Virtual Worlds:
2010 and beyond
Key industry trends and market developments

About KZero
Consulting, Analytics, Insight

KZero services (we don’t just do charts)
For Start-ups: Business planning, market sizing, financial modeling, strategic
guidance
For Virtual World/Goods companies: Marketing strategy, product
development, user analysis
For Brands: Media planning, campaign creation, virtual brand strategy
For VC’s/Investors: Deal-flow, investment analysis, market sizing

Clients

Media References

Market Growth
Buckle-Up. It’s Going North

Key Growth Drivers
Perceived Value: Parents allowing their children to spend more time in
VWs
Greater Funding: Uplift in VC activity moving into 2010
Brand Awareness: More VWs having a real-world presence
Payment Mechanics: Easier, faster ways to purchase virtual
currencies/services/goods

Growth: Number of VWs
900
750
600
450
300
150
0
2005 2006 2007 2008 2009 2010 2011 2012

Virtual World Revenues (USD)
10bn
8bn
6bn
4bn
2bn
0bn
2007 2008 2009 2010 2011 2012 2013

KT&T
Kids, Tweens and Teens

KT&T: Growth areas
Media brands: TV shows, films, youth IP all creating VWs to create greater
engagement
Music: Major growth area for virtual goods and event simulcasting
Virtual Celebrities: Starting with musicians
More genres: Lots of different types of KT&T worlds
Mobile payments: The avg. age of a new mobile phone user in the UK is 8 !!

Q-on-Q Growth: total registered accounts 400m
300m
Q1 09 Q2 09 Q3 09
200m
100m
5-10
10-15 0m
15-25
Age Group 25+

Q-on-Q Growth: net increase in reg. accs. 90m
67.5m
Q2 09 Q3 09
45m
22.5m
5-10
10-15 0m
15-25
Age Group 25+

Q-on-Q Growth: % increase in reg. accs. 50%
Q1 09 Q2 09 Q3 09
40%
30%
20%
10%
5-10
10-15 0%
15-25
25+
Age Group
Total Market

Something for the ‘Grown-Ups’
Don’t forget about the Adults

Adults: Growth Drivers
Gambling: SMOGs and MMOGs
Dating: Great for virtual goods and gifting
Creative platforms: Micro-worlds. Vastpark, Mycosm
New Genres: Sci-Fi

ARPPUs
US$6.00
US$5.00
US$4.00
US$3.00
US$2.00
US$1.00
US$0
12-13 14-15 16-17 18-19 20-29 30-39 40-49 50+
Source: Andrew Chen, http://andrewchenblog.com/

Screenshot from PKR

Screenshot from Mycosm

Screenshot from Vastpark

Screenshot from Omnidate

SocNetthe neighbourhood
Moving into
Extension

SocNet extension
SocNets have an inverse issue to VWs
SocNets have user bases without greater interaction
VWs have the interaction without the user bases (for new worlds)
We expect SocNets to aggressively move into the VW and VG space

Sports
The competition has arrived

Screenshot from Football Superstars

Education
Immersive Learning

Education: Growth areas
Remote Learning: Regardless of geographical location
Immersive Learning: For sweet-spot subjects like History and
Geography
New Student Outreach: Already being used - we expect more
P2P Learning: Students helping other students

Photo-Realistic Avatars
To lower the barrier to entry

Reputation Management
What’s your score?

Reputation Management
Necessary for trade-based and B2B platforms
A reputation or trustworthiness‘score’
Similar to an Ebay rating - P2P
Immersionalists vs Augmentalists

Accounts per unique resident (Second Life)
1.80
Stabilization
1.70
1.60
1.50
1.40
Innovators Early Adopters
1.30
1.20
Jan06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-07 Feb Mar Apr May Jun

Mirror Worlds
Virtually Real

Mirror Worlds: Growth areas
Tactical Uses: Events, promotions
Immersive Learning: For education
ARGs: Mirror worlds support Alternate Reality Gaming
But,facing competition from rapid development applications (on the fly)

Screenshot from Near

Screenshot from Twinity

Mirror Worlds: Microsoft Photosynth
Screenshot from Twinity
Source: http://michaelaltendorf.wordpress.com

Cross-World
Ideas without Frontiers?

Growth areas: Cross-World
We have to be able to move‘things’from one world to another
Or have a‘place’to aggregate or move from
Cross-world applications could be buddy-lists, communicators, virtual
goods or even currencies

More Brands
KT&T

Growth areas: Brands
The first‘brand rush’is over (Second Life 2007)
We expect a lot more brands to move in-world
Either tactically or into their own worlds

Virtual Goods Integration
Plenty of new business models

Growth areas: Virtual Goods Integration
Virtual Goods are a booming industry
Lots of emerging business models in support - such as Viximo
Increased third-party integration of virtual goods into SocNets and
virtual worlds

Virtual Goods Revenues (USD)
15bn
12bn
9bn
6bn
3bn
0bn
2007 2008 2009 2010 2011 2012
Source: KZero. Includes VGs from VWs, socnets and cross-world

KZero campaign for L’Oreal Paris

Summary
Ansoff Matrix

Summary of 2010+
Market Development
New
Virtual Goods Integration Diversification
Markets B2B / Enterprise Currency Management
Education Reputation Management
SocNet Extension
Market Penetration Product Development
Existing
Second Life Metabrands, Micro-Worlds
Markets More Brands, Mirror Worlds Theme Parks, Cross-World
Sports, Sci-Fi Photo-Realistic Avatars
KT&T Dating, Gambling
Existing Products New Products

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