Business models and Virtual Worlds: The Second Life lesson

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Slides prepared for the "SECOND LIFE WORKSHOP: Virtual Communities
COST 298 - Participation in the Broadband Society", held in November 18th, 2009 at the The Hong Kong Polytechnic University in Second Life, 209,21,51
http://slurl.com/secondlife/HKPolyU%20Campus/102/157/26

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  • Business models and Virtual Worlds: The Second Life lesson

    1. 1. BUSINESS MODELS AND VIRTUAL WORLDS: THE SECOND LIFE LESSON Prof. Maria Rosita Cagnina Dott. Michele Poian Department of Economics Università degli Studi di Udine SECOND LIFE WORKSHOP: Virtual Communities COST 298 - Participation in the Broadband Society
    2. 2. So you want to be an avatar? Yes , we can!
    3. 3. Business models (1) <ul><li>A tool for managing the convergence between strategy, technology, organization, processes (D’Atri, Braccini, 2007; Jansen, Steenbakkers, Jägers, 2007) </li></ul><ul><li>It allows to generate value and benefit from new sources of sustainable competitive advantage. </li></ul>
    4. 4. Business Models (2) <ul><li>A Business Model (BM) should consider at least (Osterwalder et Al, 2005): </li></ul><ul><ul><li>The value a company offers to one or more segments of the market; </li></ul></ul><ul><ul><li>The structure of the company and the network of partners that permit to create, market and appropriate of the generated value; </li></ul></ul><ul><ul><li>The relationship with the capital, in order to generate profits and sustainable revenue streams. </li></ul></ul>
    5. 5. SL and BM (1) <ul><li>The relationship between Second Life (SL) and BM can be seen from two points of view: </li></ul><ul><ul><li>SL as a platform to create new BMs </li></ul></ul><ul><ul><ul><li>Third parties firms, who join the VW </li></ul></ul></ul><ul><ul><li>SL as the BM </li></ul></ul><ul><ul><ul><li>Virtual World owner </li></ul></ul></ul>
    6. 6. SL and BM (2) <ul><li>SL may be used to reinforce business proposal of a firm. Indeed, SL: </li></ul><ul><ul><li>embodies a community; </li></ul></ul><ul><ul><li>enables rich interactive exchanges; </li></ul></ul><ul><ul><li>allows to manage multimedia items; </li></ul></ul><ul><ul><li>embeds a system of micropayment; </li></ul></ul><ul><ul><li>fulfils the desire of users for identity. </li></ul></ul><ul><li>SL can be exploited as an innovative business platform </li></ul>
    7. 7. Business categories VW Owner RW service providers in Second Life RW corporate brands Metabrands
    8. 8. Business in SL: 1.0 phase <ul><li>SL as a new mass-market. Therefore: </li></ul><ul><ul><li>Firms approached SL as “another web channel” (showcase islands) </li></ul></ul><ul><ul><li>Brand awareness obtained by means of “splash media” effects </li></ul></ul><ul><li>As a consequence, firms approached SL trying to replicate worn-out real-world strategies and focusing on short-term results </li></ul>
    9. 9. Showcase islands Virtual Apparel Enel Park
    10. 10. “ Media Splash” effect
    11. 11. Real World business failure <ul><li>Poor understanding of SL peculiarities. </li></ul><ul><ul><li>Avatars or humans? </li></ul></ul><ul><li>Irrational expectations. </li></ul><ul><ul><li>Absolute numbers are low </li></ul></ul><ul><li>Weak integration between firms’ BMs and SL. </li></ul><ul><ul><li>Where’s my ROI? </li></ul></ul><ul><li>Ineffective marketing efforts. </li></ul><ul><ul><li>Copyright is dead </li></ul></ul>
    12. 12. RW failure examples <ul><ul><li>Costa Crocere </li></ul></ul><ul><ul><li>Armani </li></ul></ul>
    13. 13. SL peculiarities <ul><li>Real-time interaction </li></ul><ul><li>Communication channels convergence </li></ul><ul><li>Digital content spans VW boundaries </li></ul><ul><li>Centaur consumers (Wind, Mahajan, Gunther, 2002) and prosumers (Toffler, 1980) </li></ul><ul><li>Even better, not consumers but only users </li></ul>
    14. 14. How to explain VW’s logic Source: Cagnina, Poian, 2007
    15. 15. How BM changes in SL? <ul><ul><li>The value a company offers to one or more segments of the market; </li></ul></ul><ul><ul><li>The structure of the company and the network of partners that permit to create, market and appropriate of the generated value; </li></ul></ul><ul><ul><li>The relationship with the capital, in order to generate profits and sustainable revenue streams; </li></ul></ul><ul><ul><li>The added value provided by platform users; </li></ul></ul><ul><ul><li>The network effects that connects each element. </li></ul></ul>
    16. 16. First perspective... <ul><li>Chris Satchell – ex CTO of Microsoft’s Interactive Entertainment Business (about XNA Platform) : </li></ul><ul><li>“ If you can give people a way to communicate, to talk about content, to rate it and express what's cool, then you start a virtuous cycle, because more people want to get involved, more people create content and more people comment on it .” </li></ul>Source: Welsh, 2006; http://www.gamesindustry.biz/content_page.php?aid=21697
    17. 17. ... second perspective... <ul><li>Philip Rosedale – founder and former Linden Lab CTO: </li></ul><ul><li>“ Linden Lab’s BM is not related to the company’s success in pushing a service (...). LL’s BM is to provide clients with tools to make business (among themselves), and get a share from i t (through tier and a small transaction fee on the LindeX).” </li></ul>Source: http://tsf.sapo.pt/PaginaInicial/AudioeVideo.aspx?content_id=1144559 http://gwynethllewelyn.net/2009/02/13/philips-vision-1999-2009-and-beyond/
    18. 18. ... are VERY similar! <ul><li>Putting them together: </li></ul><ul><li>“ If you provide clients with tools to make business (among themselves), you start a virtuous cycle, because more people want to get involved, more people create content and more people comment on it , and you can get a share from it” </li></ul>
    19. 19. VW and BM logics
    20. 20. Emergence of a new BM? <ul><li>Join a platform or creating a new one. </li></ul><ul><li>Providing users with tools, and get a share from the traffic they generate. </li></ul><ul><li>The BM reinforces as long as people interact each other, and get a share of the growth. </li></ul><ul><li>Therefore, the business model capitalizes on a combination of network externalities (Shuen, 2008) among different traffic routes, and get a share of them. </li></ul><ul><li>Traffic-based BM </li></ul>
    21. 21. Thanks to anyone! <ul><li>Prof. Maria Rosita Cagnina </li></ul><ul><li>Medusa Cortes </li></ul><ul><li>[email_address] </li></ul><ul><li>Dott. Michele Poian </li></ul><ul><li>Pitecus Afarensis </li></ul><ul><li>[email_address] </li></ul>Our blog http://www.fantasilab.com

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