Fad Or Future Second Life And Virtual Worlds

Slide 1: Fad or Future - What Do Virtual Worlds Have to Offer? IFL Conference on Second Life & Virtual Worlds June 14, 2007 Dr. Robin Teigland Stockholm School of Economics robin.teigland@hhs.se 1-1 www.knowledgenetworking.org

Slide 2: Today’s discussion  What’s happening today in virtual worlds? −Second Life −Others  The future - Four scenarios for 2012  What should you do? @teigland.com 2007 2

Slide 3: 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 @teigland.com 2007 3

Slide 4: What about Return on Investment in SL? We have no We have a long-term targets for RoI. approach to costs and -ABN Amro RoI. We have qualitative goals, to expand and develop our presence. - BMW 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 @teigland.com 2007 4

Slide 5: 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 BMW In-world Insead – 0 Wells Fargo and Starwood Hotels are pulling out @teigland.com 2007 5

Slide 6: 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 @teigland.com 2007 6

Slide 7: Is there critical mass on Second Life? Land area Density Location Population (km2) (people per km2) Second Life 42,500 263 162 Online, Fri, Jun 8 11:30 pm (GMT+1) Motala* 42,060 988 43 Switzerland 7,252,330 41,284 177 * Municipality (kommun) wikipedia.org @teigland.com 2007 7

Slide 8: Is there critical mass on Second Life? Land area Density Location Population (km2) (people per km2) Phat Cat’s 95 0.06 1,434 #1 popular Online, Fri, Jun 8 site 11:30 pm (GMT+1) Paris 2,153,600 87 24,759 New York 8,143,000 786 10,316 Stockholm* 782,890 188 4,164 Richmond, VA 195,250 138 1,391 Gothenburg* 489,760 450 1,083 * Municipality (kommun) wikipedia.org @teigland.com 2007 8

Slide 9: And is anyone making money? Avatars with Positive Monthly Cash Flow Total of 450 427 400 350 > $5,000 USD >5K 300 250 USD 2-5K 200 $2,000 to 150 $5,000 100 50 0 Dec 2006 Jan 2007 Feb 2007 Mar 2007 Apr 2007 May 2007 What are these individuals selling? Real estate & land rentals Simulation environments Clothing, accessories, skins Art, design, furniture SL, June 10, 2007 @teigland.com 2007 9

Slide 10: What is happening in other virtual worlds? @teigland.com 2007 10

Slide 11: Are businesses anywhere else? Active Worlds Habbo Hotel •2 mln users •7 mln users (mostly teens) •Branding •Digital goods and marketing •Wells Fargo left SL for AW •Target, Wal-Mart, Kellogg, Nintendo, Walt Disney @teigland.com 2007 11

Slide 12: MyCoke @teigland.com 2007 12

Slide 13: Secure virtual workplaces •Completely private virtual business worlds offering tools to conduct business and collaborate •Fortune 500: Johnson & Johnson, Novartis, Motorola, Intel @teigland.com 2007 13

Slide 14: MMOGs still dominate World of Warcraft •374,000 hours played each day or 50,000 man days each day •8.5 mln players worldwide Korean Free to Play (F2P) •4 of top 10 MMOGs in Western world •Silkroad Online #1 in West •MapleStory with >50 mln players Xfire.com, MMPORG.com @teigland.com 2007 14

Slide 15: 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 @teigland.com 2007 15

Slide 16: So, what about the future of virtual worlds? @teigland.com 2007 16

Slide 17: 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. Gartner Group, April 2007 @teigland.com 2007 17

Slide 18: 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 @teigland.com 2007 18

Slide 19: Two underlying questions In 2012… 2. How advanced will the usage of virtual worlds be?  Widespread use across all dimensions, high user demands  Forces: Economic development, digital divide, environmental pressures 3. How integrated will virtual worlds be?  Cooperation between different worlds, VW & RW  Forces: Security, technology, legislative, political @teigland.com 2007 19

Slide 20: Four scenarios for 2012 Integrated One Converged Universe worlds Digital Divide •High penetration •Ease of mobility •Easy avatar & asset mobility •Self-governance •High scalability & security •Dominance by gaming generation •Business transformation •Traditional vs virtual business Less- Advanced advanced usage usage Virtual Silos Wild Wests •Many competing, limited worlds •Individual “MMOGs” dominant •Difficult avatar & asset mobility •Virtual vandalism •Limited scalability •Security problems •High security •Retreat •New business models Fragmentated worlds @teigland.com 2007 20

Slide 21: 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 @teigland.com 2007 21

Slide 22: 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 @teigland.com 2007 22

Slide 23: 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 @teigland.com 2007 23

Slide 24: How? Experiment, “play”, and learn Stay on the look-out P r e s id e n t V ic e P r e s id e n t V ic e P r e s id e n t V ic e P r e s id e n t R e s e a r c h / D e v l. M a n u f a c tu r in g M a r k e t in g P ro d u c t A P ro d u c t B P ro d u c t C Consider creating independent operations Don’t forget other emerging spaces @teigland.com 2007 24

Slide 25: 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 @teigland.com 2007 25

Slide 26: “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, “Heavier-than-air flying Chairman and Founder of machines are impossible.” Digital Equipment Lord Kelvin, President, Royal Corporation, 1977 Society, 1895 @teigland.com 2007 26

Slide 27: All the things right, but not the right thing! @teigland.com 2007 27

Slide 28: Increasing pace of change! Spread of Technology (Penetration rates years after introduction, Year I =Year Invented) @teigland.com 2007 28

Slide 29: Further information  Australian Communications Authority (www.acma.gov.au) − Vision 20/20: Future Scenarios for the Communications Industry: Implications for Regulation  Christenson, C., The Innovator’s Dilemma, 1997  Gartner Group Press Release − http://www.gartner.com/it/page.jsp?id=503861  Gullers Group − The Future of eGovernment: Scenarios 2016 (www.vinnova.se)  Moore, G., Crossing the Chasm, 1991  Tapscott, D. & Williams, A. Wikinomics, 2006, see youtube for video  Xfire.com  More information: http://ssesecondlife.blogspot.com/  www.knowledgenetworking.org @teigland.com 2007 29