Collaboration/training

UC Davis Medical Center has emergency simulations

What about Return on Investment in SL? We have a long-term approach to costs and RoI. We have qualitative goals, to expand and develop our presence. - BMW We have no targets for RoI. -ABN Amro There needs to be some RoI eventually, but this is a long-term project and we are just looking at the potential. - Vodafone Financial Times , May 2007

Is anybody out there?

Visitors

9:30 pm, Friday,

June 8, 2007 (GMT+1)

ABN Amro -0

Adidas – 1

Cisco - 10

BMW - 0

Dell Island – 1

IBM – 32

Nissan – 10

Reebok - 2

Sun Microsystems - 0

Vodafone - 0

Insead – 0

BMW In-world Wells Fargo and Starwood Hotels are pulling out

So, where do people hang out?

Most popular places (total time spent there)

Phat Cat’s Jazzy Blue Lounge

Money Island

Largest Dance Island

T-Online Beach

Ilha Brasil

Skye Club Oceania Play for Pay

Puerto Banus

B-Dazzled Designs

Sexy clothing

SL, June 10, 2007

Is there critical mass on Second Life? * Municipality (kommun) wikipedia.org 43 988 42,060 Motala* 162 263 42,500 Online, Fri, Jun 8 11:30 pm (GMT+1) Second Life 177 41,284 7,252,330 Switzerland Density (people per km 2) Land area (km 2) Population Location

Is there critical mass on Second Life? * Municipality (kommun) wikipedia.org 1,391 138 195,250 Richmond, VA 1,434 0.06 95 Online, Fri, Jun 8 11:30 pm (GMT+1) Phat Cat’s #1 popular site 10,316 786 8,143,000 New York 24,759 87 2,153,600 Paris 1,083 450 489,760 Gothenburg* 4,164 188 782,890 Stockholm* Density (people per km 2) Land area (km 2) Population Location

And is anyone making money? What are these individuals selling? Real estate & land rentals Simulation environments Clothing, accessories, skins Art, design, furniture USD >5K USD 2-5K SL, June 10, 2007 Total of 427

What is happening in other virtual worlds?

Are businesses anywhere else?

Active Worlds

2 mln users

Branding

Wells Fargo left SL for AW

Habbo Hotel

7 mln users (mostly teens)

Digital goods and marketing

Target, Wal-Mart, Kellogg, Nintendo, Walt Disney

MyCoke

Secure virtual workplaces

Completely private virtual business worlds offering tools to conduct business and collaborate

Fortune 500: Johnson & Johnson, Novartis, Motorola, Intel

MMOGs still dominate

World of Warcraft

374,000 hours played each day or 50,000 man days each day

8.5 mln players worldwide

Xfire.com, MMPORG.com

Korean Free to Play (F2P)

4 of top 10 MMOGs in Western world

Silkroad Online #1 in West

MapleStory with >50 mln players

Where are we today with virtual worlds?

Business opportunities limited?

Many firms have virtual world presence, but difficulty turning it into an effective, profitable sales channel

Primarily for marketing or learning experience

No RoI success stories for real world firms

Required resources outweigh short-term benefits

Limited number of individual success stories

Anshe Chung and 138 other individuals making >$5000 per month

“ Trapped” in real world activities?

Virtual worlds overhyped?

Growth lower than appears, small compared to MMOGs

Reality vs. fantasy?

Disconnect between real world companies/products and SL fantasy avatars

So, what about the future of virtual worlds?

Gartner Group, April 2007 By the end of 2011, 80% of active Internet users (and Fortune 500 enterprises) will have a “second life”, but not necessarily in Second Life.

How can we look into the future?

Forecast

How we think the future will be

Vision

How we want the future to be

Scenario

What the future can be

Two underlying questions

In 2012…

How advanced will the usage of virtual worlds be?

Widespread use across all dimensions, high user demands

Forces: Economic development, digital divide, environmental pressures

How integrated will virtual worlds be?

Cooperation between different worlds, VW & RW

Forces: Security, technology, legislative, political

Four scenarios for 2012 Fragmentated worlds Integrated worlds Advanced usage Less- advanced usage

Digital Divide

Ease of mobility

Self-governance

Dominance by gaming generation

Traditional vs virtual business

One Converged Universe

High penetration

Easy avatar & asset mobility

High scalability & security

Business transformation

Wild Wests

Individual “MMOGs” dominant

Virtual vandalism

Security problems

Retreat

Virtual Silos

Many competing, limited worlds

Difficult avatar & asset mobility

Limited scalability

High security

New business models

Entropia Universe = MMOG + MMORP?

Today

600,000 users

$360 mln in-gaming turnover 2006

Real cash economy

Tomorrow

Won bid over SL/others to be China’s “first homegrown virtual world where millions will work, communicate, and be in love”

7 mln local + 150 mln overseas Chinese

Five virtual banking licenses auctioned for $404,000 May 2007

Financial Times , June 2007

Cyworld - A world where “MySpace meets Second Life”

20 mln users

$120 mln 2006 in Korea

96% of 20-30 yr olds in Korea regular users

More video traffic than YouTube

Computer Sweden , June 2007

What should you do?

Approach as a disruptive technology

Enables a new strategy or new business model

Enables a larger population of less skilled, less wealthy people to do things in a more convenient, lower cost setting

E.g., Telephone, digital photography, PCs, Linux

Think wikinomics and crowdsourcing

Mass collaboration by free individual agents to improve a given operation or solve a problem

E.g., Boeing, Chinese motorcycle industry, P&G

Christenson 1997, Tapscott & Williams 2006

How? Experiment, “play”, and learn Stay on the look-out Consider creating independent operations Don’t forget other emerging spaces

How?

Experiment and “play”

Find and engage the enthusiasts in your company

Support, but make aware of “risks”

Don’t ask your leading customers what they think

Stay on the look-out

Follow developments

See how they affect the path to a future scenario

Consider creating independent organization for more serious efforts

Anonymous bank buying virtual banking contract on Entropia Universe

But don’t forget other emerging media

Coca-Cola uses combination of all new media channels, e.g., YouTube, MySpace, SL, MyCoke

“ I think there’s a world market for maybe five computers.” Thomas Watson, Chairman of IBM, 1943 “ There is no reason anyone would want a computer in their home.” Ken Olson, President, Chairman and Founder of Digital Equipment Corporation, 1977 “ Heavier-than-air flying machines are impossible.” Lord Kelvin, President, Royal Society, 1895

All the things right, but not the right thing!

Increasing pace of change! Spread of Technology (Penetration rates years after introduction, Year I =Year Invented)

Further information